How Do You Pay Student Loans

Last Updated on May 19, 2022

If you’re looking for the easiest way to pay off your student loans, we’ve got some good news and some bad news. The good news is that you can pay off your student loans in as little as three years by making extra payments. The bad news is that it’s not going to be easy—but it will feel like a breeze after a few months!

Here’s how:

  1. First, take a look at your budget. If you’re willing and able, cut back on expenses like eating out or going out with friends so you can put more money toward your student loans each month.
  2. Next, find an online payment system that lets you set up automatic monthly payments from your bank account or credit card (we recommend [insert product name]). This way, even if you forget about it for a few days or weeks at a time, the money will still be coming out of your account every month without fail!
  3. Finally, commit yourself to making these extra payments for the next three years or so—that’s how long it should take for them to pay off completely
How to Pay Off Student Loans Quickly: 10 Steps for Success |  RamseySolutions.com

How Do You Pay Student Loans

1. Get on a budget.

Y’all, this one is a game changer. If you’re not already doing this, now’s the time to make a budget and stick to it. A zero-based monthly budget will show you exactly where your money is going and where you can cut back. (I’m looking at you, late-night dollar menu. Those Beefy Fritos Burritos can add up calorically and financially!)Find out if you qualify to refinance your student loan and get rid of debt faster.

When you stick to a budget, you might even find “extra” money you didn’t know you had, which is a way better plan than hoping to find $10 in your old windbreaker jacket from high school. Once you start throwing all that extra money at your student loans each month, you’ll start making progress in no time!

The easiest way to budget is with our free budgeting app, EveryDollar. You can even put a line item in your budget for each student loan you’re paying off. That way you’ll see the progress as you keep crushing that student loan debt—and it’ll feel pretty sweet.

2. Find out your payoff date.

Check out our Student Loan Payoff Calculator, where you can enter in your monthly payment, loan balance and interest rate for each student loan you’ve got. You’ll see the date you’ll pay off each loan if you keep making those minimum payments. You might not like what you see at first, but don’t worry. Move straight to point #3 to see what happens if you get focused on paying more than the minimum.

3. Pay more than the minimum payment.

You’ve probably heard this one before. If you’re only paying the minimum payment each month, you’re not getting anywhere fast. You might not even be breaking even with the interest you’re piling up! By making larger payments, you’ll be able to attack the amount you owe at a quicker rate. Start playing around with that Student Loan Payoff Calculator to figure out how fast you can pay off your loans by making extra payments.

Here’s an example:

  • Let’s say you have the typical amount of student loan debt that the average student graduates with, which is $38,792.1 (That number could be made up of multiple loans, but for the sake of this example, we’ll say it‘s all one loan.)
  • With a 5.8% interest rate (which is the industry average) and a 10-year loan term (which is super common), you’d be looking at a minimum monthly payment of $426.78.2
  • Because of interest, your total repayment amount would be $51,489—that’s $12,697 more than your original loan! Yikes. That blows.
  • But let’s say you decided to pay just 20% more than your minimum payment each month (that’s $85.36). That would put your monthly payment at $512.14—which means you’d pay off your entire loan in about eight years and save $2,794.04 in interest (plus over two years of your life)! That’s more like it.
  • If you paid over 20% more than your minimum payment each month, you’d pay off your loan even faster (I like that plan even better). You get the picture!

A word to the wise, though: When you pay more than the minimum monthly payment, the student loan servicers might put that extra amount onto next month’s payment. That pushes the due date back, but you won’t actually pay off your loan any faster. Tell your loan servicer to keep next month’s due date the same and to just apply the extra amount of money to your current loan balance.

Maybe you’ve heard about biweekly payments, where you make two payments per month. I’d only suggest setting this up if you’ve got just one loan you’re paying down, and the double payments are motivating you to work way harder to pay it off. Otherwise, I want you knocking out each loan one at a time, smallest to largest, in what’s called the debt snowball method. (I’ll cover that more in point #5.)

