How To Pay Off Student Loans Faster With Low Income

Last Updated on July 29, 2023

Hey, you. I’m [name] and I’m here to tell you how to pay off your student loans faster with low income.

When I was in college, I had $30,000 in student loan debt. When I graduated, that number was closer to $60,000. And then after graduating from law school and starting my career, it skyrocketed to over $100,000—all because of interest!

I know what you’re thinking: “No way! There’s no way I can pay that off!” But don’t worry—I’ve got some tips for you. The first thing is that you need to understand how interest works on student loans. Interest accrues daily at a certain rate based on the amount owed and your credit history. So the more money you owe, the higher your payments are going to be because more money will be going toward interest instead of principal (the actual amount borrowed).

How To Pay Off Student Loans Faster With Low Income

9 ways to pay off your student loans fast

Woman takes notes while working on laptop.

  1. Make additional payments.
  2. Establish a college repayment fund.
  3. Start early with a part-time job in college.
  4. Stick to a budget.
  5. Consider refinancing.
  6. Apply for loan forgiveness.
  7. Lower your interest rate through discounts.
  8. Take advantage of tax deductions.
  9. Ask your employer about repayment assistance.

1. Make additional payments

If you can afford it, make larger payments to cut the principal more quickly and reduce the total payoff time. By reducing the principal balance, you’re minimizing the duration of the loan period and the interest accrued.

For example, a $25,000 student loan with 6.8 percent interest and a 10-year payback period would cost $288 a month. Using a student loan calculator, you can see that paying $700 a month instead of $288 enables the borrower to repay the loan in just over three years.

Another strategy is to add payments, sending in checks every two weeks rather than monthly.

“Just be sure to advise your loan servicer to apply your extra payment to your principal balance, rather than placing your account in a ‘paid ahead’ status,” says Jessica Ferastoaru, student loan counselor at Take Charge America. “This will allow you to pay down your principal balance more quickly and save money on interest.”

If you have multiple loans, there are several strategies for choosing which to send those extra payments to. To save the most money, it’s usually best to start with the loan with the highest interest rate.Key takeawayMaking larger payments will help you cut through the principal quicker, which will allow you to pay off your loan sooner.

2. Establish a college repayment fund

If you’re not sure how much more you can devote to your student loans every month, set up automatic transfers to a separate savings account specifically for college debt. Transferring money automatically into savings is effective because you won’t be able to spend it on something nonessential like clothes or dining out.

Just make sure to set up a separate account for paying back your college debt. Don’t use a checking or savings account you already have, because you might be tempted to use that money for something other than your student loans. Compare savings accounts and put your money in a high-yield savings account to maximize your returns.Key takeawaySetting up an account specifically for your student loan repayment funds can be a great way to compartmentalize your finances or control out-of-budget spending.

3. Start early with a part-time job in college

Getting a part-time job while attending college is one way to keep college debt in check, because you can use those earnings to get a head start on paying down your balance.

Let’s say you’re able to work a part-time job that allows you to put away $500 a month. In a year, that’s $6,000 you can put toward paying off your loans. What’s more, you can earn up to $7,040 a year without affecting your eligibility for need-based financial aid.

Check your school’s resources or career center to see if they’re hiring for any on-campus jobs. Typically, on-campus jobs tend to be more understanding of unusual or busy class schedules.Key takeawayIf you’re still able to properly manage your coursework, a part-time job is a great way to earn enough money for a student loan savings account while learning time-management skills.

4. Stick to a budget

Not knowing how to manage finances properly can prevent students from paying off their loans quickly. That can lead to delays in pursuing more fulfilling financial goals. By planning and understanding your monthly cash flow, you can make some necessary sacrifices and avoid falling off the budgetary wagon.

“If you’re trying to pay down your student loans faster, one of the best ways to reach your goal is to develop a budget,” says Ferastoaru. “If you’re able to meet a savings goal each month by sticking to a budget, you can use that money to pay down your student loans.”

Do an assessment of your spending habits and your ability to keep a budget. If you find it hard to maintain a solid budget as a college student, use a student budget calculator to help you get on track and stay there.Key takeawayYour financial health and spending habits can greatly impact your ability to pay off your student loans. Be diligent about sticking to a budget during your repayment period.

