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Paying more than the bare minimum each month is the best way to pay off student loans. Your interest payments will decrease the more you pay toward your loans, and the faster the balance will be paid off.
Use a student loan payoff calculator to determine how quickly you could pay off your debt and how much you would save on interest. Here are seven methods to accelerate your student loan repayment.
Make extra payments the right way
Paying off student loans early or making more than the minimum payment carries no penalties. However, there is a catch with prepayment: Student loan servicers, who are in charge of billing you, may add the extra money to the payment due the following month.
That moves up the due date, but it won’t result in you paying off your student loans more quickly. Instead, tell your servicer to apply any overpayments to your current balance and to maintain the scheduled due date for the following month by giving them this instruction via online, phone, or mail.
You have the option of making a lump-sum payment for your student loans on the due date or making additional payments at any time during the month. Either can save you a lot of money.
For example, let’s say you owe $10,000 with a 4. 5% interest rate. If you were on a 10-year repayment plan, you could eliminate your debt more than five years earlier by paying an extra $100 each month.
Refinance if you have good credit and a steady job
You can pay off student loans quickly by refinancing without making additional payments.
A single private loan obtained through refinancing replaces several student loans, ideally at a lower interest rate. Select a new loan term that is shorter than the remaining time on your existing loans to expedite repayment.
Opting for a shorter term may increase your monthly payment. But doing so will enable you to pay off the debt more quickly and save on interest.
For example, refinancing $50,000 from 8. 5% interest to 4. You could reduce your student loan debt by 5% to pay it off almost two years sooner. Even with payments remaining roughly the same, it would also save you $13,000 in interest.
If your credit score is at least in the high 600s, you make a good living, and your debt-to-income ratio is less than 50%, you make a good candidate for refinancing. If you want or need programs like income-driven repayment and Public Service Loan Forgiveness, you shouldn’t refinance federal student loans.
Would refinancing save you money?
Another possible way to reduce the interest rate on your student loans if you don’t want to refinance is to enroll in autopay.
If you permit federal student loan servicers to automatically deduct payments from your bank account, they will reduce your interest rate by a quarter point. Many private lenders offer an auto-pay deduction as well.
This discount will probably only result in a small reduction in the interest rate on a $10,000 loan from 4 percent to 0. 5% to 4. Based on a 10-year repayment schedule, you would save 25% and roughly $144 overall. However, that is still extra cash that can be used to quickly pay off student loans.
To sign up or learn if there is a discount for autopay, get in touch with your servicer.
Make biweekly payments
Paying half of your payment every two weeks rather than one full payment each month is a straightforward trick you can use to trick yourself into making additional debt payments.
You’ll end up paying an additional amount each year, reducing your interest costs and repayment schedule by time and money. To determine how much time and money you can save, use a biweekly student loan payment calculator.
The quickest way to pay off student loans is to use autopay, make biweekly payments, and pay the interest while you’re still in school. Make extra payments to principal when you can. Consider refinancing. If not, stick to the standard repayment schedule rather than using forbearance or income-driven plans.
Yes, there are loans available for paying off student debt. You can repay one or more of your loans through a private lender, frequently at a lower interest rate; the procedure is known as student loan refinancing.
Six months after you graduate or leave school, federal and private student loan repayment usually starts. You dont have to wait to begin payments, though. What is the fastest way to pay off student loans?.
The quickest way to pay off student loans is to use autopay, make biweekly payments, and pay the interest while you’re still in school. Make extra payments to principal when you can. Consider refinancing. If not, stick to the standard repayment schedule rather than using forbearance or income-driven plans. Are there loans to pay off student loans?.
Yes, there are loans available for paying off student debt. You can repay one or more of your loans through a private lender, frequently at a lower interest rate; the procedure is known as student loan refinancing. When do you pay back a student loan?.
Six months after you graduate or leave school, federal and private student loan repayment usually starts. You dont have to wait to begin payments, though.
Pay off capitalized interest
While you are in school, during your grace period, and during your periods of deferment and forbearance, interest will accumulate on your loans unless they are subsidized by the federal government. When repayment starts, that interest capitalizes, growing your balance and causing you to pay interest on a larger sum.
To prevent capitalization, think about paying your interest each month while it is still accruing. Alternately, pay your interest in full before the end of your grace period or postponement. Although it won’t speed up the payoff process right away, doing so will result in a smaller balance to pay off.
Stick to the standard repayment plan
Unless you decide otherwise, the government automatically sets federal student loans on a 10-year repayment schedule. The fastest way to pay off federal loans is to continue on that standard repayment plan if you are unable to make significant additional payments.
Income-driven repayment options are available for federal loans, extending the time to payback to 20 or 25 years. Depending on your balance, consolidating student loans can extend repayment time to a maximum of 30 years.
If you can afford to stick with the standard plan and don’t really need these extra options, you’ll get out of debt faster.
Use ‘found’ money
If you receive a bonus for refinancing your student loans, a raise, or another financial windfall, set aside at least some of it for your debt. Think about allocating the additional funds as follows: 50% to debt, 30% to savings, and 20% for fun, discretionary spending.
Some companies pay off student loans as an employee benefit. Find out if your employer offers a program for paying back student loans by employees, and be sure to sign up.
You can start a side business to quickly pay off your student loans. Rent out your extra space, parking spot, or vehicle, sell any unwanted items like clothing or photos, or use your skills as a freelancer or consultant on the side. v.
Create guidelines for yourself, such as allocating any $5 or $10 bills you receive to your debts. You can also set savings goals and rules with the aid of some money-saving apps, such as Digit and Qapital.
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Ryan Lane is a NerdWallet assistant assigning editor whose work has been highlighted by The Associated Press, U S. News & World Report and USA Today. Read more.
FAQ
How can I pay 200k in 3 years off student loans?
- Refinance your loans.
- Add a cosigner to improve your interest rate.
- Sign up for an income-driven repayment plan.
- Pursue student loan forgiveness.
- Use the debt avalanche or snowball method.
How long does it take to pay off $100 K in student loans?
While the federal loan repayment period is typically 10 years, it typically takes between 13 and 20 years to pay back $100,000 in student loans. Depending on your financial situation and goals, here are some various scenarios to take into account.
Is it smart to pay off student loans quickly?
Paying off your student loan earlier will save you money over the course of the loan because, like most other debt, interest is charged when there is a balance. It reduces the amount of time the debt has to accrue interest, so ultimately you’ll pay less.
How do I pay off my student loan ASAP?
- Make extra payments the right way.
- Refinance if you have good credit and a steady job.
- Enroll in autopay.
- Make biweekly payments.
- Pay off capitalized interest.
- Stick to the standard repayment plan.
- Use ‘found’ money.