All that said, if you’re having trouble even making the minimum payment each month, you might think the idea of paying more money is a pipe dream. With that in mind . . .

4. Make some financial sacrifices.

Remember when I brought up sacrifice earlier? Like saying no to late-night fast food? Here’s where it comes into play.

Look at your lifestyle. What extra stuff have you been living with that you can do without? Bye bye, cable package. See ya, bougie subscription boxes. Maybe cut your housing cost in half by finding a roommate. Do you have a guest room that’s not getting much use these days? Rent that sucker out! Just think how quickly you could pay off your loans if your housing costs were cut way down.

How about selling some junk you don’t need anymore? Dig through your closet, garage and storage to see what you could put on eBay, Facebook Marketplace or Craigslist. Then, add up what you spend eating out every week. Ditch the $7 oat milk lattes and brew your own coffee at home. Eat your leftovers (they’re not that bad) or meal prep for the week instead of spending $10–20 on lunch. Get savvy at the grocery store. Trust me—there are plenty of creative ways to save. But it starts with being willing to make some temporary sacrifices for some long-term gains.

5. Pay off student loans with the debt snowball.

The debt snowball method has helped a ton of people dump their debt, and it can work for student loans too. First, list all your loan debts (private loans, secured loans, unsecured loans—you name it) from smallest balance to largest. Start paying on the smallest student loan balance first. Throw any extra money you have into paying off that first debt while still paying the minimums on everything else.

Once you’ve paid off the first debt, move to the second-smallest balance. Take everything you were putting toward the first one and add it to the minimum of the second balance. Once that debt is paid, move on to the next one and repeat the process until you’re finally out of debt. Boom.

You might be thinking, Nope—this is going to take forever! Don’t get it twisted. Most people that go all in on this plan pay off their debt in 18 to 24 months! That’s not quite forever, is it? My favorite thing about working the debt snowball method is that you’ll feel the progress you’re making as each student loan disappears. Knocking those smaller loans out first will give you a couple of quick wins and help you stay motivated to crush the bigger student loans fast!

Just make sure you don’t pocket the extra payment money as you pay off each loan. Keep the momentum going by rolling that money into the next loan payment.

Pro tip: Don’t do this on your own. Take a class like Financial Peace University (FPU) and learn how to work the plan that’s changed almost 10 million lives. This plan will help you stay on the debt-free grind and get rid of your debt as fast as humanly possible. You can get FPU today (and the premium version of the EveryDollar app I mentioned earlier) with a free trial of Ramsey+.

6. Apply every raise and tax refund toward paying off your student loans.

What do most people do when they get a raise? They blow through it like it’s nothing. And then they wonder why it felt like they didn’t get a raise.

As you keep growing in your career and getting promotions as you go, put your extra income toward paying off those student loans. Don’t move to a bigger house. Don’t buy a new car. Don’t buy any designer threads. And don’t upgrade your smartphone. You were living without that extra money before, and you can keep living without it a little while longer. Now is not the time to upgrade your lifestyle. You can do that later when you don’t have a payment in the world! Use your income boost to make major progress in your fight against student loan debt.

The same goes for your tax refund. How many people do you know who take that “free money” and burn it all on new furniture, clothes or a 55-inch flat-screen TV? One extra deposit into the bank account, and suddenly a little voice in your head yells, Treat yourself!

Here’s a not-so-fun fact: Your tax refund isn’t free money from the government. They’re just giving you back your own money because you paid them too much. They were just holding onto your money all year long with zero percent interest earned! If you really want to treat yourself, take that refund and put it directly toward paying off a big chunk of your student loans!

7. Increase your income with a side hustle.

If your biggest problem is income, pick up a part-time job on the nights or weekends so you can stack cash quickly. Then toss that extra cash directly at your student loan debt! There are a ton of side hustle options out there—everything from driving an Uber and delivering food to walking dogs and house-sitting. When I was paying off my student loans, I drove for Lyft and Uber and did freelance marketing work to pay those bad boys off even faster.

