Paying off student loans fast is all about momentum and resourcefulness. Staying up-to-date 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 as quickly as possible.
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 build momentum, so you can pay back student loans faster and make your debt a distant memory.
#1 Learning the Benefits of Prepaying
When considering how to pay off loans fast, you may want to think about saving money on student loan interest by prepaying. That means to make payments in addition to your regular monthly payment.
Generally, there is no penalty for making extra student loan payments (check with your lender or loan servicer to verify this), and it can help you spend less on interest over the life of the loan.
As a bonus, it’s amazing how motivating it can be to see your outstanding balance shrink more quickly than you planned by making more than your minimum payment each month.
An important note: Some lenders may apply the additional money to next month’s payment instead of deducting it from your loan balance if you don’t specify where you want to apply your prepayments. If your goal is to save money on interest and be done with your loans sooner, ask your loan servicer if they can apply any extra payments to your loan’s principal instead.
#2 Taking Control of Your Spending
Prepaying sounds great, but where are you going to come up with that extra cash? You can start by taking stock of where your money currently goes.
Many of us have “leaks” in our spending that we barely notice—whether we’re springing for frequent takeout dinners or have auto-payments on magazine subscriptions that we keep meaning to cancel.
Try recording your daily spending in the notes app on your smartphone or using an app like Toshl , which can help give you better insights into where your money is going. Sites like Mint offer tools that can help you create a livable budget with room for the occasional splurge.
#3 Using Unexpected Windfalls to Grow your Proverbial Garden
Instead of treating a windfall like “fun money,” use it to get ahead on your debt. Whether you come into money through inheritance, you get a pay out from a stock you’d forgotten you owned, or your boss hands out a surprise bonus, try to put a portion of your surprise cash straight toward your debt.
And don’t just think small—see if you can apply at least 50% of any financial gifts, dividends, bonuses, and raises toward paying down your loans.
#4 Creating Another Income Stream
If your main job isn’t extremely demanding, you might consider adding a side hustle to help pad your debt payments. Sites such as Upwork can connect you with freelance work. If you don’t have the time or inclination to take on another job, you can consider 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 Lowering your Interest Rate
If you are a working graduate paying down high-interest student loans, student loan refinancing could be a powerful way to make a dent, if you qualify. For example, securing a lower interest rate can make a big difference in what you have to pay over time.
Bear in mind that if you have federal student loans such as Direct Loans and Graduate PLUS loans, refinancing them with a private lender like SoFi means you will lose certain benefits that come with them, such as access to the Public Service Loan Forgiveness program and income-based repayment plans.
However, some graduates may find they don’t need these benefits and that the cost-saving benefits—and faster payoffs—that can come with refinancing provide more value.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.