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Tips for Paying Off Student Loan Quickly

You have student loan debt and you want to pay it off faster. The good news is there are many actions you can take to aggressively tackle your debt and pay your student loans off quickly. Let’s start with some of the simplest things you can do to reduce your student loan debt that shouldn’t increase your financial burden.

1. Enroll in Automatic Payments

Many private student loan lenders offer an interest rate discount to borrowers who enroll in automatic payments. This discount is typically 0.25% though some lenders offer a 0.50% discount. Enrolling in automatic payments can also help you avoid late fees by accidentally missing a payment.

2. Make Bi-Weekly Payments

With this strategy you make half of your monthly payment every two weeks. By doing this, you’ll end up making an extra payment each year, because you will make 26 half payments, rather than 12 full payments. Not only will this reduce your loan balance faster, but it can also save you money on interest.

Be sure to request that your lender apply any extra payments to the loan principal, rather than the next month’s payment.

Some lenders may not allow bi-weekly automatic payments, in which case you will have to make your payments manually.

Note: Pay attention to your loan due date when making bi-weekly payments to ensure both of your payments are received on time. You need to make sure you pay your monthly payment amount in full every month.

Now let’s get into the strategies that may require you to make more of a financial sacrifice in order to pay your student loans off faster.

3. Make Extra Payments

If you want to pay off your student loans faster, the best way to do that is to make extra payments. You can make additional payments toward your loan each month on top of the payment you are required to make, or you can make extra payments sometimes, for example if you’ve received some money as a gift or a bonus at work. Be sure to request that your lender apply any extra or over payments to the principal balance on your loan.

4. Make More than the Minimum Payment

If you make all of your minimum payments on time, you will pay off your student loan in the original agreed upon timeframe between you and your lender. However, if you make more than the minimum payment, even if that amount is small, such as ten dollars, you will pay your loans off sooner. For example, if your monthly payment is $50 per month and you pay $60 per month, by the end of the year you have applied an additional $120 toward your debt. That’s nearly two and a half months’ worth of payments you have eliminated, simply by adding an additional ten dollars to your payment amount! Be sure to request that any over payment be applied to the principal balance of your loan.

5. Make Payments While in College

If your student loans don’t require you to pay while in college, that doesn’t mean you shouldn’t. Other than Direct Subsidized Loans, you are responsible for the interest that accrues on your loans while in college. You can make interest only payments which will be applied to the interest accruing on your loan.

Here's Why You Might Want to Do This

Once your loans enter repayment, the interest is capitalized (i.e., added to your loan principal balance and then you pay interest on that new increased balance). If you have paid all of the interest while in college, there is no interest to capitalize and your loan principal will reflect the amount you originally borrowed when your grace period ends.

You’re not limited to interest-only payments while in school. If you are working it is wise to make whatever payments you can toward your student loans to reduce the overall interest you will pay and your balance when your grace period ends.

6. Paying Off Outstanding Interest to Avoid Capitalization

All federal student loans come with a grace period. This is the period of time after you’ve left school (or drop below half-time enrollment) and before you must start making payments on your student loans. At this point, the interest you have been accruing on your loans has not been added to your loan balance. If possible, pay off the accrued interest during your grace period to avoid that amount being capitalized (added to your loan principal) at the end of your grace period.

Now let’s take a look at some general strategies you can employ to help you pay your student loans off faster.

7. Create a Budget

There are few things more effective at getting your finances under control than a budget. Knowing how much money you have coming in and where it is going will help you identify areas where you can cut back and apply that money to your student loans. A budget doesn’t have to be difficult to create. There are several budgeting apps available to simplify the process.

8. Use a Savings App

There are several banks out there that let you round up the amount of your purchase to the next nearest dollar and place the difference into your savings account. This is a great way to save more money that you can then apply to your student loan balance. If your bank does not offer this feature, check out an app like ChangEd. The ChangEd app allows you to round-up your daily purchases or schedule savings based off your habits.

9. The Debt Snowball Method

The debt snowball method is a strategy to help you make physical and mental progress toward your goal of being free of student loan debt. Here’s how it works.

First, list all of your student loans from smallest balance to largest balance. Once you have your debt written down, you’ll know where to start. Begin by putting all of your extra money toward your smallest debt first. Once this debt is paid, you will take the money you were applying to that debt (and any additional funds), add it to your minimum payment amount, and tackle the next highest balance student loan.

Why the Debt Snowball Works

The idea behind the debt snowball is two-fold. It gives you an outlined method for tackling your debt, and as you knock out those smaller student loans you will feel a psychological boost from having fewer and fewer debts to pay. Sticking with the debt snowball can build momentum that keeps you motivated.

