Whether you’re about to start paying off student loans or you’ve been chipping away at a balance for many years, chances are you’d love some tips on how to pay off student loans fast.
While there’s no magical solution for paying off student loans, there are a number of tricks and strategies to reduce the pain of paying, and help you get to zero debt faster.
How you can quickly pay off your student loans
In addition to some standard advice around best practices when it comes to paying off student loans, we’ll go over some smart and creative alternate strategies you might not have considered.
Follow these steps to get out of student debt as soon as possible.
1. Figure out how long it will take to pay off your student loans
It can be easy to lose track of how far into repayment you are, but it’s a good idea to take stock of where you stand before devising a payoff strategy.
- If you’re still in school or haven’t started repaying your loans yet: check your original loan agreement for the loan term, or number of months you’ll have to pay it off
- If you’re already begun repayment: check your next monthly statement for a current update on what you owe, and how many more months you have.
You can also use a student loan calculator to calculate how much interest you’ll pay, assuming you don’t make any early or extra payments.
Bottom line impact: Minimal (but good housekeeping nonetheless)
2. Determine your payoff priority
If you have multiple student loans, it’s a good idea to prioritize them based on interest rate and your risk tolerance. While you’ll want to make the minimum payments on all loans to avoid default, any extra payments should be allocated strategically.
First, list all of your loans and their corresponding interest rates. Mathematically, it makes the most sense to pay off your highest interest rate loans first, as those will cost you the most relative to the loan balance.
That said, you should also note the type of interest on each loan—that is, fixed or variable.
As variable rates can go up over time, some people will prefer to pay those loans off first to avoid the uncertainty. Ultimately, you’ll need to decide how much risk you’re comfortable with, and consider whether you expect interest rates to rise in the time it’ll take you to pay off your loans.
Bottom line impact: Medium, but depends on your loan balances and interest rates. Could be significant if you have high-interest rates, such as for private student loans.
3. Pay extra, more often
The simplest way to pay off your loans faster is to, well, pay them off faster. But that’s not necessarily as straightforward as it might sound.
Unlike with credit cards, student loans have set loan terms and monthly payments. But don’t let that confuse you—it’s actually possible to pay any amount above the monthly payment, and you can make payments more than once per month if you’d like. And lenders can’t charge you for early or extra payments.
These tips should help you pay off your loans faster:
- To start with, try to pay more than your minimum each month. Even if it’s not a huge amount more, it’ll make a difference—and get you in the habit of putting excess funds toward your loans
- In addition, think about making extra payments in addition to paying your monthly bill, particularly if you find yourself with extra cash and don’t trust that you’ll save it for your next payment
- One little-known trick is paying bi-monthly (once every two weeks), which adds one extra payment to your loans each year. If your budget has limited flexibility, you can even split your exact minimum payment by two, meaning it really won’t feel like you’re paying anything extra. While one extra payment per year seems small, it can make a significant difference—particularly if you’re paying off a large balance
- A straightforward way to pay more is to reduce your monthly spending in other categories, and put that towards your loans. Whether it’s $20 less per month spent on coffee or $200 of spare cash from downsizing your apartment, look for extra wiggle room in your budget—and spend it strategically
- Lastly, consider using windfalls, bonuses, tax refunds, and/or other unexpected sources of income to make a larger than usual payment towards your loans. Spending that money on your loans now will pay off down the road when you’ve paid less in interest, and therefore have more money to spend how you wish.
Bottom line impact: Medium-high, depending on how much extra and how often you’re able to pay.
4. Consider refinancing and consolidating your student loans
Student loan refinancing and consolidation is an increasingly popular option for borrowers with good or excellent credit and relatively high-interest rates.
When you refinance a student loan, you essentially take out a new loan with a private lender and use it to pay off your original loan. By refinancing after school, many borrowers can secure lower interest rates because they are more financially stable than when they took out the loan.
If you have multiple federal loans, you can also consolidate all your loans, meaning that all your payments will go to one place and you’ll have a single weighted interest rate for your combined loans.
The government offers loan consolidation (not refinancing) for federal loans, which can help to simplify monthly payments but won’t ultimately save you money on interest—in fact, it could cost you more if consolidation ends up lengthening your loan term.
