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It’s common for student loan borrowers to take 20 years or more to pay off their student debt. Here are steps you can take to be debt-free faster. (iStock)
Nearly seven in 10 college graduates have federal student loan debt, and they borrow an average of $30,800, according to the National Center for Education Statistics. Paying back that kind of debt can be hard work — especially when you’re just getting started in your career.
If you don’t know how to pay off student loans fast, you’re not alone. It’s not unusual for borrowers to take 20 years or more to repay their student loans.
Fortunately, there are ways to pay off your student loans faster and save money.
Understand all your debts, then make a plan
Make a list of all your student loans, including the current balance, interest rate, projected pay-off date, and pay-off amount for each. Having this information available will help you make more informed financial decisions about the best actions to take.
You can find the information you need on federal student loans by logging into your account at StudentAid.gov. You’ll need to check your most recent statement or log into your online account for private student loans.
Consider consolidation or refinancing
Deciding to consolidate or refinance your student loans can be complicated, especially because these terms are sometimes used interchangeably. But they don’t mean the same thing. Consolidation means combining multiple federal student loans into one Federal Direct Consolidation Loan.
Pros of consolidating student loans
- Spreading payments over a longer period may lower your monthly payment amount
- You can switch from variable- to fixed-rate loans
Cons of consolidating student loans
- A longer payment period can mean more interest paid over the life of the loan
- You may lose borrower benefits associated with current loans, such as interest rate discounts, principal rebates, or some cancellation benefits
Refinancing your student loans involves getting a new private student loan with new terms and using that loan to pay off one or more existing federal or private student loan balances.
Pros of refinancing student loans
- Simplify multiple loans into a single monthly payment
- May qualify for a lower interest rate with the new loan
Cons of refinancing student loans
- If you refinance federal loans with a private lender, you lose access to federal income-driven or income-sensitive repayment plans, deferment, or forbearance
- Lose federal loan forgiveness option for borrowers working in certain government, military, education, health care, and nonprofit jobs
With Credible, you can compare student loan refinancing rates without affecting your credit score.
Stick to a budget
If you’re struggling to cover living expenses, student loan payments, and some occasional fun, you might benefit from budgeting with the 50/30/20 rule. Here’s how it works:
- 50% of your budget goes toward needs: Required expenses such as housing, utilities, insurance, groceries, transportation, and minimum student loan payments
- 30% of your budget goes toward wants: Fun stuff such as hobbies, dining out, and other entertainment
- 20% of your budget goes toward savings: Long-term goals like an emergency fund, retirement savings, additional principal payments on student loans, and investing
If this is your first time preparing a budget, look through your last few months of bank or credit card statements and categorize your transactions into these three buckets. The process might open your eyes to some changes you could make to pay off your student loans faster.
Pay more than the minimum each month
Paying a little extra toward your loan’s principal each month can reduce the interest you pay and help you get out of debt faster. The key is to make sure those payments are applied to principal rather than applying your extra payment to accrued interest. Otherwise, you won’t see much progress on your debt.
Unfortunately, student loan servicers don’t always make it easy to pay off your loans early. To make sure your extra payments go toward your principal balance, check your loan servicer’s website to see if it gives you the option of making extra principal-only payments. If you don’t see that option on the website, call your lender and ask how to make principal-only payments.
The Consumer Financial Protection Bureau (CFPB) recommends putting your request to make extra payments in writing and even has a sample letter you can send to your servicer.
Decide between the debt snowball and debt avalanche methods
If you have multiple student loans, paying a little extra toward each will help pay them off faster. But the debt snowball or debt avalanche methods are more strategic ways to get out of debt.
How the debt avalanche method works
- Focus on paying off your debt with the highest interest rate, putting any extra payments you can afford toward that loan while paying the minimum on your other debts.
- Next, move on to the loan with the next-highest rate, adding 100% of the payment you were making on the first loan to the second loan.
How the debt snowball method works
- Target the loan with the smallest balance first, putting any extra principal payments toward that loan until it’s paid in full.
- Move on to the next-lowest balance.
While you might pay less interest under the debt avalanche method, the debt snowball method is popular because the quick win of paying a loan in full can help keep you motivated.
Set up auto payments for an interest rate reduction
Federal student loan lenders and some private lenders offer a small interest rate reduction if you enroll in automatic payments. With autopay, your lender automatically drafts payments from your account rather than having you manually make payments each month.
This is a good way to ensure you’re never late making a payment, and the interest rate reduction — usually 0.25 percentage points — can add up to hundreds of dollars in savings over the life of your loan.
You can easily compare prequalified student loan refinance rates through Credible.
Get a temporary side hustle
When you’re just starting your career, it can be tough to come up with extra cash to put toward your student loans. Fortunately, the gig economy offers many opportunities to make a little extra money, including:
- Drive for a rideshare service like Uber or Lyft
- Walk dogs or pet sit for busy neighbors with Rover or Wag
- Find babysitting jobs at Care.com
- Deliver groceries or takeout orders in your downtime through Instacart, DoorDash, or GrubHub
- Rent out your car when you’re not using it via Turo or Getaround
You might also consider selling unused items or flipping items found at thrift stores and garage sales on eBay, Facebook Marketplace, or Poshmark.
Use any increase in income toward paying the debt
What did you do with the extra money the last time you got a raise or bonus? If you’re like most people, you used it to upgrade your lifestyle. Spending more when you earn more is called lifestyle creep, and it can prevent you from paying off your student loans quickly.
The next time you get a raise, bonus, tax refund, or another unexpected cash windfall, don’t spend every penny of it. Take half (or more) and make an extra principal payment on your student loan debt.
Stay on the standard repayment plan
Most federal student loans are eligible for the standard repayment plan, which has fixed payments that ensure you pay off your loans within 10 years (or within 30 years for Consolidation Loans).
Of course, the standard repayment plan isn’t the only option for repaying your student loans. But alternative repayment plans like a graduated repayment plan (that increases payments every two years), extended payment plan (which gives you 25 years to repay), and an income-driven repayment plan can all extend the amount of time it will take to fully pay off your student loans. And the longer you pay on student loans, the more likely you are to pay higher interest costs.
Utilize tax breaks
Don’t forget to deduct the interest paid on your student loan on your federal income tax return. The student loan interest tax deduction allows eligible taxpayers to deduct up to $2,500 of student loan interest as an above-the-line deduction, meaning you don’t have to itemize deductions in order to take this one.
This deduction gradually phases out if your income is between $70,000 and $85,000 ($140,000 and $170,000 if you’re married and file a joint return).
Ask about employer student loan repayment programs
Some employers offer help for employees with student loan debt, and the number of employers offering such assistance could grow thanks to recent legislation. The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows employers to pay up to $5,250 per employee toward student loans. As a tax-free fringe benefit, these payments are deductible business expenses for the employer, but aren’t taxable income for employees.
This benefit is available through Dec. 31, 2025.
Ask your employer’s HR or employee benefits department whether they’re currently offering this benefit. It can put a big dent in your student loan repayment efforts without increasing your taxable income.
Paying off student debt can seem like an impossible goal when you’re just starting out. But there are many steps you can take to see progress quickly. And that progress will keep you motivated to continue. Even small steps can lead to big strides over the course of several years, so try out a handful of the tips above to pay off your student loans faster.
Comparison shopping for student loan refinance rates is easy when you use Credible.
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