5. Consider refinancing

If you’re not sure how to pay off student loans quickly — or if it doesn’t seem feasible — you may be paying too much in interest.

In this case, you might want to consider refinancing your student loans for a lower interest rate, a shorter repayment period or both. While refinancing federal loans with a private lender will cause you to lose some federal benefits, it could also allow you to pay off your loans faster.

Timing is key with this strategy. Your credit score is typically going to be at its lowest immediately after graduation, which generally means that the interest rates you’re offered will be higher. Many lenders also require you to have stable income or employment history to qualify. This makes it doubly important to shop around with a few lenders in order to see which offers you the best rates.

You can refinance your loans more than once, which may be worthwhile if you drastically improve your credit score or increase your annual income.Key takeawayRefinancing may be a good option if you have private loans. While it’s not for everyone, refinancing can help you score a lower interest rate or different repayment terms.

6. Apply for loan forgiveness

Forgiveness programs can eliminate all or part of your student loan debt, but each program has unique requirements and strict approval standards.

The most well-known program is Public Service Loan Forgiveness (PSLF). To be eligible for this program, you must be employed full time in a public service position by a government or nonprofit organization and make 120 qualifying payments under an income-driven repayment plan. Getting approved for the program is difficult, so read through the details carefully to stay on track.

The Teacher Loan Forgiveness program is another option. To qualify, you must have an eligible loan under the Direct Loan Program or FFEL Program and teach full time for five consecutive years in a low-income school or educational service agency. At least one of those years must be after the 1997-98 academic year. The program forgives up to $5,000 or $17,500, depending on your specialty.

It’s also possible to have a portion of your student loans forgiven if you’re on an income-driven repayment plan. Once the 20- or 25-year repayment term ends with these programs, any remaining balance is forgiven. If you hit the end of your repayment period before 2026, the forgiven amount is not taxable.Key takeawayIf you’re willing to work in a specific occupation and adhere to a variety of other program requirements, it may be possible to get a substantial portion of your loans forgiven.

7. Lower your interest rate through discounts

Most lenders will offer a 0.25 percent to 0.5 percent discount if you set up automatic payments on your loan.

In addition, private lenders may offer other interest rate discounts if you meet certain criteria, like making a certain number of on-time payments or taking out another loan with the same company. If you have private student loans, contact your lender and ask about any opportunities for interest rate reductions or discounts.Key takeawayIt may be possible to reduce the interest rate on your existing loans by setting up autopay or asking about loyalty discounts.

8. Take advantage of tax deductions

The federal government offers a student loan interest deduction on your taxes for interest paid during the year on qualified loans. The law allows you to deduct up to $2,500, depending on your adjusted gross income. The deduction is available for both federal and private student loans.

You can claim this tax deduction if you’re legally required to pay interest on a qualified student loan and your filing status is not married filing separately. There are also adjusted gross income limits for this program, which are set annually. You do not need to itemize to claim this deduction.

Those who qualify for the deduction will generally save a few hundred dollars on their income taxes, which could help with student loan repayment. “If you pay less in taxes, this could free up some extra money to pay down your debt. It’s a good idea to speak with a tax advisor to make sure you’re taking advantage of any relevant tax benefits related to your education,” says Ferastoaru.Key takeawayThe student loan interest deduction allows you to deduct up to $2,500 in interest paid on federal and private student loans.

9. Ask your employer about repayment assistance

There are many employers that have begun offering student loan repayment assistance or tuition reimbursement. Some employers, including Starbucks and Walmart, even offer free college for workers who sign up for degree programs within a chosen network of courses and schools.

Employers can contribute up to $5,250 toward an employee’s college tuition or student loan repayment assistance through 2025 with favorable tax treatment. This benefit is not considered taxable income for the employee, which is a major boon for workers who are pursuing higher education while continuing to work.

Employers can deduct the expense on their end as well, paving the way toward a considerable tax benefit on both ends. Check your employee manual or speak with your HR department to see what kind of tuition assistance or loan repayment options are available at your company.

how to pay off student loans in 5 years

How to pay off student loans in 5 years

If you’re really serious about learning how to pay off your student loans quickly, use a student loan prepayment calculator. This will help you figure out how much more you’ll need to pay each month on your loans to pay them off within five years (or another term of your choosing).