If you think refinancing could be a good fit for you, use this calculator to see how much you might save.
Bottom line impact: High, particularly if you’re paying high interest and have excellent credit.
5. Use your job to your advantage
There are a few ways that your job might help you pay off your loans.
- First, a number of jobs actually offer student loan forgiveness in exchange for working in a service capacity. Some public servants, doctors, lawyers, nurses, volunteer organization workers, federal agency employees and automotive workers may be eligible for student loan assistance or forgiveness, so check whether your career goals align with the criteria for each forgiveness program
- In addition, some employers have started to offer student loan assistance as part of their benefits package, so it could be worth taking this into account as you look for your next job. Even if it’s not explicitly stated, it could be worth negotiating something into your compensation package if you expect student loans to be a significant burden on your finances
- Perhaps most simply, the last way to leverage your job for paying off student loans faster is to ask for a raise. As discussed above, making higher and/or extra payments can significantly shorten the payoff period and save you money on interest—and your employer controls your primary monthly income, after all. If you’re able to secure a raise, make sure to allocate at least some of it to make extra monthly payments, as your debt will only go down as much as you pay towards it. In the long-term, you’ll be glad you got your loans paid off sooner, rather than spending your extra cash right when it hit your bank account.
Bottom line impact: Medium-high, especially if you’re able to qualify for some sort of loan forgiveness.
6. Avoid certain repayment programs
Government repayment programs such as income-based repayment can be a saving grace for those struggling to repay their loans, as they can help you avoid default on federal loans. But if you’re trying to pay off your loans faster and have the budget to do so, repayment programs will work against you.
That’s because most repayment programs lower your monthly payments by lengthening your loan term, so not only will it take you longer to get out from under your debt, you’ll also end up paying more interest overall.
Bottom line impact: Depends on the repayment program and your total loan balance.
7. Find interest rate deductions
Many loan servicers offer an interest rate discount of 0.25% when you enroll in autopay, which is small but can add up to some savings over the life of your loan. Plus, autopay is generally a good idea, as it decreases the chance that you’ll get into trouble by forgetting a payment.
Bottom line impact: Low, but worth it for the minimal effort required.
8. Take advantage of tax deductions and credits
There are two types of school-related tax deductions that can help reduce the tax burden for students and recent graduates.
The first, the student loan interest tax deduction, allows you to reduce your taxable income by up to $2,500 for interest paid on student loans in the year for which you are filing. In order to qualify for this deduction, you must:
- Have paid interest on a loan in your name
- Have been enrolled at least half-time in a degree program when you took out the loan
- Be filing as a single taxpayer or as “married filing jointly”
- Have a modified adjusted gross income (MAGI) of less than $80,000 as a single taxpayer or $160,000 if you are filing jointly
- Not have anybody else claiming you as a dependent on their tax return
The second type of deduction is for up to $4,000 per year for tuition and fees. Unlike the student loan interest tax deduction, this can only be claimed for tax years in which you paid for educational expenses—so will generally only be an option while you’re in school, or if you go back to school while repaying your student loans. Eligibility criteria for this deduction include:
- You must have paid qualified education expenses (including tuition and fees, but not room, board, transportation, etc.) of higher education
- You must have paid the education expenses for an eligible student, who can be yourself, your spouse, or your dependent for whom you claim an exemption on your tax return
If you’re still in school or have gone back to graduate school, you may also be eligible for tax credits, which directly reduce the amount of tax you owe. For more details on how these credits work, read our guide to tax season.
Bottom line impact: Low-medium—higher if you’re enrolled in school and can take advantage of credits.
9. Stick with it
This might be the most obvious one, but it’s important! It’s easy to talk about ways to pay off your student loans faster, but actually doing it is the hard part.
Once you decide which loan payoff strategies make sense for your financial situation, put in place a plan that includes regular check-ins to make sure you’re on track.
While you’ll likely need to make some short-term sacrifices in order to pay off your student debt faster, you’ll reap the benefits once you’re loan-free, and be happy you put some extra effort (and funds) toward paying your loans off early.