How To Pay Off Student Loans: A Guide to Becoming Debt-Free

Without a solid repayment strategy, student loans can take decades to pay off. As of September 2024, about 9 million federal borrowers over 50 were still repaying their loans, according to Federal Student Aid. Luckily, if you want to become debt-free faster or save on interest, there are multiple strategies to consider.

From refinancing to repayment methods like the debt snowball and avalanche, we'll walk you through the best ways to pay off your student loans based on your financial goals. Plus, we'll cover common repayment mistakes to avoid so you don't pay more than necessary.

Current private student loan refinance rates

Top strategies to pay off student loans faster

Paying off student loans ahead of schedule can save you money on interest, but it's important to consider whether it aligns with your overall financial goals.

“Ask yourself, 'Is aggressively paying down my student loans in my best interest or not?' Many financial advisers will tell clients not to do it because it eats up all your discretionary cash flow,” says Brandon Barfield, director and founder of Student Loan Professor, a full-service student loan advisory company.

See Also: Should You Pay Off Student Loans or Invest?

That said, if prioritizing a faster payoff makes sense for you, there are several ways to accelerate repayment while keeping your financial health in check. Here are some of the most effective strategies:

1. Refinance private student loans

Refinancing can help you secure a lower interest rate or shorten your loan term, both of which can reduce the total cost of your debt. A lower rate means paying less interest over time, while a shorter term allows you to become debt-free faster, though it may come with higher monthly payments.

Your ability to qualify for a lower rate depends on your credit score and income, so improving both before applying can increase your chances of approval. Most lenders require a credit score of at least 670, but if yours isn't strong enough, applying with a cosigner can help.

If you have federal student loans, think carefully before refinancing. Turning federal loans private means losing access to benefits like income-driven repayment, forgiveness programs, and temporary payment relief options. Because of this, refinancing is usually best for private student loans.

2. Make extra payments to reduce interest costs

Putting extra money toward your student loan payments each month can help you pay them off faster and save on interest. You can use a year-end bonus, tax returns, holiday windfalls, or extra income from a side hustle to chip away at your balance.

“Even small additional payments each month help reduce the loan balance over time,” says Dr. Sonia Lewis, CEO of The Student Loan Doctor LLC, a financial coaching business that focuses on helping people pay off their student debt.

3. Use the debt avalanche or snowball method

Both of these strategies can help you better structure your repayment strategy by prioritizing your debt:

• Debt avalanche method: You target the loan with the highest interest rate first while making minimum payments on the rest, then move to the next highest once it's paid off. This approach minimizes the total interest you pay over time.
• Debt snowball method: You start by paying off the loan with the smallest balance while making minimum payments on the rest. Once that loan is gone, you move to the next smallest, and so on. This method helps build motivation with quick wins.

If staying motivated is your priority, the snowball method may be a better fit. If saving the most on interest is your goal, the avalanche method will likely be the smarter choice.

Tips to manage loan payments on a budget

If you're on a tight budget, there are still ways to stay on top of your student loan payments without neglecting other financial priorities. It's important to maintain an emergency fund and continue saving for long-term goals, like retirement, while managing your debt.

Here are a few strategies to help you balance student loan repayment with your budget:

• Switch repayment plans: If you have federal student loans, you can change your repayment plan at any time to better fit your budget. Income-driven repayment plans adjust your monthly payment based on your income and family size, while the extended repayment plan spreads payments over 30 years. There's also a graduated repayment plan, where payments start low and increase over time. Use the Department of Education's loan simulator to compare your options.
• Refinance to a longer loan term: If you have private student loans, refinancing could lower your monthly payments by extending your repayment term, ideally at a lower interest rate. However, as Barfield points out, “there is definitely a tradeoff between lower payments and keeping your interest low.” He adds, “If you want a lower payment, that is usually going to mean paying more interest.”
• Cut expenses to free up money for loan payments: If your budget has room for adjustments, look for areas to cut back and redirect that money toward your student loans. The more you can put toward your balance, the less you'll pay in interest over time.

Loan forgiveness and repayment assistance

Loan repayment help exists in the form of student loan forgiveness or repayment assistance programs. Some options you might explore include:

• Public Service Loan Forgiveness (PSLF): If you work for a not-for-profit organization or government agency, you may qualify for PSLF. Under this program, your remaining loan balance is forgiven after making 120 qualifying payments under an eligible repayment plan.
• State-sponsored loan forgiveness programs: Some states offer loan forgiveness for professionals in certain fields. For example, the Georgia Nurse Faculty Loan Repayment Program (NFLRP) provides up to $25,000 in loan forgiveness over 2 years for graduate-level nursing faculty working in Georgia's university system. Check your state to see what's offered, particularly within your field of employment.
• Employer student loan repayment benefits: Some employers offer student loan repayment assistance as an employee perk. These programs may involve direct payments to your lender or funds you can apply to your loan balance. If your employer offers this benefit, it can help reduce your debt faster.

Common mistakes borrowers should avoid

Making on-time payments is the most important part of managing your student loans. But beyond that, some missteps can cost you more or slow down your progress, especially if you're trying to pay off your loans faster and more efficiently.

Here are some common mistakes to watch out for:

• Assuming you can only refinance once: One of the biggest misconceptions is “thinking you cannot refinance more than once,” says Barfield. Since many lenders “don't charge any fees whatsoever to refinance,” you can “update your interest rate and your term as many times as you want to” to ensure you're getting the best deal.
• Using forbearance when it's not necessary: Forbearance allows you to pause payments temporarily, which can help if you're facing financial hardship or unexpected expenses. But interest continues to accrue, increasing your balance and making repayment more expensive. You may also lose progress toward forgiveness while in forbearance. It should be used only as a last resort.
• Overlooking loan forgiveness programs: “Eligible borrowers often miss out on PSLF and other forgiveness options,” says Lewis. If you qualify, take advantage of these programs. Otherwise, you could end up repaying your entire loan balance when you might have only needed to pay part of it.