Repaying student loans can put a tremendous strain on your finances, making it more difficult for you to tackle financial goals, like retirement or saving money for a down payment on your dream home.
Fortunately, you can take several actions to kick student debt to the curb faster and potentially save hundreds of dollars on interest. One surefire way to do this is to pay more than the minimum amount due each month. However, there are plenty of solutions to consider.
Here are 10 steps you can take to pay off student loans fast:
- Make extra payments
- Research loan forgiveness, repayment assistance programs
- Refinance your loan
- Enroll in automatic payments
- Conquer capitalized interest
- Keep pace with standard repayment
- Use a cash windfall
- Look for found money
- Use your tax refund
- Increase income
If you have extra cash, making extra payments may be the fastest way to pay off your student loans early. One way to do this is to make bi-weekly payments instead of monthly payments. With this strategy, you end up making one additional payment for the year.
| For example: If you had a $20,000 loan with a 5-year term and 10% interest, and your current monthly payment was $424.94, you could pay an additional $212.47 bi-weekly and pay off your debt slightly early in 4 years and 6 months. You would also be saving at least $612.29 in interest. The more you pay bi-weekly, the sooner you can pay off the debt. |
Another option is to make extra payments whenever you can instruct your loan servicer to apply it directly and immediately to your loan’s principal balance — the amount you originally borrowed. Contacting the servicer helps avoid the payment potentially being advanced to the next month’s payment.
If you have little extra cash or none at all, budgeting can help carve out more room to make extra payments. For example, you could free up cash by unsubscribing from any unused subscriptions and redirecting the money toward repaying your loans.
If you have a federal student loan, you might qualify for certain student loan forgiveness programs.
For example, if you work for a government or not-for-profit organization, you may qualify for the Public Service Loan Forgiveness (PSLF). With this program, after you make 120 qualifying payments while working for an eligible employer, your remaining student loan balance is forgiven.
To determine whether you qualify for PSLF, you can use the PSLF help tool on Studentaid.gov.
Plus, if you’re a teacher, you may qualify for the Teacher Student Loan Forgiveness Program. Under this program, you can receive up to $17,500 in student loan forgiveness after teaching full-time in a qualifying low-income school or educational service agency for five years.
| Good to know: To see whether your school qualifies, visit the Teacher Cancellation Low Income (TCLI) Directory. |
Refinancing might be your option if you have good credit (around 700 or higher), a low debt-to-income (DTI) ratio (less than 50%), and a reliable source of income. When you refinance student loans, you swap out your existing loans for a new loan from a private lender that has new rates and terms. If you refinance to a loan that has a shorter term or lower interest rate, it can help you pay off your loans quicker and save a lot of money.
For instance, if you have a $10,000, 10-year loan at 10%, you could save $3,324 in interest by refinancing to a $10,000, 7-year loan at 7%. To estimate how much you can save by refinancing, use a student loan refinancing calculator.
If your goal is to pay off your loans faster, try to avoid refinancing to a loan that has a longer term. While doing so can lower your monthly payment, it can also lead to paying more interest over the life of the loan.
| Important: Before you refinance federal student loans, keep in mind that you’ll lose access to federal benefits, like student loan forgiveness programs and income-driven repayment (IDR) plans. Instead, you can consolidate your federal loans into a new Direct Consolidation Loan. |
Related: Learn more about refinancing your student loans on Credible.com
If you enroll in autopay, federal lenders (and some private lenders) will give you an interest rate discount — usually 0.25 percentage points. Although this might not seem like much, savings can add up over time and help you pay down your loans more quickly.
Also, another benefit of enrolling in autopay is that it can ensure you make payments on time and avoid late fees.
Capitalized interest happens when unpaid interest gets added to the principal of your loan — which is the amount you originally borrowed. As a result, you end up with a larger balance, which means you’ll pay more interest over the life of the loan.
Capitalized interest generally happens while your loans are in forbearance or deferment and you’re not required to pay any interest. You can make a lump-sum payment to pay off any capitalized interest in full to reduce your balance and pay off your student loans faster.
The Standard Repayment Plan, which is the default payment plan for the majority of federal student loans, is 10 years. By comparison, private student loans don’t come with a standard payment plan — terms can range from five to 20 years or longer.
Regardless of what type of payment plan you have, sticking to it can help you pay off your loan faster than you would if you switched to a longer repayment plan.
You may be able to get help from your employer to repay your student loans. Some employers offer tuition assistance of up to $5,250 per year.
Employers that offer this benefit include:
| Good to know: If your employer doesn’t offer tuition assistance, let them know that under the Consolidated Appropriations Act (CAA), they can offer tax-exempt assistance up to $5,250 through 2025. Although this might not change their minds about offering it, it’s worth a shot. |
A cash windfall is a large sum of money that you received unexpectedly. Some examples include a holiday bonus check, an inheritance, or winning the lotto.
If you receive a cash windfall, you can use some or all of the money to pay down your student loans faster.
Found money can be described as money that has been “found” after being forgotten or abandoned by the owner. In this case, found money can refer to money you find around the house or in the pocket of a jacket you haven’t worn in a long time.
Additionally, every state has an unclaimed property agency that deals with returning funds to their owners. Funds can include:
You can check with your local state agency using MissingMoney.com, a government-endorsed website.
If you receive a tax refund, set it aside to pay down some of your student loan debt.
Depending on your income, as of the 2022 tax year, you can receive a tax deduction of up to $2,500 on the amount of student loan interest you paid throughout the year. And depending on your unique tax situation, this could impact whether you receive a tax refund.
To determine whether you qualify for the student loan interest deduction, use the IRS’ Interactive Tax Assistant (ITA) or consult a tax professional.
Although it may be difficult, it’s possible to boost your income. One potential way to do this is to pick up a side hustle, such as dog walking, selling unused items sitting around the house, renting out your car space, beta testing, freelance social media management, or tutoring.
If you put the extra money you earn toward student debt, it can help you pay it off much sooner.
In addition to getting a side hustle, you can increase your income by asking for a raise at your current job. Alternatively, you could work on learning in-demand skills to help you land a job in a higher-paying career.
Related: Learn more about refinancing your student loans on Credible.com