Paying off your student loans faster can help you save money on interest charges and create more space in your budget for other important financial goals and lifestyle upgrades. While there are several approaches to accelerating your debt repayment, the right one for you will depend on your financial situation and objectives.
Here are eight strategies to help you pay off your student loans faster.
1. Make Extra Principal Payments
Putting a little extra toward your student loan payments every month can shorten your repayment term, even if it's just a little.
For example, let's say you owe $20,000 with an average interest rate of 6.5%. With the standard 10-year repayment plan, that gives you a monthly payment of $227.10. If you added just $25 to your monthly payment, you'd knock 16 months off your repayment term and save nearly $1,000 in interest.
Add $50 per month, and you'll pay off your loans two years and four months sooner, with more than $1,800 in interest savings.
That said, it's important to make sure you're also building an emergency fund. Any money you put toward your student loans can't be recalled if you incur an unexpected expense. You may need to evaluate your budget and cut back on other expenses to make room for your financial goals.
2. Set Up Autopay
Federal student loans and many private student loans offer a discount on your interest rate if you set up automatic payments. The discount is usually 0.25%, which doesn't translate to big savings. However, it ensures that more of your monthly payments go toward paying down your balance, and using it along with other strategies can improve your effectiveness.
Learn more >> How Can Student Loan Autopay Save You Money?
3. Pay Interest While in School
Unless you have subsidized federal student loans, you'll accrue interest on your student loans while you're still in school. Once you begin repayment, your loan servicer will capitalize that accrued interest, adding it to your balance and increasing the amount you owe and your monthly payment.
However, if you can manage to make at least interest-only payments while you're in school, you'll have a smaller balance to deal with when you leave. What's more, the lower monthly payment will give your budget more room to pay more.
4. Make Biweekly Payments
Instead of paying your bill once a month, consider paying half of what you owe every two weeks. With this approach, you'll end up making one additional monthly payment each year.
It might not seem like much, but using our previous example and adding one extra payment each year can shave a full year off your repayment plan and save you more than $700 in interest charges.
Learn more >> How to Create a Biweekly Budget
5. Avoid Extending Your Repayment Plan
The U.S. Department of Education offers several repayment plans, many of which spread your payment over 20 to 30 years instead of the standard 10-year plan.
If you're experiencing financial hardship or you're eligible for student loan forgiveness, income-driven repayment plans and others may be the right fit. However, if you can comfortably afford your monthly payments and don't qualify for forgiveness, extending your repayment term will only increase the time spent in debt, not to mention your total interest charges.
6. Use the Debt Snowflake Method
The debt snowflake method is a repayment strategy that allocates small everyday savings toward paying down your debt faster. You can define what you count as a "snowflake," but some common ideas include savings generated from:
- Grocery store coupons
- Splitting a subscription
- Carpooling with a coworker
- Cash back credit card rewards
- Eating at home rather than going out
- Buying generic brands
- Renting a book from the library rather than buying it
You can also use larger snowflakes, such as your tax refund or a performance bonus from work. Ultimately, the idea is that small everyday contributions can add up to big savings over time. Just be sure to find a good balance with your approach, especially if you're trying to maximize everyday savings to cope with a tight budget.
7. Consider Refinancing
If you have great credit and don't anticipate needing access to federal loan relief options, refinancing your student loans with a private lender could help you accelerate your repayment.
Depending on your situation and current loan terms, you may be able to secure a lower interest rate with a private refinance loan. Some lenders even offer repayment terms as low as five years, which could be helpful if you can afford the higher monthly payment and want to stay disciplined.
That said, refinancing may not make sense if you don't want to give up a chance at forgiveness or an income-driven repayment plan. It can also be really difficult to qualify for better terms if your credit score and income aren't in stellar shape.
Learn more >> Is It Better to Consolidate or Refinance Student Loans?
8. Research Forgiveness and Repayment Assistance Options
If you have federal student loans, take some time to research federal student loan forgiveness programs, including their eligibility criteria and how much you can get discharged.
There are also several federal and state government programs that provide repayment assistance to a variety of eligible borrowers, such as:
- Military service members
- Public defenders and state or local prosecutors
- Health care professionals
- Teachers
Additionally, many private employers offer student loan repayment assistance as an employee benefit. Take your time to research employment options and forgiveness or repayment assistance opportunities based on your chosen career.
Work on Building Your Credit to Improve Your Future Credit Options
As you tackle your student loan debt, it's important to also prioritize building and maintaining a good credit score. Having great credit can make it easier to qualify for affordable credit options when you need them, minimizing your monthly payments.
With Experian's free credit monitoring service, you'll be able to access your FICO® Score☉ and Experian credit report anytime you want. You'll also get real-time alerts when changes are made to your report, making it easy to track your progress, get helpful insights and address potential issues as they arise.