Paying Off Student Loans Faster – Top Strategies

With average student debt now exceeding $30,000, managing education loans is a major burden for graduates. Paying them off aggressively can save thousands in interest payments over time. This guide covers proven strategies to pay off student loans faster.

Benefits of Prepaying Student Loans

Getting ahead on student loan payments provides multiple advantages:

• Saves money by reducing interest paid over the loan term
• Frees up cash flow sooner by eliminating monthly payments
• Allows achieving other financial goals quicker by removing this obligation
• Reduces stress and anxiety caused by large debt balances
• Paves the way for major purchases like a house or starting a family

Every extra dollar paid now reduces future interest accumulation and gets you closer to becoming debt-free.

Best Repayment Strategies

Utilize these proven strategies to accelerate student loan repayments:

1. Increase your monthly payment

• Even small bumps of an extra $20-50 monthly makes a difference over time.
• Target paying at least 10% extra each month.
• Pick up part-time work or find ways to earn extra income you can allocate specifically to student loans.

2. Make biweekly half-payments instead of monthly

• Making half-payments every two weeks (26 per year) is mathematically equivalent to paying an extra monthly payment annually.
• This simple “pay frequency” change can shave years off loans.

3. Pay all windfalls and bonuses toward loans

• Put tax refunds, inheritance, gift money, work bonuses and insurance proceeds directly toward debt.
• Don’t succumb to lifestyle inflation as income rises. Keep living like a student and attack loans aggressively.

4. Spend minimally and trim expenses

• Limit eating out and entertainment until loans are paid off. Downsize housing or take on a roommate to save on rent.
• Slash monthly costs relentlessly so you have more available to pay down debt.

5. Pay off highest interest rate loans first

• Funnel extra payments toward the loan with the highest interest rate.
• Once paid off, roll that payment amount into the next highest interest loan.

This “debt avalanche” method saves the most on interest payments.

Ways to Secure Additional Funds

Explore options like these to find extra money that can be applied to student loans:

• Negotiate a pay raise or promotion
• Freelance in your field of expertise for side income
• Drive for a rideshare service or deliver food
• sell items you no longer need on eBay or Facebook
• Rent out extra rooms or a parking spot at your house
• Ask family for help with a fixed monthly contribution
• Take on a roommate to reduce housing costs
• Lower monthly bills by negotiating rates and cancelling unused services

Even small amounts of supplemental income make a difference when focused directly on debt.

Federal Student Loan Programs

Take advantage of federal debt relief and repayment programs:

Income-driven repayment plans

Plans like PAYE and REPAYE set payments at 10-20% of discretionary income and provide forgiveness after 20-25 years.

Public Service Loan Forgiveness (PSLF)

PSLF provides tax-free forgiveness after 10 years for public sector and non-profit employees. Be sure loans and employer qualify.

Unemployment deferment

Federal loans allow deferment for up to 36 months while unemployed or facing economic hardship. Interest still accrues in most cases.

Check if you qualify for any federal programs to lower monthly payments. However, these will extend the loan term.

Student Loan Refinancing Considerations

Refinancing involves taking out a new private loan at a lower interest rate to pay off federal and private student loans:

Pros

• Typically offers lower interest rate that saves substantially over loan term
• Flexible loan lengths and payment options
• Potential to release cosigner after several consecutive payments

Cons

• Loses access to federal loan protections and programs
• Variable rates may increase over time after refinancing
• Creditworthy borrowers get best terms; those struggling don’t qualify

Be sure you won’t need federal loan safeguards before refinancing. Shop rates across multiple lenders while interest rates are relatively low.

Other Debt Payoff Methods

If you have other debts along with student loans, consider:

Avalanche Method

Pay minimums on all debt, putting all extra funds toward loan with highest interest rate first until paid off. Then repeat with next highest rate debt.

Snowball Method

Pay minimums on all debt, focusing all extra payments on smallest balance debt first until paid off. Repeat with next smallest balance.

Consolidation Loan

Combines multiple debts into one new loan with fixed rate and term. This simplifies payments but increases total interest costs.

A debt repayment strategy tailored to your specific situation keeps you motivated and on track.

Avoiding Common Mistakes

Be sure to avoid these counterproductive moves that prolong paying off student loans:

• Only making minimum payments
• Paying loans with high balances first instead of highest interest rate
• Ignoring loans and letting them go into default
• Deferring payments unnecessarily instead of budgeting
• Spending windfalls and bonuses instead of paying debt
• Taking out additional debt before prior loans are paid off

Stay intentional with payments and debt will melt away faster than expected.

Retirement Savings and Debt Repayment

When trying to pay off student loans early, continue contributing enough to retirement accounts to get all matching funds from employers. This is free money.

If loans have double-digit interest rates, prioritize above retirement after securing match. But for most, moderate monthly retirement savings alongside determined extra loan payments provides balance.

Celebrating Payoff Milestones

As you pay down principal milestones, celebrate your progress:

• Take 10% of the payoff amount and splurge on something fun or beneficial for yourself.
• At 50% loan balance, increase retirement savings by what you were paying extra on loans.
• When paid off, allocate those payments to maximize 401(k) and IRA contributions.

Use motivation points along the way toward the ultimate goal of becoming 100% student debt free!

Conclusion

With focus, discipline, and tailored strategies, becoming student debt free much faster is an attainable goal. Consistent extra payments and maximizing cash flow to loans remains the surest path. Celebrate each milestone and find positives along the journey. Your future self will thank you.