According to the Federal Reserve Bank of New York, student loan debt has reached over $1.5 trillion. The average student loan debt per borrower is over $37,000. Student loans are more in demand than any other loan in America.
It is important to tackle your student loan debt as quickly as possible. The most effective way to pay off student loans fast is to pay more than the minimum payment in any way you can. The more you pay down the principal balance, the less you’ll pay in interest overall.
Do you dream about paying off your student loans fast? So does pretty much every student in America.
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How to Pay Off Student Loans Fast
The best way to pay off student loans fast is to pay more than the minimum each month. The more you pay toward your loans, the less interest you’ll owe — and the quicker the balance will disappear. So, here are creative payoff strategies to help you pay down your student loans faster:
1. Make extra payments the right way
In order to make extra payments, check with your lender about the existence of any prepayment penalties. If there are no prepayment penalties then this is one of the easiest ways to reduce your debt.
Just take the payments you have and add extra money to the payment to be made. You should already have payments set up, so anything extra goes straight toward your principal.
2. Refinance if you have good credit and a steady job
Refinancing student loans can help you pay off student loans fast without making extra payments.
You’re a good candidate for refinancing if you have a credit score in the high 600s, a solid income and a history of on-time debt payments. If you’re using federal loan benefits like income-driven repayment, refinancing may not be for you.
Refinancing student loans replaces multiple student loans with a single private loan at a lower interest rate. You can choose a new loan term that’s shorter than the one you originally received. That may increase your monthly payment, but it will help you pay the debt faster and save money on interest. You’ll also have just one bill to pay, rather than multiple.
Refinancing your student loans is a great way to manage your student loan debt, it is advised to have in-depth knowledge about it before you jump into refinancing.
For example, refinancing $50,000 from 10% interest to 5.0% could let you save $15650 which can be used in the prepayment.
3. Enroll with autopay
Many loan servicers offer an interest rate discount of 0.25% when you enroll in automatic payments. This is a small amount but can add up to some major savings over the life of your loan.
Plus, autopay is generally a good idea, as it decreases the chance that you’ll get into trouble by forgetting a payment.
For example, Dropping a $10,000 loan's interest rate from 4.5% to 4.25% would save you about $144 overall, based on a 10-year repayment plan. But that’s still extra money to help pay off student loans fast.
Contact your servicer to enroll or find out if an autopay discount is available
4. Make biweekly payments
By making bi-weekly payments, the frequency of payments being done increases. If these payments are contributed towards your loan forgiveness then you can have your loans forgiven faster.
Many loan servicers offer an interest rate discount of 0.25% when you enroll in automatic payments. This discount is a small amount, but can add up to some major savings over the life of your loan.
Plus, autopay is generally a good idea, as it decreases the chance that you’ll get into trouble by forgetting a payment. Talk to your servicer about any interest rate discounts they offer that you can benefit from.
5. Pay off capitalized interest
Capitalized interest is interest that isn’t paid off. That interest adds to your balance which causes you to pay more on your student loans overall.
Typically, interest accrues while you’re still in school or in deferment or forbearance. But if you make payments every month while the interest accrues, your student loan balance will be less and therefore easier to pay off since you’ll avoid capitalization.
Alternatively, if you’re still in your grace period, focusing on paying off the accrued interest can help lower your balance immensely. So, basically money saved by preventing capitalize interest can be used as a prepayment towards your principal amount.
Worried about your college tuition? Learn more about student loans
6. Stick to the standard repayment plan
The government automatically puts federal student loans on a 10-year repayment plan unless you choose differently. If you can’t make big extra payments, the fastest way to pay off federal loans is to stay on that standard repayment plan.
Federal loans offer income-driven repayment plans, which can extend the payoff timeline to 20 or 25 years.
If you don’t truly need these options and can afford to stick with the standard plan, it will mean a quicker road to being debt-free.
7. Use 'found' money
Whenever you get a raise, a bonus or other financial windfall, allocate at least a portion of it to your loans. Consider using this breakdown:
50% of the extra income can go toward debt, 30% to savings and 20% to fun, discretionary spending.
Some employers offer money for loan repayment as an employee benefit. Find out if your company does, and be sure to enroll.
8. Make extra payments whenever you can
In addition to paying more on your monthly bill, think about making extra payments. This can be particularly easy if you find yourself with extra cash.
