9 Smart Ways to Pay Off Student Loans

By Jody McMaster · April 06, 2022 · 9 minute read

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9 Smart Ways to Pay Off Student Loans

Let’s talk about student loan payments. Woo-hoo! OK, it’s not the most thrilling topic, but know what is serotonin-boosting? Paying off that very last loan.

How to Pay Off Your Student Loans

It’s the unglamorous work that goes on behind the scenes that make or break every business owner, athlete, or creative person. It is helpful to think about student loan repayment like any other big feat worth accomplishing.

It begins with knowing that paying down student loans in a smart and effective way can take a lot of planning, budgeting, and adapting.

While there is no single smartest way to pay off student loans, because everyone’s situation is different, there are steps that will put most borrowers in a position to pay off their student loans without too much pain and on a timeline.

Another goal could be to create a financial plan that includes your loans.

Strategies to Pay Off Student Loans

Here are nine steps to consider including in your student loan repayment plan.

1. Organizing All Of Your Debt, Including Student Loans

Keeping track of your student loans and other sources of debt can be tricky, especially if you are a recent graduate. Consider listing them. Include the student loan servicer, amount of the loan, monthly payment, interest rate, and when the loan should be paid in full.

If you aren’t sure what your monthly payments will be, you can use this student loan calculator to get a rough idea, or you can call your loan servicer.

If you have credit card debt or personal loans, include them on your debt list. With all of your sources of debt, you can then mark on a calendar the date that the monthly payments are due.

While you always need to make the monthly minimum payments on all debts (unless your student loans are within their grace period or are in forbearance), listing them allows you to identify which debts you may want to pay off first.

If you have high-interest credit cards adding up each month, a credit card consolidation loan may be a great option to look at, too.

Once your credit cards are paid off, you’ll want to think about whether your goal is to pay your loans off quickly, or to simply make the monthly payments until the loans are done. The former is one way to save on interest over time.

Some folks do prefer to pay only the minimum monthly amount on their student loans so that they can save a little for other things.

2. Budgeting to Include Loan Payments

It can take time and effort to develop a monthly budgeting system that works for you, but it is doable, and totally worth it.

To get started, track your monthly cash inflows and outflows for two months. Total how much money you spent in each category, including debt payments like student loans.

Once you have a general idea of what you’re spending in each category, you can begin to build a budget framework. For example, if you spend $300 on groceries one month and $350 the next, you can now set a realistic grocery budget. Leave room for annual and quarterly expenses as well as incidentals.

With a budget that is built to include student loan payments, you’ll be more equipped to make all of your payments on time and know how much is available to spend on other wants and needs. Also, understanding how you’re spending will allow you to identify the areas where you’re overspending.

3. Setting Up Automatic Payments

Hopefully your student loan payments are set up to be automatically deducted from your bank account. If they aren’t, you can contact your student loan servicer to set up autopay. That way you won’t miss a payment because you forgot or are somewhere where you can’t access the internet.

Remember, missed or late payments will negatively affect your credit score. Damaged credit could preclude you from opportunities in the future, such as being able to refinance your loans.

Many loan service providers offer a discount if you arrange to autopay. When you sign up, ask if such a discount is available.

See how student loan refinancing could
be a smart way to help
pay off your student loans.

4. Paying More Than the Minimum Monthly Amount

Paying more than the minimum monthly payment can be a great strategy if your goal is to pay off your loan faster than the stated term. You’ll also save on interest over the life of the loan by paying it off sooner. Even small amounts can make a difference.

To do this, instruct your loan servicer to apply any extra payments to the loan principal, or adjust your automatic monthly payment to a higher amount and clarify that you want that extra money dedicated to the principal.

Make sure, after the next month’s payment, that the money was indeed put toward the loan’s principal.

Recommended: Why Making Minimum Student Loan Payments Isn’t Enough

5. Paying a Lump Sum Toward Student Loans

Increasing your monthly payment isn’t the only way to put a dent in your loans; at any point, you are allowed to make a lump sum payment toward the principal.

You could put your tax refund, holiday or birthday money, work bonuses, or inheritance money toward your student debt.

6. Adjusting Your Repayment Plan If Needed

Most federal student loans come with a 10-year repayment plan unless you choose otherwise.

Income-driven repayment plans base payments on discretionary income and family size. The plans lower monthly payments by extending the length of repayment to 20 or 25 years, after which any remaining loan balance is to be forgiven.

Even though your monthly payments are lower, you will pay more interest over time (longer loan terms mean more interest payments, after all). So it’s not a great choice if you want to pay off your student loans quickly or pay as little interest as possible, but it is available to those who are having trouble making their monthly payments.

If you are planning to use the Public Student Loan Forgiveness (PSLF) program for your federal student loans, you will need to select one of the income-driven repayment plans.

7. Considering Refinancing Your Loans

When you refinance one or more student loans, a private lender like a bank, credit union, or online company pays off your current loans and issues one new student loan, ideally at a lower interest rate. A lower rate could mean substantial savings over the life of the loan.

With federal student loan consolidation, on the other hand, the government bundles your federal student loans into one, using a weighted average of the interest rates, rounded up to the nearest one-eighth of a percentage point.

It’s important to note that by refinancing your federal student loans to a private student loan, you will not be able to access federal programs like income-driven repayment plans, PSLF, and government deferment or forbearance. If you don’t need any of those benefits, a lower rate gained by refinancing could be worthwhile.

Exploring refinancing with a private lender takes little time and doesn’t cost anything.

8. Knowing Your Worth and Asking for a Raise

With any pay raise, you can use the extra income toward your financial goals. This could mean increasing the monthly amount you pay toward your student loans or making a lump sum payment.

How much money you earn is an important factor contributing to your financial stability and ability to pay down your student debt. While budgeting is important, so is knowing your worth and asking for more when you deserve it.

If you haven’t already, start keeping track of your successes so that at your next compensation conversation, you have concrete examples on why you deserve a salary bump.

9. Understanding Your Employment Benefits Package

Although student loan repayment help is not as widespread as retirement or health care benefits, more employers are offering that perk to attract and retain employees.

Whenever you’re comparing job offers, it’s a good idea to compare benefits packages; although they’re not flashy like a big salary or company equity, benefits can be just as valuable.

If you’re looking for a new job, you could include student loan repayment help in your search. While it obviously shouldn’t be your only consideration, it’s great to have an idea of what you’re looking for in an employer.

Recommended: Finding Jobs That Pay Off Student Loans

Refinancing Student Loans

Refinancing is among the ways to pay off student loans, and SoFi is a standout in that field. SoFi refinances federal and private student loans with fixed or variable rates and a range of loan terms.

Take a close look at your student loan balance and the rates you’re paying, and then check your refinance rate in two minutes.


What is the smart way to pay off student loans?

To pay off any loan, it’s smart to look at the interest rate and repayment term. If you can manage the monthly payments, a short term and a low rate is a winning combo.

If the payments are too painful and a longer term is needed, it could be smart to make extra payments of any amount whenever you can.

The PSLF program forgives any remaining Direct Loan balance after 10 years of on-time payments and qualifying employment. That could be seen as a smart way to pay off federal student loans if a graduate commits to working for a government or nonprofit employer, but the program has had a 98% applicant denial rate.

How can I pay off $100k in student loans in five years?

Say what? Well, it has been done. It might take sacrifice (moving in with relatives, no eating out, no new car), putting chunks that would normally go to rent toward student loan debt, staying motivated by watching and listening to others’ stories of debt repayment, refinancing one or more times, and getting aggressive about payments.

Most refinance lenders will offer a lower rate for a shorter loan term. Of course, the shorter the term, the higher your monthly payments will be, but the less costly the loan will be. A borrower might find that a variable rate, which usually starts lower than a fixed rate, pays off with a short-term loan.

How do I pay off a five-year loan in two years?

By paying extra toward the principal, in dribs and drabs or in a lump sum, and/or refinancing to a lower rate. Federal law prohibits prepayment penalties for federal or private student loans, so that’s not a worry.

To keep your student loan servicer from applying extra amounts to the next month’s payment, tell your servicer, by phone, mail, or online, to apply any extra payments to the loan principal.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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