How to Pay Off Student Loans Fast

Extra student loan payments will speed up payoff, but you can also refinance to get a shorter loan term and save on interest.

Brianna McGurranNovember 16, 2018

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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.

For example, on a 10-year, $10,000 loan with a 4.5% interest rate, you’d be debt-free about six years ahead of schedule if you paid an extra $100 every month. These strategies can help you get there:

Use a student loan payoff calculator to see how fast you’d get rid of your loans, and how much money in interest you’d save.

Extra payments? Make them the right way

The government automatically puts federal student loans on a 10-year repayment timeline, unless you choose differently. If you have a private loan, your repayment term could be shorter or longer.

Generally, there’s no penalty for paying more than the minimum. You can make an additional payment at any point in the month, or you can make one larger payment on the due date.

Instruct your servicer to apply overpayments to your current balance, and to keep next month’s due date as planned.

Here’s one big caveat: Student loan servicers, which collect your bill, may apply the extra amount to next month’s payment. That advances your due date, but it won’t help you pay off student loans fast.

Instead, be sure to instruct your servicer — either online, by phone or by mail — to apply overpayments to your current balance, and to keep next month’s due date as planned.

Good credit and steady job? Refinance

Refinancing student loans can help you pay off student loans fast without making extra payments.

If you qualify, a lender will replace 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.

For example, refinancing $50,000 worth of student debt from 8.5% interest to 4.5% could get you out of student loan debt nearly two years sooner. It will also save you about $13,000 in interest, even with payments that stay about the same.

You’re a good candidate for refinancing if you have a credit score of 690 or higher, a solid income and a history of on-time debt payments.

Nothing extra? 5 ways to save

Stick to the standard repayment plan

If you can’t make big extra payments, the fastest way to pay off federal loans is to use the 10-year standard repayment plan.

Federal loans offer income-driven repayment plans, which can extend the payoff timeline to 20 or 25 years. You can also consolidate student loans, which stretches repayment to a maximum of 30 years, depending on your balance. 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.

Pay off capitalized interest

Unless your loans are subsidized by the federal government, interest accrues on your loans while you’re in school, in your grace period, and during periods of deferment and forbearance. That interest capitalizes when repayment begins, which means your balance grows, and you’ll pay interest on a larger amount.

Paying off accrued interest during your grace period won’t immediately speed up the payoff process, but it will mean a smaller balance to get rid of.

Consider making monthly interest payments while it’s accruing to avoid capitalization. Or make a lump-sum interest payment before your grace or deferment period ends. That won’t immediately speed up the payoff process, but it will mean a smaller balance to get rid of.

Make biweekly payments

This simple strategy is a way to trick yourself into paying extra on debt: Pay half of your payment every two weeks instead of making one full payment monthly. You’ll end up making an extra payment each year, shaving time off your repayment schedule and dollars off your interest costs. Use a biweekly student loan payment calculator to see how much time and money you can save.

Increase your earnings

Consider making extra income that will go directly toward paying off student loans fast. You can sell items like clothing, unused gift cards, or photos; rent out your spare room, parking spot or car; or use your skills to freelance or consult on the side.

You’ll be less likely to spend money you’ve earmarked for loans if it’s separate from your main checking or savings accounts. Set up a separate bank account specifically for paying off loans. Save your extra money there, or automatically transfer a certain amount to it per month and make extra payments from it.

Use 'found' money

Whenever you get a raise, a bonus, or another 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.

You can also set up rules for yourself, like putting any $5 or $10 bills you receive toward your loans. Some money-saving apps, like Digit and Qapital, will help you set savings goals and rules.

These resources can also help clear the way for more money to go toward loans each month: