How To Pay Off Your Student Loans Faster

Last Updated on January 19, 2023

How to Pay Off Your Student Loans Faster

Student loans are a burden that can weigh heavily on your mind. However, if you have the right information and plan in place, it’s possible to pay off student loans faster than ever before. In this article, we’ll cover everything from how much money you could save by consolidating your loans to what strategies you can use to increase your savings rate. Let’s start with a quick overview of why student loans are so important.

Why You Should Pay Off Your Student Loans Faster

Paying off student loans faster is one of the best things you can do for yourself. Not only will it help you avoid paying extra interest over time, but it will also give you more financial flexibility in the future. Here are just a few reasons why paying off student loans sooner rather than later may be a good idea:

It allows you to start saving for retirement earlier—instead of waiting until after graduation when everyone else has started saving too late already! The sooner you start saving for retirement (or any other goal), the more time there is for compounding interest rates to work their magic on your behalf instead of against them! You’ll be able

How To Pay Off Your Student Loans Faster

Use these 10 Strategies to Pay Off Student Loans Fast


1. Try to make monthly payments while loans are deferred

Ideally, while you are still in school or when you have recently graduated, you’ll already be looking into how to pay off your student loans fast.

While you are in school and shortly after graduation, you may not be required to make loan payments because your loans are in deferment. Unfortunately, interest keeps accruing during this time, except for Subsidized Direct Loans. 

If you are serious about learning how to pay off private student loans fast, you’ll make payments while you are still in school that are large enough to cover the cost of interest. If you do that, you can avoid capitalization of interest, which happens when your accrued interest is added onto your loan balance.

Capitalization makes your loans more expensive, because you end up paying interest on interest. That means they can take longer to pay off. You can avoid this if you can at least cover interest costs. 

2. Choose your repayment plan carefully

Federal student loans offer a choice of repayment plans, including options for extended repayment. If you’re hoping to figure out how to pay off student loans fast, you should likely opt for the standard payment plan. That will give you higher monthly payments than many other plans that are available, but it will also ensure your loan is paid in full within 10 years. 

If you have private loans, then you’ll have to choose your loan repayment timeline when you borrow. Choose the shortest loan term you can afford if your goal is to figure out how to pay off private student loans fast. A shorter loan term will usually result in a lower interest rate and, of course, a higher monthly payment that ensures your loan is paid off sooner.

3. Pay extra each month

If you can pay a little bit of extra money toward your loan each month, you’ll pay down your loans faster. Just be sure to specify that you want the extra payment applied to reduce your principal. Otherwise, loan servicers might simply apply the extra money towards the next month’s payment instead of using it to reduce your balance. 

4. Pay your student loans biweekly

If you get paid twice per month, like most people do, you can opt to pay half your monthly student loan payment out of each paycheck rather than just making one monthly payment. Since you get 26 paychecks each year, you’ll end up making the equivalent of an extra month’s worth of payments if you take this approach.

5. Make extra lump sum payments whenever you can

If you come into any unexpected money, whether it’s a bonus at work or a birthday card with a check in it or a tax refund, put it towards making an extra payment on your student loans. Again, make sure to specify you want the extra money to go toward reducing your principal. 


6. Sign up for automatic payments

If you sign up for autopay, you can qualify for a .25 percentage point discount from federal student loan servicers. Many private loan lenders also provide a similar discount. 

This may not seem like much, but by reducing your interest rate even a little bit, you can make it easier to pay down more principal and get free of your loans sooner. If you owe a lot of money, even a small change in rates could also make  a big difference. For example, if you’re trying to figure out how to pay off 100K in student loans fast, this technique could be a really valuable one. 

7. Enlist the help of loved ones

If you are comfortable, consider asking your friends and family to help with loan payoff efforts. See if they might be willing to give you money toward your student loans in lieu of holiday gifts, for example. 

8. Pay off your higher interest loans first

If you have multiple different loans, focus on paying extra towards the ones with a higher interest rate first. This will allow you to get rid of your more expensive debt ASAP, which makes it less costly to repay what you owe. That can make it easier to become debt-free faster. 