Once you at least have a ballpark figure in mind …

1. Establish your goals

To stay motivated, think about your personal and financial goals. If student loan debt is holding you back from starting the business you dreamed of or buying a home, that can be a powerful motivator.

Print out a picture or symbol of your goals and tape them next to your computer or on your credit card to remind you of what you’re trying to achieve.

2. Build a budget

The most important part of your repayment plan is your budget. If you don’t have one, you have no idea how much money is coming in or going out, or how much extra cash you can realistically allocate to your student loans.

3. Cut expenses

Once you have a budget in place, identify areas where you can cut back to free up more money for your student loan payments. Bring up your latest bank statements and credit card bills to identify your spending patterns and recurring charges.

Ways to save money are specific to each person, but common areas to cut back on include:

  • Subscriptions: A standard Netflix subscription costs $8.99 per month. That alone probably won’t put a dent in your budget, but combined with other TV subscription services, a gym membership and the online styling service that sends you new clothes on a monthly basis, these expenses can add up fast. Cut subscriptions you don’t use first, then dig deeper to determine whether you truly need the others.
  • Food: Your diet can seriously eat into your budget. Whether you’re dining out for lunch each day or buying a $2 cup of coffee every morning, this is money not going toward paying off your student loans. Take a close look at your daily diet to find ways to curb your spending (without harming your health).
  • Transportation: Driving to work solo is filled with expenses that can add up fast, such as gas, tolls and parking. Ease the burden by carpooling with co-workers, taking public transportation or biking to work. In addition to cutting costs, you’ll also be doing the planet a favor.
  • Clothes: Trendy clothes go out of style quickly, so focus on building a wardrobe filled with classic pieces. Save money by shopping at secondhand stores and focus on quality instead of quantity. Unsubscribe to emails from your favorite stores, so you won’t be tempted to shop online when a deal arrives in your inbox. You might also consider selling clothes online.
  • Entertainment: Going out on the town isn’t the only way to have a fun night with friends or your significant other. Plan movie nights and game nights at home to save money while still spending time with your favorite people. When you need a leisure activity, search for free entertainment, such as a concert in the park, a hike or a visit to a museum that offers free admission during certain days of the week or month.
  • Living arrangements: When figuring out how to pay off student loans in five years, living expenses are a huge factor. If you can live with your parents or relatives, cutting back on your rent payment can seriously help with paying off student loans quickly. Alternatively, getting a roommate also can ease the burden of living expenses, if living with family isn’t an option.

4. Increase your income

While budgeting and cutting costs are smart steps, there are only so many expenses you can eliminate. If you’re wondering how to pay off student loans in five years, boosting your income is an important step. While earning more money might sound impossible, you might be able to get a wage increase either at your full-time job or a new side gig.

If you’re doing good work at your job and are contributing to the company, asking for a raise can be an easy way to boost your salary. Approximately 70% of people who ask for a raise end up getting one, according to a 2018 report from PayScale, so it’s worth speaking up if you don’t feel your compensation is adequate.

If a raise isn’t an option or you want to boost your income even more, a side hustle can help pay down your debt. Some ideas include:

  • Transcribe audio and video recordings: Earn extra cash by transcribing audio and video recordings in your spare time. You’ll likely need to take a transcription test, but if you pass, you’ll be able to pick up projects on your schedule. For example, a service called Rev pays $0.30 to $1.10 per minute for transcribing audio and even more for translations.
  • Become a virtual assistant: If you’re organized and detail-oriented, pick up some extra cash by serving as a virtual assistant. Do note, if you’re balancing this gig with a day job, you’ll need to find clients with flexible hours.
  • Serve as a mystery shopper: Use apps like EasyShift to find mystery shopping gigs in your area. Earnings vary depending on the size of the city you live in and the number of jobs you pick up.
  • Join focus groups and fill out online surveys: Help marketers better understand their audience and get paid for it. Companies like UserTesting and uTest compensate you for testing out products.
  • Housesit: If you’re willing to leave the comforts of home, you can earn extra cash by housesitting and/or pet sitting. For a relatively nominal fee, sites like MindMyHouse and Nomador offer access to thousands of potential house-sitting jobs.
  • Become a driver: If you have a car, there’s no shortage of flexible job opportunities. You can work as a professional driver for Uber or Lyft, deliver food for companies like DoorDash or Postmates or deliver packages through Amazon Flex. Pay varies by gig, but most Amazon Flex drivers earn $18 to $25 per hour.
  • Become an umpire or referee: An ideal job for sports lovers, being an umpire or referee allows you to earn extra cash by becoming an integral part of the game. Little League umpires earn an average of $12 to $28 per hour, according to Glassdoor data.