Did grandma send you a check for your birthday? Put it toward your loans.
Got a one-time bonus at work for a job well done? Put it toward your loans.
Tax refund? Put it toward your loans.
Spending that money on your loans now will pay off down the road when you’ve paid less in interest — and therefore have more money to spend how you wish.
9. Take advantage of tax deductions and credit
There are two types of school-related tax deductions that can help reduce the tax burden for students and recent graduates.They are Student loan interest tax deduction and tuition and fees tax deduction.
Student loan interest tax deduction
The student loan interest tax deduction allows you to reduce your taxable income by up to $2,500 for interest paid on student loans in the year for which you’re filing. In order to qualify for this deduction, you must:
Have paid interest on a loan in your name
Have been enrolled at least half-time in a degree program when you took out the loan
Be filing as a single taxpayer or as “married filing jointly”
Have a modified adjusted gross income (MAGI) of less than $80,000 as a single taxpayer or $160,000 if you’re filing jointly
Not have anybody else claiming you as a dependent on their tax return
Tuition and fees tax deduction
The second type of deduction is for up to $4,000 per year for tuition and fees. Unlike the student loan interest tax deduction, this can only be claimed for tax years in which you pay for educational expenses. This will generally only be an option while you’re in school, or if you go back to school while repaying your student loans.
To be eligible for this deduction you must have paid qualified education expenses of higher education (including tuition and fees, but not room, board, transportation, etc.) for yourself or an eligible student (your spouse or your dependent for whom you claim an exemption on your tax return).
If you’re still in school or have gone back to graduate school, you might also be eligible for tax credits, which directly reduce the amount of tax you owe
10. Start a side hustle
One way to pay down your student loans faster is to make more money. But you can’t always get a raise or a better job on the spot. So start by increasing your income with a side hustle.
Getting a side gig doesn’t always mean driving for Uber or Lyft (but you can!); sometimes it just means doing something simple like selling your unwanted stuff on eBay or Craigslist, delivering with Postmates or Grubhub or starting a dog walking business. You can even rent out a room or your entire residence on Airbnb just once or twice a year and put that money toward student loan payments.
11. Find the right refinancing lender
You can pay off your refinanced student loan early regardless of which lender you choose because student loan refinances lenders don’t charge prepayment penalties. But not all lenders go the extra mile to make quick payoff convenient. Look for lenders that let you make biweekly and greater-than-minimum payments via autopay, so you can set it and forget.
12. Choose the shortest repayment timeline you can afford
Also look for lenders that offer repayment schedules that fit with your debt payoff goal; some offer shorter terms than others. If you want to be debt-free in seven years, for instance, it’s helpful to have a seven-year loan term. That way, you’ll meet your goal just by making the minimum payments — any extra payments will be gravy.
13. Refinance with the lender that offers you the lowest rate
Above are top-rated lenders that offer all or most of these fast payoff features. Get rate estimates from each and go with the lender that offers you the lowest interest rate.
Best Refinance lenders for paying off student loans fast
Some refinance lenders make it easier than others to pay off student loans fast. These top-rated refinancing lenders scored highest for features that help you pay off student loans more quickly.
|Lender||Fixed APR||Variable APR|
Penfed Credit Union
|3.48 - 6.03%||2.32 - 7.06%|
|SoFi||3.46 - 7.36%||2.31 - 7.36%|
|3.24 - 7.99%||2.49 - 7.24%|
|Common bond||3.21 - 6.45%||2.02 - 6.30%|
|Earnest||3.45 - 6.99%||1.99 - 6.89%|
|RISLA||3.49 - 8.14%||N/A|
|First Republic||1.95 - 4.20%||N/A|
If you have a good Credit Score, you'll almost always qualify for the best interest rates. The less money you pay interest, the lower the monthly payments to be made and the more money you have for other expenses.
Min. Credit Score
Penfed Credit Union
|SoFi||Did not disclose|
College Ave Student Loans
|First Republic||Did not disclose|
As shown in the table above, not all lenders will disclose the minimum credit score required. You can reach out to an official and find out. They might not provide the exact credit sore but it is always advised to get a rough idea.
Before you decide on any lender or loan option be aware of all the options available to you and pick out which is best suited for your financial condition.