The Exhaustive Guide to Paying Off Student Loans Faster

As the cost of college has gone up, and students are continuing their education through graduate school, more adults in the United States have large amounts of student loan debt than ever before. In 2016, the average college graduate in the workforce had about $37,172 in student loan debt, which has led to about $1.5 trillion in debt across the country.

These big numbers seem imposing, but there are ways to repay student loans faster without feeling overburdened. This guide shows you options on how to pay off student loans faster so you can enjoy the job and quality of life your education afforded you, with less worry about monthly payments or interest rates. 

Top 10 Options for Paying Off Your Student Loans Faster

1. Choose the right repayment plan. The best way to pay off student loans faster is to choose the best possible repayment plan for yourself. While this can be a tough call for students entering college for the first time, there are usually many options for repayment plans, and you can choose the most forgiving.
   The standard repayment plan for federal loans, for example, is a set interest rate with specified monthly payments that will be spread out over 10 years. If you do not sign up for a specific payment plan, this one will be automatically chosen for you.
   
   With federal loans, you can:
   
   • Switch to a different payment plan that suits your income needs, personal financial goals, or other aspects of your life.
   • Choose income-driven payments, which will base your payment plan on how much you get paid.
   • Use an online payment estimator before deciding which payment plan to pursue.

If you qualify for an income-based repayment plan, be sure you understand how much you will be paying in full, including interest. While the monthly payments are lower based on your income, this is usually because the terms of the loan spread the payments out past 10 years. This means you are actually paying much more than you would under a standard repayment plan.

Private loans will have a wider range of repayment options, although they are likely to have higher interest or stricter terms. You can negotiate with the lender to adjust your payment plan, but this may not be built into the loan’s terms. If you are more interested in loans from a private organization than the federal government, be sure to thoroughly read the contract so you know how flexible the repayment options are. 

1. Pursue student loan forgiveness plans. Some federal loans have options for student loan forgiveness. For example, if you become a teacher when you graduate and choose a job in a low-income school district, this position could be considered a public benefit, and part of your student loans may be forgiven if you stay in the job long enough. Volunteering can also forgive part of your student loans.
   
   Many forgiveness programs will remove part of your debt and lower your interest rate, but you will still be responsible for some portion of your student loans.
   
2. Work for a company that pays your loan. As a form of student loan forgiveness through the private sector, some companies offer student loan repayment assistance. This helps to offset the cost of the college education that helped you get the job, which also benefits the company.
   
   While few companies currently offer this perk, as more people with tens of thousands of dollars in student loan debt enter the workforce, more employers are seeing it as a way to draw highly educated and skilled employees. Companies that offer student loan repayment assistance may offer anywhere from $500 to $10,000 per year toward the cost of your student loans.
    
3. Pay more than the minimum. Many people with student loans feel like they cannot pay more than the minimum amount every month. But even if you can throw an additional $25 or $100 at your monthly payments once in a while, it can make a big difference over time.
   
   If you took out a $20,000 loan with 6% interest and a standard repayment plan of 10 years, you can save $315 and finish paying the loan five months early if you pay an extra $100 every year.
   
   Federal student loans do not require you to pay anything until you have graduated or otherwise left the school. Some private loans begin collecting monthly payments while you are still in school. Either way, if you can swing it, you can pay more than required of you while you are a student, and that can also help to alleviate your post-graduate debt.
   
4. Sign up for autopay. Both federal and private loan companies are keen to have guaranteed monthly payments. If you sign up to automatically pay each monthly installment, you can get discounts, waived fees, and lowered interest rates. The typical discount is about 0.25% lower interest on the loan, which adds up over a decade or more.
   
5. Split your monthly payment. Since most people are paid about every two weeks, or around the first and 15th of every month, you can take the strain off one paycheck by dividing your payment into two parts. Most loan companies, including private lenders, just want the total payment on time. If you pay $400 every month toward your student loans, you can pay $200 on the 10th and $200 on the 20th instead of a one-time payment of $400 on the 30th.
   
   This process makes you feel more financially secure, but even better, it helps you pay off your student loans faster. With a monthly schedule, you have 12 payments in a year; however, if you split the payments over weeks rather than months, you end up with 26 smaller payments. This basically gives you one extra month that you didn’t have in the previous payment plan.
   
   This little psychological trick may also encourage you to find extra money in those paychecks, so you can also pay more than your minimum payment.
   
   If you are paying a private student loan, check the terms to make sure you will not be penalized for paying anything early. Prepaying on some types of loans comes with financial penalties.
   
6. Refinance the loan. Both private and federal loans allow refinancing options if you have steady income and good credit. Refinancing essentially means you take out a new loan with different terms, like lower interest, and then use the new loan to fully pay off the old loan.
   
   You may also decide to refinance your loan if you need a different repayment term. If you have a well-paying job that makes it possible to repay your student loans faster and you want to avoid early payment penalties, you can refinance the loan so you repay it with larger monthly payments over seven years rather than 10. This can also save you a lot of money on interest.
   
   Some private lenders may have loan origination fees if you go to refinance. These fees may cancel out any apparent savings from lower interest rates.
   
7. Use your end-of-year bonus. If you work for a company that gives you a cash bonus at the end of the year, put that toward your student loan debt. You’ll feel more relaxed as you start a new year knowing that your student debt is lighter.
   
8. Use psychology to pay more effectively. The human brain likes instant rewards, but when it comes to large payments, we all define this a bit differently. Economists have found two approaches to repaying loans – debt snowball and debt avalanche – can harness your subconscious to work to your benefit. These methods can actually encourage you to pay your student loans faster if you have multiple different loans to repay.
   The debt snowball method works for people who like instant gratification. Through this method, you focus on paying your smallest loan first, so they are out of the way. Make minimum payments on all your loans, but spend more money on the smallest. Then, turn your attention to the next smallest, and so on. You’ll get faster results by getting student loans out of the way, and this can trigger the brain’s reward system.
   
   With the debt avalanche method, you focus on the loan with the highest interest rate and pay more on that balance while paying the minimum on your other loans. This helps pay off the most daunting loan first, and you can then focus on your other loans in a similar order. It is less about instant gratification and more about completing a large, difficult task.
   
9. Get a second job. If you work a full-time job, you may not feel like you have time for a second job, but you may have points during the year where you have a bit more time on your hands. Retail and food service work is almost always available, so you could set a few months aside and work a second job in one of those professions. Or you could pursue a second freelance job since more types of work are available online.
   
   With a little extra income, you can increase your monthly payments and pay off your student loans faster. 

Some Approaches on How to Pay Off Student Loans Faster May Not Work

The list of options above is long partially because many don’t work across the board. You may not have time for a second job because you are a new parent. Your career field may not qualify you for student loan forgiveness. You may not be able to afford anything beyond the monthly minimum.

You may also have accrued other types of debt, like credit card debt, mortgage or car payments, or retirement investments.

Your personal approach to repaying your student loans could be to pay them off as fast as possible, but consider your long-term financial goals too. You may live a happier, less stressful life if you pay the standard rate over the standard time rather than stressing to get rid of your student loan debt as fast as possible.