How to Pay Off Student Loans Faster (Like This Year!)
Learning how to pay off student loans faster is actually easier than you think.
It’s safe to say that the worst graduation present is being slapped in the face with thousands of dollars in debt, but it doesn’t have to be a life sentence.
By being smart with your money and making a few financial sacrifices, you, too, can become free from student loan debt.
1. Consider refinancing if you are currently employed and have good credit.
Refinancing is an excellent first step in attacking your student loan balance.
By choosing a shorter term, you can take the burden off your back faster, allowing you to get a glimpse of financial freedom.
When you refinance, you should always try to reduce the term of your loan. Refinancing from a 30-year loan to a 15-year loan can dramatically change your life.
You might have to make some financial sacrifices to make it work, but cutting 15 years off your student loans can impact your future plans of buying a home, having kids, and living a more comfortable lifestyle.
Use free financial calculators like payoff.io to see how much you would save by refinancing. The calculators can also help you estimate your new payment to see if refinancing is right for you.
Refinancing isn’t for everyone, but if you have a steady job and decent credit, you may qualify for a better APR that could lower your monthly payments and cut interest costs.
Two options for reducing your loan cost are refinancing through the U.S. government or a private loan servicer.
Before you refinance, make sure you have all of your paperwork ready. You will need to track down all of your student loans (usually, they are broken into multiple loans).
Getting a free copy of your credit report will provide a list of what you owe and to whom.
Federal loans
If you refinance with the U.S. government, you will pay the APR that Congress has set for the year (the APR will differ from year to year and type of loan).
However, you can get an interest rate discount by automatically withdrawing the student loan payment from your bank account on the same day each month.
Choosing a federal loan will also grant protection for widespread student loan forgiveness or national payment pauses (i.e., the COVID-19 pandemic).
Government programs can also forgive your student loan debt if you work in public service.
Private loans
Refinancing with a private company may sound appealing, as they offer significantly lower APRs, and most offer additional auto-pay discounts.
Remember to do your research when choosing a private loan company and read the fine print to ensure the APR is fixed for the loan’s lifetime and not just an introductory period.
Weigh the pros and cons of how much money you’ll save vs. having federal government protections.
Employer student loan repayment
Regardless of your refinancing option, please speak with your employer or HR department about any student loan repayment benefits they provide.
According to Paycor, 34% of employers offered student loan benefits as of October 2023.
Employers can offer up to $5,250 annually in tax-free student loan repayment benefits per employee through 2025.
2. Dedicate part of your savings toward the principal of your student loan
When you only make the minimum payment on your student loan, seeing the light at the end of the tunnel can be challenging.
Any extra cash you can throw at your student loan can significantly decrease the interest paid and the time it takes to pay the loan off.
You can make a full payment every two weeks or a lump sum once a month.
If you don’t have enough discretionary income to make double payments every month, even contributing $50-$100 monthly can make a massive dent in your student loan debt.
When making extra payments, make sure your loan servicer knows your intentions. If you simply pay more each month, they will automatically just delay when your next payment is due.
You must tell the loan servicer through the online portal, by phone, or by mail that you want any overpayment to go toward your principal and not to affect your payment due date.
You must be current on your loan for this to take effect. Otherwise, extra funds will go toward late fees and accrued interest first.
Tax deductions for student loan interest
Take advantage of tax deductions. If you make student loan payments, you can receive a tax deduction for interest paid during the year if your student loans qualify.
The current deduction is up to $2,500, depending on your adjusted gross income (AGI).
You can have a federal or private loan to qualify. Consider using your yearly tax refund to pay down your student loans.
3. Prioritize your money
If you cannot refinance or dedicate discretionary income each month to your student loan, you can still pay off your loans faster by creating or modifying your budget.
Open a high yield savings account to keep extra funds. This way your money can earn interest instead of sitting in a checking account earning zero interest.
Making a few lifestyle changes can significantly affect how much you can pay on your monthly student loans.
We didn’t say it would be fun or easy, but having the discipline to pay off student loans is worth succeeding at.
Make it fun using a budget planner so you can visually track your success. This is a great way to track all of your income and expenses on paper while paying off your student loan.
Without the burden of student loans, you won’t have to choose your budget over pleasure. You can continue to advance your career and keep the profits for yourself.
Here are our favorite ways to pay off student loans fast:
- Start a side hustle
- Blog for profit
- Seek out a better-paying job
- Use a budgeting app
- Make lifestyle changes that improve your budget
- Ask your current boss for a raise
- Try loud budgeting
- Create a debt pay-off plan (snowball, avalanche, consolidation)
You can do it!
Student loan debt is overwhelming and causes stress on an already tight budget. However, consider the benefits of paying off student loans quickly.
You are building a solid financial foundation by sacrificing your time and money.
Once your loans are paid off, you are more financially secure in purchasing a home, having a family, planning for retirement, and taking an annual vacation.
