How to Pay Off Student Loans Faster Using Momentum



Paying off student loans is all about momentum and resourcefulness. Staying current on your payments—or ideally getting ahead of them a bit—can give you the motivation you need to tackle and clear your student loan debt quickly.

When it comes to student loan repayment, there are two great ways to build momentum: prepaying (or paying more than the monthly minimum) and reducing interest rates (through student loan refinancing). Here are five tips to help you leverage these strategies to build momentum and make it work in your favor – so you can make student debt a distant memory sooner rather than later.

#1 Learn the benefits of prepaying.
One of the most effective ways to speed up debt payoff and save money on interest is to pad your payments. Generally, there is no penalty for making extra student loan payments, and it can help you spend less on interest over the life of the loan. As a bonus, it’s amazing how motivating it is to see your outstanding balance shrinking more quickly than you planned by sending in even small extra payments every month.

Some lenders may apply the additional money to next month’s payment instead of deducting it from your loan balance. If your goal is to save money on interest and be done with your loans sooner, check with your loan servicer to see if they can apply that extra payment to your loan’s principal instead.

#2 Get control of your cash.
Prepaying sounds great, but where are you going to come up with that extra cash? You can start by recognizing where your money currently goes.

Most of us have leaks in our spending that we barely notice—whether we’re springing for frequent takeout dinners or auto-payments on magazine subscriptions that we keep meaning to cancel. Try recording your daily spending in the notes area of your smartphone or using an app like Level Money or Toshl to see where it’s all going. Sites such as Mint and PowerWallet offer tools to help you create a livable budget with room to splurge, so you don’t feel deprived.

#3 Use “found” money to grow your proverbial garden.
Once you’ve got a handle on your current spending, it’s time to take a hard look at your spending habits to see where you might be able to harvest extra cash. Even minor adjustments, like parking on the street instead of the garage or taking public transportation instead of grabbing a cab, can add up.

But don’t just think small – try to apply at least 50% of financial gifts, dividends, bonuses and raises you earn at work towards paying down your loans. Instead of treating the windfall like “fun money,” use it to get ahead on your debt. You will be glad you did over the long haul.

#4 Create another income stream.
If your main job isn’t extremely demanding, you might consider adding a side hustle to help pad your payments. Sites such as Upwork or Freelancer can connect you with freelance work. Another company we like is Hourly Nerd, which matches MBAs with flexible, project-based consulting opportunities.

If you don’t have the time or inclination to take on another job, consider creating a passive income stream by becoming an Airbnb host. According to recent analysis from SmartAsset, the average host can expect to cover 81% of their rent by listing one room in a two-bedroom apartment on Airbnb. They also found that in many cities, it may be possible to pay the entire rent on a two-bedroom apartment with around 20 days of bookings per month. That translates to sizable savings you can put toward your student loans.

#5 Lower your interest rate.
If you are a working graduate paying down high-interest student loans, student loan refinancing can be a powerful way to make a quick dent. Securing a lower interest rate can make a big difference in what you have to pay over time. For example, the average SoFi borrower saves around $14,000 when refinancing with us.

Bear in mind that if you have federal student loans such as Direct Loans and Graduate PLUS loans, refinancing them with a private lender means you will lose certain benefits that come with them, such as public service forgiveness programs and hardship-based repayment plans. However, some graduates find they don’t need these benefits and that the cost-saving benefits of refinancing outweigh them.

If you take advantage of these tips, you’ll start to see faster progress on paying down your student loans – and that motivation may be all you need to keep plugging away. It may not be as hard as you think, and you might even have fun doing it!


ABOUT Christina Kramlich Christina Kramlich is Senior Director of SoFi and runs operations for SoFi Wealth, the new wealth management initiative within SoFi. Christina holds a BA in History from Columbia College in NY and an MBA from The JL Kellogg School of Business at Northwestern University.


2 thoughts on “How to Pay Off Student Loans Faster Using Momentum

  1. Glad to know that. Nice post. Very useful for me. Thanks a lot.

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