And don’t hit me with the “I don’t have time for another job” excuse. If you have time to hang out with your friends, scroll Instagram, or watch Netflix, you have time to make a few extra bucks.

Remember, the extra job won’t last forever. You’re just trying to get intense and kick that student loan debt out of your life so you can move on with your life.

8. Don’t bank on student loan forgiveness.

Okay, this one really grinds my little gears. I know people probably told you that taking out student loans was no big deal because you could just get them forgiven later.

But student loan forgiveness isn’t really the dream come true it sounds like. First off, with the current program, there are so many requirements you have to meet in order to be eligible (like working in a public service job for 10 years). And even then, forgiveness isn’t guaranteed.

Now, there’s been a lot more talk lately about the government wiping out student loan debt across the board. Okay, that would be awesome, but don’t bank on it. I mean, Biden talked a lot about that sweet student loan forgiveness. So far, he’s canceled nearly $3 billion of current student loans.3 That may sound like a lot until you hear the current federal student loan debt sits at $1.57 trillion (as of summer 2021).4 So after all that talk, only 0.19% of the debt was forgiven. Listen: Politicians make a lot of empty promises. It doesn’t matter who’s in the White House. You’re responsible for taking care of your money and your debts.

You’re better off having a job that pays well (that you actually like) so you can go ahead and pay off your student loans as fast as you can. That way you won’t spend years of your life waiting to have your loans forgiven—it may never happen.

P.S. If you’re into documentaries, you need to check out this new one called Borrowed Future—it’s all about the student loan debt crisis in America. But be forewarned: it might make you a little mad. Borrowed Future premieres October 14 on Amazon Prime Video, AppleTV or Google Play.

9. Refinance student loans—if it makes sense.

Before you go running into the arms of an all-too-eager lender, know that refinancing student loans is not the right move for everyone. If someone told you this is the absolute best way to pay off student loans, they were lying. But that doesn’t mean you shouldn’t at least look into refinancing.

When you refinance, you’re taking all your loans—federal, private, often a mix of both—to a lender who pays them off for you. And now you owe this new lender the money they just fronted you.

With a refinance, the goal is to secure a better rate and better payment terms—which means you pay less each month and for a shorter amount of time to one lender instead of more money for a longer period of time to one or more lenders.

If you’re in a position to keep paying the same amount you were paying before you refinanced, even better. Because that means you’re throwing more at the principal each month than you were before and avoiding more interest. Plus—and here’s the best part—if you’ve got other debt outside your newly refinanced student loan, you can ramp up your debt snowball even faster once you knock out that student loan. (Head back to #5 for a debt snowball crash course!)

Remember though, you’re refinancing to get a better rate and payment terms. If that’s not what you’re being offered, don’t refinance. It’s a bad deal. Make sure to do your homework and read the fine print, or you could end up deeper in the hole than you were before.  

10. Stay motivated and you’ll destroy your student loan debt ASAP!

Look, I’m not here to beat you up because you took out student loans in the past. I ain’t no bully. But I do want you to experience the power of living debt-free. There’s no need to drag out your student loan payments for the next five, 10 or even 20 years. When your money doesn’t have Sallie Mae’s name on it every month, you can do so much more with it. Just think about how many Beefy Fritos Burritos that freed up money could buy!

If you’re ready to kick-start your journey to dumping student loan debt, then start with our 64-page quick read, Destroy Your Student Loan Debt: The Step-by-Step Plan to Pay Off Your Student Loans Faster. Then jump into that free trial to Ramsey+, your membership to the content that walks you through your debt-free journey and the tools you need to make it happen.

