If you’re dealing with student loans and making payments every month, you’d probably like to get them repaid sooner than later. Not only will paying off student loans quickly reduce your debt, it can also help you save money.
Fortunately, there are a number of strategies you can use to speed up repayment. Read on for tips that could help you pay off your student loans early so you can free up your budget and focus on other financial goals.
Key Points
• Making extra payments toward student loan principal can reduce the amount of interest paid over the life of the loan and total payoff time.
• Strategies for making additional student loan payments include starting a side hustle for extra income and using “found money” like bonuses, gifts, and tax refunds.
• Employers may provide student loan repayment help for employees; there are also loan repayment assistance programs offered by some states and organizations.
• The snowball debt repayment method can be used to pay off loans with smaller balances first and work up to larger balances.
• Refinancing or consolidating loans may simplify payments and potentially lower payment amounts.
6 Effective Solutions to Student Loan Debt
There are different methods of paying off student loans fast — what works for you depends on your specific situation. You may want to try combining some of the following six approaches, for instance, or focus on just one.
1. Putting Extra Toward the Principal
One way to get ahead of student loan debt is to pay more than the monthly minimum owed. There are no prepayment penalties for federal or private student loans, so it can be an efficient method to shrink your debt.
As a bonus, when you put extra money toward the principal loan balance, you’re also reducing the total amount of interest you pay over the life of the loan.
If possible, put some additional funds toward your student loan payments each month. If that’s more than you can afford, you might consider increasing your payments every other month or quarterly.
Just make sure that the extra payments are applied to the loan principal. Contact your loan server and tell them to allocate your payment that way.
2. Making a Lump Sum Payment to Pay Off Student Loans Faster
Another option to consider is making a lump sum payment with any “found money” you have. This could be a tax refund, a monetary gift you get for a birthday or other occasion, or a bonus at work. Use that windfall to double down on your debt.
It may also be a good time to review your spending habits and see where you might be able to find some extra cash. Even minor adjustments like eating out a little less frequently or giving up one of the streaming services you pay for but don’t often use could add up.
When you identify discretionary expenses to cut back, you can add the money you save to your student loan payments.
3. Finding a Side Hustle
Creating an additional source of income and putting those funds toward your debt could also help you pay off your student loans faster.
For example, if you’re crafty, you could try selling your creations on an online marketplace. If you’re a photographer, writer, or editor, you could look for a freelance gig. Or you could do tutoring or dogsitting on evenings and weekends. Once you get your side hustle going, the additional income can be regularly dedicated toward extra student loan payments.
Recommended: 15 Low-Cost Side Hustles
4. Getting Help Paying Off Your Loan
You may be able to speed up student loan repayment with a little help from your employer, your state, or by doing volunteer work.
Getting help from your employer. Some employers offer a benefit called loan repayment assistance, in which they help employees repay their student loans. The employer might contribute up to a certain amount, and the employee may have to work for the company for a specific period of time to be eligible.
Other employers have programs that incentivize student loan repayment. For example, when an employee makes their regular monthly student loan payment, an employer can send an additional contribution toward their loans. The employee’s student loan gets paid off faster, and they save money on interest.
Seeking out Loan Repayment Assistance Programs.. If you’re eligible, a Loan Repayment Assistance Program (LRAP) can provide funds to help you lower your student loan payments. Some states, organizations, and companies may offer LRAPs, especially if you work in certain fields like health care or education. LRAPs often include a requirement that you work in your eligible job for a certain number of years, typically in public service.
Volunteering. Some volunteer opportunities might help ease your student loan debt. For example, skills-based volunteers and frontline workers for the Shared Harvest Fund, a mission-driven organization that’s dedicated to wellness and service, can get help paying for their student loans if they match up with a nonprofit organization that needs their talents.
5. Rolling Out the Debt Snowball Method
There are specific debt repayment methods you can consider as well, including the debt snowball method. Here’s how that works.
First, take a look at your loans and focus on the balances. While you should be making at least the minimum monthly payment on all your loans, the debt snowball method has you put any additional money toward the loan with the smallest balance first.
Once that loan is paid off, you use the money you were paying on the old loan payment amount and roll it over to the next smallest debt. The idea is to continue using this method until all of your loans are paid off. Each time you pay off a loan, it feels like a win that helps you see the progress you’re making.
6. Refinancing or Consolidating Loans
With a refinance student loans, you pay off your existing loans with a new loan from a private lender. Ideally, the new loan will have a lower interest rate, which could lower your monthly payments, or more favorable loan terms.
To see how much refinancing might save you, you can crunch the numbers with a student loan refinancing calculator.
It’s important to be aware that refinancing federal loans makes them ineligible for federal benefits like income-driven repayment plans and federal deferment.
If you have federal student loans, you could consolidate them into a Direct Consolidation Loan, with one monthly payment. The new, fixed interest rate will be the weighted average of your existing interest rates rounded up to the nearest one-eighth of a percentage point.
Consolidation can lower your monthly payment by giving you up to 30 years to repay your loans, but a longer term means more payments and more interest. That’s something to keep in mind if you’re considering student loan consolidation vs. refinancing.
The Takeaway
There are several methods you can use to pay off student loans quickly, including making extra payments toward the loan principal, earning extra income with a side hustle, and loan repayment assistance programs. One or more of these strategies could be the ticket to chipping away at your student debt faster.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
What’s the fastest way to pay off student loans?
One of the fastest ways to pay off student loans is to put extra money toward the principal balance on your student loans whenever you can. Not only will this help you reduce the total principal you owe, it will also save you money on the total amount of interest you pay over the life of the loan.
Is it smart to pay off student loans early?
Paying off student loans early can be smart. Paying down your debt faster can help you save money overall and reduce the total amount of interest you’ll pay over the life of the loans. Paying off your loans quickly can also allow you to put more money toward your other financial goals, such as a downpayment on a house or saving for retirement.
How can I find extra money to pay down student loans?
You can find extra money to pay down student loans by using your tax refund or a bonus you get at work and applying those funds to your student loan debt. You could also consider taking on a side hustle to earn extra income to put toward your loan payments.
What are some solutions to student loan debt besides refinancing?
Other solutions to reducing student loan debt include paying more than a minimum balance on your student loans whenever you can and directing that money to the loan principal; making a lump sum payment with any “found money” you get, such as a tax refund or a bonus at work; and checking to see if your employer or state offers student loan repayment assistance.
Should I refinance or pay off student loans faster?
Whether you choose to refinance or pay off your student loans faster is up to you — each borrower should make a decision based on their own financial situation. That said, it is possible to do both. Refinancing may help you pay off your student loans faster if you qualify for a lower interest rate, which can lower your monthly payments, or if you shorten your loan term. Just be aware that a shorter term will likely make your monthly loan payments bigger.
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