9. Look for an employer offering student loan payoff help

A growing number of employers offer student loan repayment assistance. If you’re looking for options for how to pay off your student loans fast, it may be smart to consider this in your job search. If you can find an employer that gives you money towards student loan payoff, this extra cash can help pay down your principal balance more quickly so you can become debt-free ASAP. 

10. Consider student loan refinancing

If you have private student loans, refinancing them with a different private lender could help you reduce your interest rate and make it easier to figure out how to pay off private student loans faster. 

You can lower total borrowing costs and make it easier to pay your loan faster if you can qualify for a new loan at a lower rate. You can also choose a loan with a shorter repayment timeline if you want to be sure you’re paying off your loans as soon as possible. 

how to pay off loans faster calculator

Debt Payoff Calculator

The calculator below estimates the amount of time required to pay back one or more debts. Additionally, it gives users the most cost-efficient payoff sequence, with the option of adding extra payments. This calculator utilizes the debt avalanche method, considered the most cost-efficient payoff strategy from a financial perspective.

Fixed total amount towards monthly payment?Yes   NoIf “Yes” is chosen, after a debt has been paid off, the money that was being paid to that specific debt will be distributed towards paying off remaining debts; the total amount initially allotted to monthly payments will be fixed until all debts are paid off. If “No” is chosen, after a debt is paid off, the monthly payment for that particular debt will not be distributed towards paying off the remaining debts. In this case, the total amount allotted to monthly payments decreases as debts are paid off.

RelatedDebt Consolidation Calculator | Payment Calculator

Loans and debts are basic economic activities in modern society. Companies, individuals, and even governments assume debts to maintain operations. Most people will take on some loans during their lifetime, be it mortgage loans, student loans, auto loans, credit card debt, or other obligations.

If used responsibly, debts can help people own homes, purchase cars, and keep their life rolling. However, debt can also lead to high levels of stress. This can cause severe mental, physical, and medical problems over time. Also, excessive debts, especially credit card debt, can encourage people to overspend, costing them significant amounts of money in interest expenses. It may also interfere with financial planning, reduce credit scores, and eventually damage personal lives.

Pay off Debts Early

Most people like the feeling of being debt-free and, when possible, will pay off debts earlier. One common way to pay off loans more quickly is to make extra payments on top of the required minimum monthly payments.

Borrowers can make one-time extra payments or pay additional amounts every month or year. Those extra payments will lower the principal amounts owed. They also move the payoff date forward and reduce the amount of interest paid over the life of the loan.

The Debt Payoff Calculator above can accommodate a one-time extra payment or multiple periodic extra payments either separately or combined.

Before deciding to pay off a debt early, borrowers should find out if the loan requires an early payoff penalty and evaluate whether paying off that debt faster is a wise decision financially.

While making extra payments towards a loan can help, it is unnecessary in most cases, and the opportunity costs deserve consideration. For instance, an emergency fund can bring peace of mind when incidents like medical emergencies or car accidents occur. Moreover, stocks that perform well during good years can offer a greater financial benefit than extra payments towards a low-interest debt.

Conventional wisdom has it that borrowers should pay off high-interest debts such as credit card balances as early as possible. They should then evaluate their financial situations to decide whether it makes sense to make extra payments on low-interest debts such as a home mortgage.

How to Pay Off Debts Early?

Once borrowers decide to pay off debts early, they may struggle to act. Achieving such a goal often takes firm financial discipline. Finding extra funds to pay off the debts usually involves actions such as creating a budget, cutting unnecessary spending, selling unwanted items, and changing one’s lifestyle.

Borrowers should also use the right strategies to pay off their debts. Listed below are some of the most common techniques:

Debt Avalanche

This debt repayment method results in the lowest total interest cost. It prioritizes the repayment of debts with the highest interest rates while paying the minimum required amount for each other debt. This continues like an avalanche, where the highest interest rate debt tumbles down to the next highest interest rate debt until the borrower pays off every debt and the avalanche ends.

