How To Pay Off $100k in Student Loans: Best Strategies

Approximately 3 million federal student loan borrowers owe more than $100,000, according to the latest Federal Student Aid data, and many of those borrowers have medical and law degrees. Paying off six figures in student loan debt can feel impossible, but it's doable with the right strategies.

How much is $100K in student loans?

When you owe $100,000 in student loans, it's not just the principal you must repay. Whether you have federal or private student loans, you pay interest to the lender as the cost of borrowing. For example, if you took out a private student loan with a 10-year repayment term at a fixed interest rate of 7.50%, you'd pay $42,442 in interest over the loan term, meaning you'd actually end up paying back $142,442.

Here's what you'd end up paying for a $100,000 loan across different repayment terms, including interest, with that same rate of 7.50%:

What are my repayment options for $100k in student loans?

Paying off over $100K in student loan debt requires a multi-pronged approach. Some tactics you might try include:

1. Refinance: Refinancing involves taking out a new loan to pay off your existing student loans. It can potentially lower your interest rate or extend the repayment term to make your monthly payments more affordable.
2. Making extra principal payments: Making extra principal payments helps you pay off the loans faster and saves you interest in the long run.
3. Income-driven repayment plans: Federal income-driven repayment (IDR) plans adjust your monthly payments based on your income and family size. They also forgive any remaining balance after 20 or 25 years.
4. Creating a budget that prioritizes your student loans: You can accelerate progress toward student loan repayment by building a budget that allocates a significant portion of your income to your loans.

Here are four of the best strategies to help you tackle your student loan debt and potentially save thousands of dollars in interest.

1. See if refinancing makes sense

Refinancing your student loans can be a smart strategy — especially if you qualify for a lower interest rate. Refinancing may allow you to secure a lower interest rate if your credit score has improved since you initially took out your loans. This can save you thousands over the life of the loan.

For example, say you have $140,000 in student loans with an interest rate of 6.8%, a monthly payment of $1,737, and nine years of payments left. If you could refinance into a new 10-year loan with a 4.25% interest rate, your monthly payment would drop to $1,434, and you'd save $15,472 in interest over the next decade.

While the savings can be substantial, keep in mind that refinancing federal student loans with a private lender means losing access to federal loan benefits, like income-driven repayment plans, deferment, forbearance, and student loan forgiveness programs.

To find out if refinancing is right for you, you can prequalify with multiple lenders to compare rates and terms without affecting your credit score, as it only involves a soft credit check.

2. Make extra payments to reduce interest costs

Making extra payments on your student loans is one of the most effective strategies for lowering interest costs and speeding up repayment. Even small additional payments each month can add up over time and reduce the total interest you'll pay.

For example, say you have $140,000 in student loans with an interest rate of 6.8% and a 10-year repayment term. If you just paid the minimum each month, you'd pay $53,335 in interest. However, if you paid an extra $100 toward the loan principal each month, you'd pay $48,637 in interest — saving $4,698 in interest and shaving nine months off your repayment term.

When you make extra payments, ensure your loan servicer applies them directly to the principal balance instead of future interest. Also, prioritize loans with the highest interest rates to get the most savings. You may need to contact your servicer for guidance on directing extra payments toward the principal.

3. Consider an income-driven repayment plan

Income-driven repayment (IDR) plans adjust your monthly federal student loan payments based on your income and family size, making them more manageable if you're dealing with a large balance like $100k.

The U.S. Department of Education offers four IDR plans to choose from:

• Income-Based Repayment (IBR)
• Saving on a Valuable Education (SAVE)
• Income-Contingent Repayment (ICR)
• Pay As You Earn (PAYE)

While IDR plans can lower your monthly payments, they typically extend your repayment period by 25 years. This means you'll likely pay more interest over time, which could take decades to pay off your loans. However, any remaining balance is forgiven at the end of the repayment term, which can be a major advantage if your income remains low or stagnant.

Before enrolling, consider your long-term financial goals. If you can afford larger payments, paying off your loans more quickly may save you money in interest. But if your current budget is tight, IDR can provide immediate relief and prevent default. Just be mindful of the potential trade-offs in terms of overall cost.

4. Create a budget that accelerates repayment

Creating a budget that prioritizes your student loan repayments can help you make meaningful progress toward your student loans. The following steps can help you build your budget:

• Track your income and expenses: Identify your total monthly and current expenses. You can use a budgeting app or a simple spreadsheet to categorize spending into essentials like housing, utilities, groceries, and non-essentials like entertainment and dining out.
• Prioritize your debt payments: After covering essential expenses, allocate a portion of your remaining income toward your student loans. Aim to pay more than the minimum whenever possible to chip away at the loan principal.
• Cut non-essential expenses: Look for areas to cut back. Reducing discretionary spending on things like streaming subscriptions, takeout, and shopping frees up extra money for your loans.
• Use windfalls wisely: Direct any unexpected income, like tax refunds, bonuses, or gifts, toward your student loans to make a bigger dent in your balance.
• Automate payments: Automating your loan payments ensures you never miss a due date. Many lenders also offer a small interest rate reduction on your loan when you sign up for automatic payments

More strategies for tackling $100k in student loan debt

Combining multiple student loan repayment strategies can help you pay off your student loans faster and save money in the long run. Consider adding the following strategies to the loan repayment tactics mentioned above.

• Student loan forgiveness programs: The Public Student Loan Forgiveness (PSLF) program wipes out your remaining loan balance after making 10 years of qualifying payments under an income-driven repayment plan. It's available to borrowers who work full-time for a government or not-for-profit organization.
• Loan repayment programs: Many professionals, especially in healthcare, education, or legal fields, may qualify for loan repayment programs (LRPs) through federal or state initiatives. For example, the National Health Service Corps offers a loan repayment program for healthcare professionals who work in underserved areas. Research industry-specific LPRs that apply to your profession.
• Employer education assistance programs: Some employers offer education assistance as part of their employee benefits package. These programs can provide tax-free contributions (up to $5,250 per year) toward your student loans, helping you reduce your balance without increasing your taxable income. Ask your employer if they offer this benefit.
• Extra 529 plan funds: If you or your family have leftover 529 plan funds after completing your education, you can use up to $10,000 from these accounts to pay off your student loans without penalty.

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