10. The Debt Avalanche Method

The debt avalanche method is another strategy for how to pay off your student loans. You’ll start by listing all of your loans and their corresponding interest rates. Once you’ve done this, identify the loan with the highest interest rate. This is the loan you will pay off first. Make the largest payment you can afford on the highest interest loan, making only the minimum payments on all other loans.

Once the highest interest rate loan is paid off, move to the next highest interest rate loan on the list in the same fashion until all of your debts are gone.

Why the Debt Avalanche Works

Tackling your loans based on interest rate can help you save money overall by knocking out your highest interest rate loans first. As you eliminate loans, you will increase the payment on each subsequent loan until all of your debt is paid in full.

11. Refinance Your High-Interest Student Loans

One of the best ways to save on student loans is to reduce your interest rate. You can do this by refinancing your high-interest student loans. When it comes to private student loans and PLUS loans, you may be able to find a more competitive interest rate in the refi market. This also allows you to roll many student loans into one, reducing the number of bills you need to pay each month. Here’s what you need to know about student loan refinancing once you have located all of your student loans.

Consider Which Loans You Want to Refinance

Refinancing student loans has the potential to save you thousands. Especially if you are using the refinance to consolidate several high-interest private student loans. You can also include federal student loans in a private student loan refinance, however, there are a few things you’ll want to consider.

Should you choose to refinance your federal student loans privately, you will forfeit your eligibility for the benefits of the federal student loan program. These may include Public Service Loan Forgiveness, Income Based Repayment, and generous periods of deferment and forbearance.

You may also look into consolidating your federal student loans through the Direct Loan Consolidation Program. This will not reduce the interest rate you pay on your federal student loans, but can help you maintain some of the federal student loan benefits while reducing the number of federal student loan payments you make each month.

Compare Student Loan Refinance Lenders

Once you have all of your student loan debt gathered up, the first thing you will want to do when looking to refinance is to compare lenders. You can compare interest rates, repayment terms, and other benefits such as interest rate deductions for enrollment in automatic payments, cosigner release, and customer service.

Apply with a Creditworthy Cosinger

If you’re a recent graduate, or do not have a strong credit or employment history, you may need to apply for a student loan refinance with a creditworthy cosigner. This is someone who will share equal responsibility for the loan with you. If you fail to make the payments, your cosigner will be responsible.

If you require a cosigner to get approved for a student loan refinance, look for a lender that offers cosigner release as an option. This allows you to release the cosigner from the loan at your request after making a series of on-time payments (typically 24 to 48 months).

12. Minimize Your Expenses

This is another area where having a budget can be very useful because you’ll be able to see where all of your money is going and where you can cut back or eliminate spending. Take a look at all of your monthly expenses. This includes everything, like gas, streaming services and daily coffees. Are there any areas where you can cut back? These expenses may seem small, but they add up quickly.

For example, if you buy a five dollar coffee each day on your way to work that adds up to more than $100 per month. What if this money was freed up and applied toward student loan debt?

Ways to Minimize Expenses

Other techniques that can help minimize expenses are grocery shopping with a list (and sticking to it), paying for things with cash instead of a debit card (there is a psychological component to parting with your actual money vs. your virtual money), and avoiding impulse purchases, all of which will affect how much money you have at the end of the month to apply toward student loan debt.

13. Ask If Your Employer Offers Student Loan Assistance

It’s not uncommon for an employer to offer tuition assistance, but more and more employers are also offering assistance in repaying student loans. Talk to your HR department about what benefits, if any, your employer may offer to assist in paying down student loans.

14. Ensure Overpayments are Applied Toward Your Loan Principal

Lenders will often apply overpayments toward the interest on a loan, or the next month’s payment, unless you specifically request the money be applied to the principal. Make sure to request this each and every time you pay more than the minimum, or make additional payments.

15. Make Use of Student Loan Tax Deductions

Student loan borrowers are able to deduct up to $2,500 in interest payments made on qualifying student loans. If you qualify for the student loan interest deduction, you will receive a 1098-E form from your lender or servicer. If you have questions about student loan tax deductions you should consult a tax professional.

16. Start a Side-Hustle (money from a side hustle can add up fast)

Every extra dollar you apply toward your student loans has an impact. Even if it’s just ten or twenty dollars a month. With a side hustle, you can earn a lot more than that and throw it all at your outstanding student loan debt. Getting a second job may seem overwhelming to some, but a side hustle doesn’t have to be something you do all the time. You can offer your services as a house sitter, dog sitter, babysitter, etc. which are all “sometimes” gigs. You can also look into things like tutoring, or driving for a food delivery service, which could be just a few hours a week. And don’t forget the possibility of turning a hobby into a money-maker. Websites like Fiverr and Task Rabbit are great places to take a skill you possess and capitalize on it.

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