Ways to Pay Off Student Loans Faster
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You're not the only one struggling to make payments on their student loans. The average federal student loan balance in the U.S. is $37,014, according to EducationData.org. The standard repayment plan for federal student loans lasts for 10 years. But if you're making the minimum monthly payment, 10 more years can add on fairly quickly. While minimum payments may be easy on the pockets, they drastically increase the time you remain in debt. Because loans accrue interest, these minimum payments hardly put a dent in the principal balance much, leaving you in a perpetual cycle of debt.
Want out? If you're serious about getting out of debt, here are a few repayment options you can follow to get out of student loans faster.
Related: How to Cancel Student Loan Debt
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How to repay your student loans faster
Take stock of your finances
Create a budget that allows you to manage your money more effectively. By keeping track of how much money you spend each month, you'll be better prepared to handle any unexpected expenses. You’ll also be able to identify areas where you may reduce your spending and save some extra money to pay off your student loans faster. It's also a good idea to set financial goals for yourself. This will help you stay motivated while paying off your student loans and staying on track toward achieving your financial objectives.
5.62% - 16.85% VARIABLE rate APRs 4.39% - 16.49% FIXED rate APRs
- Check your eligibility in just 2 minutes
- Fast application and decision-making process
- Flexible repayment options
- No fees for origination, disbursement, prepayment, or late payment
- Skip a payment once per year (once repayment period restarted)
- Covers up to 100% of the school's certified cost of attendance
- 9-month grace period (3 months more than most lenders)
Make a plan
It's tempting just to pay off the minimum each month, but it's important to make a plan to pay your loans off as quickly as possible. You can find out how much you're supposed to pay by logging into your student loan account or contacting your lender. Once you know what you owe, figure out how much you can afford to pay off each month and create a repayment plan based on that. For example, if you plan to pay off $10,000 in student loans, you might decide to set aside $200 per month to pay them off. This may seem small, but it will eventually add up and help you get your loans paid off sooner.
Make extra payments
If you have extra money at the end of the month, make it a priority to direct those Benjamins toward your student loan balance. This will allow you to pay off your debt faster and reduce the total interest you have to pay in the long run. If possible, set up automatic payments so you won’t have to worry about remembering to make monthly payments (more on that later). With the high interest rates on federal and private student loans, taking advantage of any opportunities to reduce your loan balance and make extra payments is essential.
Refinance your student loan
If you already have student loan debt and are having trouble making payments, you should consider refinancing your loans. Refinancing allows you to lower your monthly loan payments to free up more money that you can use to pay down other debts or invest in the future. Refinancing also allows you to get a more favorable loan term, such as an interest rate reduction and better loan repayment options. The lower your interest rate, the less you will have to pay back over time and the more money you will save. If you’re interested in refinancing your student loans, you should work with a lender to discuss your options and eligibility.
Turn on automatic payments
When you're paying off a loan, it can be tough to remember to send your payment on time every month. One of the easiest ways to avoid late fees is to turn on autopay. Most federal student loan servicers offer some type of rate discounts if you let them auto-deduct your installment.
Use windfalls
If you have money coming in from an unexpected source, such as a lawsuit settlement, a bonus from work, or a tax refund, you can apply this money to your existing student loan debt or use it to pay down other debt you have, such as a credit card balance or a car loan. This will reduce your monthly debts and help you become more financially secure in the long run.
Inquire about job benefits
Many jobs offer benefits, such as student loan assistance. If you work for a company that offers this type of benefit, take advantage of it! Even if it's not stated in your offer, you could try and negotiate with your employer. If it is, ask for details on how the company offers student loan debt assistance – Is there a cap on the amount they will pay each year? Do some research online to see what other companies are offering their employees, and see if you can get your employer to follow suit.
