Budgeting to pay off student loans faster may seem impossible, but there are ways to pay down your debt faster than the standard 10-year repayment plan.
By making some adjustments to your budget and looking into repayment strategies. These strategies include income-driven repayment plans, refinancing, or paying extra each month.
You can make those intimidating student loan balances disappear more rapidly. Keep reading for more details on how to pay off your student loans faster.
Read Also: What Student Loan Should I Get
How to Pay Off Your Loans Faster
Here are ways to pay off your student loans faster:
1. Take Inventory of Your Loans
Before making a payoff plan, you must know exactly what you’re dealing with. Log into your student loan servicer’s website and take stock of the following:
- The total balance – Add up the balances on all your federal and private student loans to get the big-picture number.
- Interest rates – The rates on your loans impact how much interest accrues over time. The higher the rates, the more interest you pay overall.
- Loan types – Federal, private, subsidized, unsubsidized? Different loans have different rules and options.
- Monthly payments – How much is due each month across all loans?
Once you know where you stand, you can start mapping out a strategy.
2. Adjust Your Budget
Freeing up cash in your monthly budget is key for putting extra money toward loans. To find extra money:
- Cut discretionary spending on things like dining out, entertainment, and shopping.
- Find cheaper expenses like groceries, cell phone plans, and cable packages.
- Find a roommate or downsize your living space to cut housing costs.
- Sell things you no longer use – old clothes, electronics, furniture, etc.
- Earn extra income with a side gig like rideshare driving, tutoring, or freelance work.
- Pause retirement savings temporarily until high-interest debt (like credit cards) is paid off.
Every dollar you can divert toward student loans now will save you money on interest later.
3. Make Payments Every Two Weeks
Most student loans have a monthly payment due date. By making half your payment every two weeks instead, you’ll make 26 half-payments over the year, equaling 13 full payments.
This trick allows you to make the equivalent of an extra monthly payment each year, which accelerates payoff time.
Set up automatic transfers from your checking account every other week to implement this strategy easily.
4. Enroll in an Income-Driven Repayment Plan
Income-driven repayment plans like Income-Based Repayment (IBR) or Pay As You Earn (PAYE) cap your monthly payments at a percentage of your discretionary income and extend repayment terms.
While this means paying more interest over time, it helps free up cash flow so you can first target any extra funds toward your highest-interest loans. You must have federal Direct Loans to qualify.
5. Refinance Your Student Loans
Refinancing involves taking out a new private student loan at a lower interest rate to pay off your existing loans. This consolidates multiple loans into one and can accelerate payoff.
Focus on refinancing any private loans above 5-6% interest first. Just be sure to compare repayment terms and check if you’ll lose borrower protections like income-driven repayment by refinancing federal loans.
6. Make Extra Payments
Any extra amount you can pay monthly above the minimum due will reduce the principal faster. Even adding $20 per month makes a difference.
There are two effective ways to do this:
- Pay a fixed amount extra each month: Add $100 or whatever amount you can afford in addition to the minimum due.
- Pay biweekly and add the two extra payments: Making half-payments every other weekend adds two equivalent payments over the year. Send the extra amount from those two payments toward the principal every year.
Always specify the extra amount should go to the principal only, not future payments. You can send one-time extra payments, too, with bonuses or tax refunds.
7. Target Loans Strategically
Putting extra payments toward your highest-interest-rate loan is best to optimize payoff speed first.
Loans with lower balances and rates can be paid off according to the minimum schedule.
If interest rates are similar across loans, tackle the smallest balance first using the debt avalanche method.
This eliminates one loan quickly and frees up cash flow to attack the next one.
Read Also: Student Loan Settlement
8. Avoid Deferment and Forbearance
While these options temporarily postpone payments, the interest tradeoff will continue growing.
Avoid deferment and forbearance unless necessary. Interest can snowball during these postponement periods and slow your payoff timeline.
If you’re struggling to make payments, get on an income-driven repayment plan instead to make managing payments more affordable long-term.
9. Consider Paying Loans During Grace Period
After graduating, there is a 6-month grace period before student loans enter repayment.
Any payments made during this time go directly to the principal instead of the interest accrued.
If you can pay during the grace period, you can reduce the principal balance before interest capitalization. Even paying a portion of the principal makes a dent.
10. Automate Everything
Set up automatic withdrawals from your checking account for the amount due each month so you get all the payments.
On top of autopay, arrange automatic transfers on payday to send any extra cash to loans right away before you spend it.
Automation takes the effort out of making frequent manual payments and extra payments. Consistency is key for speedy repayment.
11. Get an Accountability Partner
Repaying loans solo can feel lonely. Recruit a friend or family member to be your accountability partner on your debt freedom journey. Share your balances, payoff goals, and repayment plan.
Then, check in monthly on progress and have them help keep you motivated with reminders, encouragement, and peer pressure!
Having someone in your corner makes the process more manageable.
12. Remain Focused Until the End
As loan balances decrease over time, it can be tempting to ease up on reining in spending or sending extra money toward loans. Avoid debt fatigue by staying focused until all loans are fully paid off.
Keep picturing life after student loans are finally out of the picture – it will keep you motivated!
Zero student loan debt gives you much more financial freedom and flexibility. Keep momentum until you cross the finish line.
Paying off student loans aggressively requires discipline and commitment, but these steps can make you debt-free years sooner.
With a thoughtful strategy and focused effort, you can pay off your loans faster than a decade from now. Just stay positive and tackle it step-by-step for a big payoff.