Another factor to consider is your current job. While you may love your current gig, if the salary is not enough for you to manage your expenses and pay off your student loans quickly, it may be worth transitioning to a new job in a higher-paying industry. It’s a tough decision, but it might pay off in the long run.

5. Look for grants and assistance programs

There are some grants and repayment assistance funds available to help borrowers pay back their student loans. Particularly if you’re a teacher, nurse or medical professional, you might be able to find programs that could eliminate some or all of your debt.

While the federal government and nonprofit organizations may offer student loan aid, also check with your state. Some areas offer programs for professionals in particular fields or simply for living and working in the state. Check out our guide to student loan repayment grants or use our student loan repayment search tool to find a program that can accelerate your debt payoff.

6. Check with your employer

A growing number of employers are establishing student loan repayment assistance programs for their workers. As both a recruitment and retention initiative, helping employees repay their student loans can improve company morale and reduce stress.

When looking for a new job, student loan repayment aid can be a huge benefit. Ask potential employers if they have a program set up or ask your current boss if the company would be willing to look into it. Many startups and small businesses are adding student loan programs to compete for top talent.

7. Consider refinancing your loans

If you are laser-focused on paying off student loan debt in five years, one approach that can help you accomplish your goal is refinancing your loans. If you refinance, you’ll work with a private lender to take out a new loan for the amount of your current federal or private loans.

The new loan will have a different interest rate and repayment term than your old loan. If you have good credit and steady income, you could get a significant interest rate reduction, which can help you save money over the length of your repayment term.

While refinancing can also lower your monthly payment, sticking with your current payment — or adding to it — can help you pay off your student loan debt even faster. However, think carefully about whether or not refinancing is for you. By refinancing your federal loans, you give up certain benefits, such as access to income-driven repayment plans or deferment options.

To make an informed decision, use a refinancing calculator to find out how much you could save and how much faster you can pay off your student loan debt by refinancing.

STUDENT LOAN REFINANCING CALCULATOR
Step 1: Current loan info
Student loan balanceStudent loan balance tooltip
Average interest rateAverage interest rate tooltip
Term
Step 2: New loan info
New interest rateNew interest rate tooltip
New loan term (years)New loan term (years) tooltip
Interest
Monthly
Rate
Years
ORIGINALNEWSAVINGS
Interest$10,998$9,527+$1,471
Monthly$383$371+$12/mo
Rate5.7%4.99%+ 0.71%
Years10yr10yr

Refinancing $35,000 in student loans at a rate of 4.99% with a 10-year term would save $1,471 in interest paid and reduce your monthly payments by $12/mo.

  • 6 Best Banks To Refinance Your Student Loans
  • 10 Questions To Ask Before Refinancing
  • Top Lenders To Refinance Your Parent PLUS Loan

Student loan refinancing APRs as low as 1.74% Variable . Check your rate in 2 minutes.

TotalPayments
MonthlyPayments
CURRENT

$10,998

05/2032

NEW

$9,527

05/2032$0$3K$5K$8K$11K

8. Treat yourself

While you’re working toward paying off your student loan debt in full, it can be easy to feel deprived or exhausted by all of your hard work. That’s why it’s so important to set up small, achievable milestones along the way. When you meet those little goals, reward yourself with something affordable that refreshes you.

For example, you could celebrate every time you pay off $5,000 of your student loan debt. Have a picnic in the park with friends, indulge in a lazy day complete with a Netflix binge or open up a nice bottle of wine. Little treats can help you feel motivated to see your plan through.

If you’ve been trying to come up with a plan for how to pay off student loans in five years, know that it is achievable. If you’re diligent about both your spending and earning potential and you approach your student loans strategically, you can pay off your loans quicker than you might have imagined.

About the author

The Editorial Team at Infolearners.com is dedicated to providing the best information on learning. From attaining a certificate in marketing to earning an MBA, we have all you need. If you feel lost, reach out to an admission officer.
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