12 Strategies To Pay Off Student Loans Faster

Paying off your student loans before your scheduled payoff date can help reduce the overall cost of your loans. That’s because you pay interest on the principal balance for as long as you have the loan — if you reduce that balance by making larger payments, you'll pay less interest. The good news is there are many options available that can help you become debt-free ahead of schedule.

Here are 12 strategies you can use to pay off student loans faster.

1. Pay more than the minimum

Your monthly payment may be set to a specific dollar amount, but you can always pay more than the required amount to your lender. This is the simplest strategy to speed up your loan payoff.

Just keep in mind that paying extra doesn’t automatically reduce your loan principal. Some lenders may apply your extra payments to interest first unless you specify otherwise. Make sure to clearly tell your lender that you’d like extra payments applied to your principal loan balance. 

2. Make biweekly payments

Setting up biweekly payments means paying half of your usual payment every two weeks instead of the full payment once a month. This may seem no different from making monthly payments, but it actually means you’re making one full additional monthly payment every year. That’s because you’ll make 26 half-payments over the 52 weeks in a year, which equals 13 whole payments.

Most borrowers won’t notice a difference in their monthly budget between biweekly and monthly payments — but the minor change can shave a year or more off of a 10-year student loan repayment term and save hundreds of dollars (or more) in interest.

If you set up biweekly payments, make sure you tell your lender that you want any excess payment to go toward your principal loan balance. 

3. Prioritize high-interest loans

If you took out more than one student loan, consider using the “debt avalanche” approach to speed up your payoff. This process starts with you listing out all of your student loans from the highest to the lowest interest rate. You’ll then focus on allocating any extra funds to the loan with the highest interest rate first, since these loans accumulate debt more quickly. 

As you pay off each loan, you’ll move on to the loan with the next-highest interest rate and apply the same strategy. The “avalanche” effect means that as each high-rate loan gets paid off, more of your payment can go toward reducing the principal balance on your other remaining debt. 

By following the debt avalanche method, you can potentially save thousands on interest costs, making it a good option for borrowers with high-interest loans. 

Alternatively, you can use the “debt snowball” method, which focuses on targeting the loan with the smallest balance first for a quicker repayment. Once that debt is cleared, you would redirect those payments toward the next-smallest loan, repeating this cycle until all your debt is eliminated.

4. Don’t let interest capitalize

Interest capitalization is the process of unpaid interest being added to the principal balance of your loan. When interest capitalizes, it increases your total loan balance, which can also increase your monthly payment and the total cost of your loan over its lifetime.

There are several circumstances that can lead to capitalized interest on federal student loans, including: 

• Resuming payments at the end of a deferment on unsubsidized loans 
• Leaving the Income-Based Repayment (IBR) plan or no longer qualifying for this plan

It’s possible to avoid letting your interest capitalize in these situations by paying your unpaid interest before your deferment ends or before switching out of the IBR plan.

5. Use autopay and other lender discounts

The majority of lenders, including federal student loan servicers, will offer you a small interest rate discount when you sign up for automatic payments. Generally, this autopay discount is 0.25 percentage points off your interest rate. Although this may seem small, it can add up over the life of the loan. 

Depending on your lender, there may also be other discounts to take advantage of. Private lenders sometimes offer loyalty discounts to borrowers who have an existing account with them, aside from the student loan. Some lenders also offer a graduation bonus to any borrowers who successfully complete their course of study. These types of bonuses usually offer you a percentage of cash back upon your graduation.

You may also be able to get a referral bonus or discount if you get a friend to sign up for a loan with your private lender.

6. Shorten your repayment timeline

If you have federal student loans, choosing a plan with a shorter repayment period can help you accelerate loan payoff and save money in the long run, if you can afford the monthly payments. 

The Standard Repayment plan offers a 10-year repayment term, which is often the shortest path to loan payoff for many federal borrowers. But there are also income-driven repayment (IDR) plans that can lengthen the repayment period up to 25 years. These plans effectively lower your monthly payment, but also increase the amount you pay in overall interest.

Extended repayment plans can be a lifesaver for borrowers who are struggling to make payments under the standard plan. But if you’re trying to pay off your loans quickly and effectively, it’s important to choose a repayment plan that doesn’t extend your payment terms.

7. Explore refinancing

If you have good-to-excellent credit and you’re currently paying a high interest rate on your student loans, refinancing may be a good option for speeding up your payoff timeline.

When you refinance student loans, you take out a new loan to pay off your original debt, and then make payments to the refinancing lender until the loan is paid off. Many borrowers can secure a lower interest rate with a refinancing loan because they may be in a better financial position than they were when they originally took out loans. 

However, don’t forget that refinancing federal loans means you’ll no longer have access to federal protections like income-driven repayment plans or forgiveness options.