To pay off student debt quickly, you’ll need to change your student loan repayment strategy. In this guide, you’ll learn the best strategies to pay off student loans faster, save money, and get out of student debt sooner.
Student loan debt has reached over $1.51 trillion with an average of $31,172 per borrower. It takes anywhere from 10-30 years for borrowers to pay off student debt.
For many, student loans take a big chunk of your monthly income. But the best and fastest way to pay off student loans is to pay more than the minimum each month. Basically, the more you pay, the less interest you’ll owe, and the quicker the balance will disappear.
Asses your student loan debt
Get to know exactly how much you owe, type of debt, federal or private, and who services your student loan. The best way to find out this information is to access the National Student Loan Data System to view federal loans and AnnualCreditReport.com to find your private student loan lenders.
After listing your student loans, call the servicers to verify your monthly due date, minimum monthly payment, and payoff date based on the repayment plan you’re on.
Once you have this information, I recommend calculating your cash flow to determine if you have extra cash to use towards additional debt payments.
Strategize your payments
The fastest way to pay off student debt is to pay more than the minimum. But there are other things you can do to make the process simpler too. This is how you can strategize your payments:
Automate the minimum monthly payments to avoid late payment fees. With some lenders, enrolling in autopay can also mean a reduction in interest rate saving you hundreds, if not, thousands of dollars during the life of the loan.
Make biweekly payments instead
Instead of one payment each month, you pay half the amount every two weeks. This turns 12 monthly payments into 13 payments per year. Pay every half the amount due when you get your biweekly paycheck. When getting started just make sure your monthly payment satisfies the minimum amount before the due date.
Pay more than the minimum payment
Each month add to your minimum monthly payments. By adding a few extra dollars, you can lower the principal amount sooner. It’s important you notify the loan servicer to apply all additional student loan payments towards the principal balance.
Make additional payments
Anytime you get gift money, find money or get a tax refund or bonus, put it towards the principal balance. You’ll speed the payoff and lower the total amount of interest paid.
Pay off accrued interest
If you’re in a grace period, deferment or forbearance, pay at least the interest accrued so it doesn’t capitalize. Allowing interest to capitalize causes your principal balance to grow which will cost you more overall.
Get a side gig
The best way to pay down student loans faster is to make more money. Use your personal skills or talents and offer them to family or friends or in online marketplaces. You can find creative ways to increase your income with side hustles.
Stick with the standard plan
Federal student loans are automatically set to a standard plan of 10 years. By adding extra payments in a Standard Repayment, you’ll pay off your loans sooner than 10 years. In the event, you’re facing financial hardships or in a low-income job, you could benefit by switching to an income-driven repayment plan. But these IDR can extend your payoff timeline by 20-25 years.
Avoid income-driven repayment
Income-driven repayment plans are helpful when your income is limited. However, it extends the length of time it takes to pay off student loans. For instance, switching to an IDR plan can extend a standard repayment plan of 10 years into 20 years. Do your best to stick with a standard repayment plan unless you’re working towards loan forgiveness.
Refinance student loans
With student loan refinancing, you can consolidate multiple payments into one, lower the interest rates, and reduce the repayment term. Refinancing involves using a private lender to pay off original loans that can include refinancing federal loans, private loans or both loan types together. Once you refinance any federal loans into a new loan, you’ll lose any federal benefits such as income-driven repayment plans.
Work in public service or nonprofit
If you work in public service or in a qualified nonprofit organization, you may apply for student loan forgiveness. Forgiveness is the cancellation of all or some portion of your remaining federal student loan balance. If your loan is forgiven, you are no longer responsible for repaying that remaining portion of the loan.
Get student loan assistance benefit
A growing number of employers have begun offering student loan assistance programs as part of an employee’s compensation package. Ask your Human Resource department if a program exists. If you’re looking for a new job, inquire if this benefit is offered.
In Summary: Visualize and Strategize
The quickest way to pay off student loans is adding extra to your minimum monthly payments and making additional student loan payments towards the principal balance. To stay on track, visualize your goal and choose a repayment strategy that works for you, and employ these tactics to achieve your student debt payoff goals.
In some situations, refinancing multiple student loans may help you consolidate payments and lower the total cost of borrowing. Learn more about refinancing student loans or find the best student loan refinance companies.