In other words, a credit card with an 18% interest rate will receive priority over a 5% mortgage or 12% personal loan, regardless of the balance due for each. The Debt Payoff Calculator uses this method, and in the results, it orders debts from top to bottom, starting with the highest interest rates first.

Debt Snowball

In contrast, this debt repayment method starts with the smallest debt first, regardless of the interest rate. As smaller debts get paid off, the borrower then directs payments toward the next smallest debt amount.

This method often results in borrowers paying more interest than with the debt avalanche method. However, the resulting boost in confidence (even if small) can provide a significant emotional stimulus that may allow a person in debt to remain motivated or even make some sacrifices to contribute more towards paying off remaining debts. The Debt Payoff Calculator does not use this method.

Debt Consolidation

Debt consolidation involves taking out a single, larger loan. This usually takes the form of a home equity loan, personal loan, or balance-transfer credit card. Borrowers use that new loan (usually at a lower interest rate) to pay off all existing smaller debts.

Debt consolidation is most helpful when paying off higher interest debts, such as credit card balances. This can lower the monthly repayment amount in many situations, making it is less stressful to pay off debt. Also, having one sole monthly payment instead of several can simplify the repayment process.

For more information or to perform calculations involving debt consolidation, use the Debt Consolidation Calculator.

Alternative Methods of Managing Mounting Debt

Sometimes, individual borrowers may struggle in situations where they simply cannot repay their mounting debts. A lack of financial means, serious illness, and a poor mindset are some of the reasons this occurs.

In the U.S., borrowers have alternative methods that can salvage their situations. They should carefully weigh these options and assess in detail whether they should use them or not, as many of these methods may potentially leave borrowers worse off than before. Higher costs, lower credit scores, and additional debt are some of the possible consequences. For these reasons, some personal financial advisors suggest avoiding the options listed below at any cost.

Debt Management

Debt management first involves consulting with a credit counselor from a credit counseling agency. The U.S. Department of Justice contains a list of approved credit counseling agencies by state.

Credit counselors review each debtor’s financial situation. From there, the counselor usually contacts creditors and negotiates with them to potentially reduce interest rates or monthly payments for their clients.

Suppose they deem a debt management plan viable. In that case, the credit counselor will extend an offer to the debtor. The agency will take responsibility for all their debts every month and pay each of the creditors individually. In turn, the agency requires the debtor to make one monthly payment to the credit counseling agency (instead of several to each creditor) and possibly other fees. Usually, credit counselors will also require debtors to avoid opening new lines of credit and close their credit cards to avoid accruing new debt.

Debt management can offer relief from constant calls, emails, and letters from creditors. It provides the most benefit to people disciplined enough to stay on repayment plans and slowly reduce debt over the long term. Although debt management may negatively affect credit scores at first, it prevents the more severe effects that would probably come with a debt settlement or bankruptcy.

Debt Settlement

Debt settlement involves negotiating with creditors to settle an existing debt for less than the amount owed. This usually entails a 45% to 50% debt reduction, not including an additional debt settlement fee. Borrowers who choose debt settlement typically pay 20% of the outstanding balance in fees.

Debt settlement typically leads to a significant negative impact on credit scores and reports. Additionally, the IRS treats forgiven debts as income, requiring the payment of income taxes to the IRS.

Bankruptcy

Bankruptcy is the legal status of a person or entity that cannot repay debts to creditors. While six types of bankruptcies exist, generally, only two of them pertain to individual debtors.

The first and most common type is Chapter 7 bankruptcy. The primary purpose of a Chapter 7 bankruptcy is to discharge debt, relieving the filer of the legal obligation to pay it back. However, this will likely entail the sale of some personal assets to pay off creditors. Also, this process cannot discharge obligations such as tax debt, student loan debt, child support, or alimony.

Chapter 7 filers should expect the process to take between six months and one year.

The second is Chapter 13, which constitutes a reorganization. This puts the filer on a payment plan that can last anywhere from three to five years.

Once the borrower completes the payment plan, any remaining debt gets discharged. Unlike Chapter 7, Chapter 13 bankruptcy often allows for the retention of valuable assets rather than having the Court sell them.

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