Take advantage of the grace period
When you finish school and leave campus, you’ll usually start making student loan payments after completing your grace period. During this time, you don’t have to worry about making payments on your loans. Your grace period can last six months after graduation. But instead of frittering away, use it as a chance to figure out how much money you can contribute each month. See, even if you don't have to make payments on your student loans, interest begins to accrue during periods of deferment or forbearance. So the longer you wait, the more you will have to pay back once you begin paying. That's why it's important to start using your grace period to get your finances in order!
Use traditional debt payoff methods
Debt snowball and debt avalanche are two of the most popular debt payoff strategies. The basic idea behind each strategy is to pay down your debts and become debt free faster. Using one of these strategies can be helpful when you are paying off multiple debts with different interest rates. These strategies are easier to manage if you have several debts to pay off. However, if you only have one debt to pay off, it may be best to focus on that one debt and pay off the entire balance as soon as possible.
Get a side hustle
Side hustles are great ways to earn extra money for your debt. Unlike a 9-to-5 job, you can do them on your schedule and earn as much or as little as you want. The other great thing about side hustles is they are entirely flexible, so you can fit them into your lifestyle any way you want. Examples include freelance writing, tutoring, or driving for Uber/Lyft. Best of all, once you get a side hustle, you can continue earning money even after you've paid off your debt!
Related: Best Private Student Loan Providers
5.62% - 16.85% VARIABLE rate APRs 4.39% - 16.49% FIXED rate APRs
- Check your eligibility in just 2 minutes
- Fast application and decision-making process
- Flexible repayment options
- No fees for origination, disbursement, prepayment, or late payment
- Skip a payment once per year (once repayment period restarted)
- Covers up to 100% of the school's certified cost of attendance
- 9-month grace period (3 months more than most lenders)
A note on student loan forgiveness programs
The federal government has a few programs designed to forgive loans before repaying the full amount. However, loans from private lenders or other loan companies cannot be forgiven; these programs only apply to direct loans made by the government and Stafford loans.
- Public service loan forgiveness program: If you're a government employee or work at a qualifying nonprofit, the remainder of your debt balance may be forgiven without tax deductions.
- Teacher loan forgiveness program: Teachers rejoice! You may be eligible if you teach mathematics, science, or special education at a low-income school or an educational service agency for five consecutive years.
- Income-driven repayment plan forgiveness: This isn't outright forgiveness of your loans. Instead, it combines repayment assistance and forgiveness. Your repayment term will be extended over 20 to 25 years. Once this term ends, anything remaining will be forgiven if you remain current on all your payments.
How long does it take to pay off student loans?
You'll find accounts online of people paying off their loans in a year or two. And while I'm sure they're true, that's not the case with most people. Take, for example, Barack Obama, who paid off his student loans in his 40s. Actor Kerry Washington paid off her loans in her mid-thirties, and actor Miles Teller, who racked up more than $100,000 while attending New York University, notoriously hadn't paid his loans up until Maverick came out.
Repaying student loans can be a long and arduous process. Generally, student loans are paid off in 10 to 25 years. According to EducationData.org, the average borrower takes 25 years to pay off their student loans, and some take as much as 45 years.
The bottom line
Paying off student loans isn't a walk in the park; the data backs this statement! It may seem impossible to get rid of all that debt in a short amount of time. But you can do many things to help pay it off faster and become more financially independent in the process. The easiest way of achieving that is to make additional payments each month. And if you can't make extra payments, you should seriously consider a side hustle for some extra cash to pad your bottom line. Another option is to make biweekly payments instead of monthly and look into student loan consolidation (a new loan to repay your old loan) or student loan refinancing.
It's important not to get discouraged if it seems impossible to get out of debt quickly - there are ways to make it work! The most important thing to remember is that you don't have to do it all at once. Just take it one step at a time, and you'll start to see the progress you're making toward becoming debt-free in no time!
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Writer
Jasir Jawaid is Joy Wallet's Assistant Editor. He has more than 13 years of experience as a journalist covering Wall Street, equities, financial policy and regulation, and cryptocurrency and blockchain.
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