How to Pay Off Your Student Loans

Pursuing a higher education is typically a worthwhile endeavor, but it can still be a costly one. If you’re feeling overwhelmed by the amount of student debt you owe, here are seven suggestions that may help you repay it faster, including choosing the most affordable payment plan, reviewing your employee benefits, and consolidating or refinancing your loans.

1. Know the Facts

More than just how much you owe, you should fully understand the terms of your student loans. Being acutely aware of these details can help you avoid headaches and fees down the line. The main things you need to understand about your student loans are:

• Grand total: It’s not uncommon to have multiple student loans, so combine their outstanding balances to get a clearer picture of how much you owe in total.
• Loan provider: What company is servicing your loan? Has it changed recently? Do you have a phone number or online portal you can use to contact it for support?
• Federal or private: The type of student loan that you have matters, as it can determine whether you’ll have access to things like debt consolidation or forgiveness.
• Minimum monthly payments: How much are you required to pay each month to prevent your loan from defaulting, and when are payments due? 
• Interest rates: Knowing how much interest your debt accrues each month will help you plan payments accordingly.

2. Review Your Federal Repayment Options

When it comes to federal student loans, you have a few different options for repayment plans. What you’re required to pay, how much you can actually pay, and how often you make payments will vary based on your financial situation, goals, and whether you qualify for any income-driven repayment (IDR) plans. Using a loan calculator can help you visualize what you’ll owe over time and select a payment plan that works best for you.  

• Standard repayment plan: This is the default repayment plan, which can be ideal for borrowers aiming to pay off their student loans quickly. For non-consolidation loans, you’ll have up to 10 years to repay your debt; compared to other repayment options, this will reduce the amount of interest you’ll pay over the life of your loan.
• Graduated or extended repayment plans: Under the graduated repayment plan, payments start off low and then increase over time. As with the standard repayment plan, your payments for non-consolidation loans will be spread across 10 years. With the extended repayment plan, you’ll have a maximum of 25 years to pay off your debt, and payments can either be fixed or graduated. These plans may be helpful for those looking to build more flexibility into their budgets.
• IDR plans: These are special repayment plans that base your monthly payments on your income and family size. What draws many to these plans is that, after a set number of qualifying monthly payments, any outstanding debt you still have will be forgiven.

3. Use Your Grace Period Wisely

A student loan grace period is a brief window in which a borrower isn’t required to make any payments. For federal loans, the grace period typically starts when you graduate, leave school, or drop below half-time enrollment, and it lasts six months. For private loans, lenders may determine whether a grace period is available and, if so, for how long.

Although grace periods are helpful, especially for graduates who’ve yet to start their careers, your loan may still accrue interest during this time (depending on the type of loan you have). At the end of the grace period, that interest is added to the outstanding balance of your loan and, in certain cases, will then be capitalized.

Be strategic in order to make the most of your grace period. Opting to make payments anyway, despite none being due, will allow you to pay down the principal balance faster and reduce the amount of interest that’ll accrue down the line. If making large payments isn’t currently an option, consider at least covering the interest each month.

4. Investigate Student Loan Consolidation and Refinancing Options

If you have multiple student loans with different servicers, consolidating them should streamline your monthly payments. When consolidating your federal student loans, the lender combines your outstanding loans under a direct consolidation loan, with an interest rate that’s a weighted average of the rates on the loans being consolidated. As a result, you’ll only be responsible for making a single monthly payment instead of multiple payments. You typically cannot consolidate private student loans with their federal counterparts.

If you have private loans and are trying to cut costs, refinancing could be an option for paying less in interest. Refinancing also involves taking out a new loan (ideally one with a lower interest rate) to pay off your old one(s); however, because it’s only available through private lenders, qualifying will likely require good credit. With student debt refinancing, you can combine federal and private student loans, but this’ll mean losing out on the former’s benefits and protections.

5. Take Advantage of Autopay

Because loan payments can significantly impact your credit score, you’ll want to make sure you’re making yours on time. Setting up autopay can help prevent any accidental late payments and remove the need to rush and fret over whether your bills have been paid.

Another benefit of using autopay could come directly from your lender, as some will offer interest rate discounts for doing so. Not only will this help you avoid any potential late fees or negative marks on your credit report, but you’ll also pay less in interest in the long run. 

6. Increase Your Monthly Payment

If you’re serious about paying off your student loans quickly, only making minimum payments isn’t going to cut it. Doubling your monthly payment, or even modestly increasing it, will allow you to put more toward your principal and greatly reduce how long it takes to repay your debt.

If your budget won’t allow for increased student loan payments, your loans can also benefit from any extra funds that come your way throughout the year. This can include:

• Cash gifts
• Tax refunds
• Credit card cashback rewards
• Work bonuses
• Inheritance
• Rebates
• Settlements
• Side hustle income

Another option is to divide the monthly payment you want to make in half and pay your bill every two weeks. Although the change will require you to pay your loan more frequently, it will allow you to make 13 payments in a year, rather than 12. Speak with your lender to find out if it will agree to this payment schedule.

7. Apply for Forgiveness and Repayment Assistance

There are several ways that federal student loans may be forgiven. For example, the Public Service Loan Forgiveness (PSLF) program offers debt relief for borrowers in certain public service fields after 120 qualifying payments. Similarly, any remaining loan balance under an IDR plan will be forgiven by the end of the repayment period.

Borrowers with special circumstances may be eligible for exclusive forms of debt forgiveness. If your school permanently closes while you’re enrolled or soon after withdrawing, for instance, you may be eligible to have your loans discharged. Likewise, students who’ve become totally and permanently disabled can also qualify for debt cancellation.

If you’ve entered the workforce, review your employee benefits, as your company may offer student loan reimbursements. If none of these options apply to you, consider working with a debt relief company. It may be able to get you a lower monthly payment or even partial forgiveness of your private student loans.

The Bottom Line

Student loans can be complex, and repayment terms can be lengthy, but they won’t last forever. Whether paying off your debt is a primary goal or if it’s something you aim to accomplish eventually, understanding the terms of your loan and keeping repayment top of mind will help you make the best decisions for your financial situation.