Remember, the only magic in this is you and how hard you’re willing to work. But it’s totally worth it. You’re worth it. Keep fighting the good fight (and the bad debt!).

student loan forgiveness

If you are employed by a U.S. federal, state, local, or tribal government or not-for-profit organization, you might be eligible for the Public Service Loan Forgiveness Program. Keep reading to see whether you might qualify.

To ensure you’re on the right track, you should submit a Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification & Application (PSLF Form) annually or when you change employers. We’ll use the information you provide on the form to let you know if you are making qualifying PSLF payments. This will help you determine if you’re on the right track as early as possible.

*This provision will be waived through October 31, 2022 as part of the limited PSLF waiver. Learn more.

Suspended Payments Count Toward PSLF and TEPSLF During the COVID-19 Administrative Forbearance

If you have a Direct Loan and work full-time for a qualifying employer during the payment suspension (administrative forbearance), then you will receive credit toward PSLF or TEPSLF for the period of suspension as though you made on-time monthly payments in the correct amount while on a qualifying repayment plan.

To see these qualifying payments reflected in your account, you must submit a PSLF form certifying your employment for the same period of time as the suspension. Your count of qualifying payments toward PSLF is officially updated only when you update your employment certifications.

Digital signatures from you or your employer must be hand-drawn (from a signature pad, mouse, finger, or by taking a picture of a signature drawn on a piece of paper that you then scan and embed on the signature line of the PSLF form) to be accepted. Typed signatures, even if made to mimic a hand-drawn signature, or security certificate-based signatures are not accepted.

Note: In-grace, in-school, and certain deferment, forbearance, and bankruptcy statuses are not eligible for credit toward PSLF.

Have questions? Find out what loans qualify and get additional information about student loan flexibilities due to the COVID-19 emergency.

Qualifying Employer

Qualifying employment for the PSLF Program isn’t about the specific job that you do for your employer. Instead, it’s about who your employer is. Employment with the following types of organizations qualifies for PSLF:

  • Government organizations at any level (U.S. federal, state, local, or tribal) – this includes the U.S. military
  • Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code

Serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF Program.

The following types of employers don’t qualify for PSLF:

  • Labor unions
  • Partisan political organizations
  • For-profit organizations, including for-profit government contractors

Contractors: You must be directly employed by a qualifying employer for your employment to count toward PSLF. If you’re employed by an organization that is doing work under a contract with a qualifying employer, it is your employer’s status—not the status of the organization that your employer has a contract with—that determines whether your employment qualifies for PSLF. For example, if you’re employed by a for-profit contractor that is doing work for a qualifying employer, your employment does not count toward PSLF.

Other types of not-for-profit organizations: If you work for a not-for-profit organization that is not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, it can still be considered a qualifying employer if it provides certain types of qualifying public services.

Full-time Employment

For PSLF, you’re generally considered to work full-time if you meet your employer’s definition of full-time or work at least 30 hours per week, whichever is greater.

If you are employed in more than one qualifying part-time job at the same time, you will be considered full-time if you work a combined average of at least 30 hours per week with your employers.

If you are employed by a not-for-profit organization, time spent on religious instruction, worship services, or any form of proselytizing as a part of your job responsibilities may be counted toward meeting the full-time employment requirement.

Eligible Loans

Any loan received under the William D. Ford Federal Direct Loan (Direct Loan) Program qualifies for PSLF.

Loans from these federal student loan programs don’t qualify for PSLF: the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan (Perkins Loan) Program. However, they may become eligible if you consolidate them into a Direct Consolidation Loan.

Student loans from private lenders do not qualify for PSLF.

Under normal PSLF Program rules, if you consolidate your loans, only qualifying payments that you make on the new Direct Consolidation Loan can be counted toward the 120 payments required for PSLF. Any payments you made on the loans before you consolidated them don’t count. However, if you consolidate these loans into a Direct Loan before October 31, 2022, you may be able to receive qualifying credit for payments made on those loans through the limited PSLF waiver. 

About the author

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