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How to Pay Off Student Loans Fast

Extra payments will help pay off student loans fast, but you can also refinance to get a shorter loan term and save on interest.

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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.

Use a student loan payoff calculator to see how fast you could get rid of your loans and how much money in interest you’d save. Here are seven strategies to help you reach your student loan payoff goals.

1. Make extra payments the right way

There’s never any penalty for prepaying student loans, or 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. Either can save you a lot of money.

For example, let’s say you owe $10,000 with a 4.5% interest rate. By paying an extra $100 every month, you’d be debt-free more than five years ahead of schedule, if you were on a 10-year repayment plan.

But there’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, 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.

2. Refinance if you have good credit and a steady job

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

You’re a good candidate for refinancing if you have a credit score in the high 600s, a solid income and a history of on-time debt payments. If you’re using federal loan benefits like income-driven repayment, refinancing may not be for you.

Refinancing $50,000 from 8.5% interest to 4.5% could let you pay off your student loan debt nearly two years faster.

Refinancing replaces 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 from 8.5% interest to 4.5% could let you pay off your student loan debt nearly two years faster. It would also save you about $13,000 in interest, even with payments that stay about the same.

3. Enroll in autopay

If you don’t want to refinance your loans, signing up for autopay is another potential way to lower your student loan’s interest rate.

Federal student loan servicers offer a quarter-point interest rate discount if you let them automatically deduct payments from your bank account. Many private lenders offer an auto-pay deduction as well.

The savings from this discount will likely be minimal — dropping a $10,000 loan's interest rate from 4.5% to 4.25% would save you about $144 overall, based on a 10-year repayment plan. But that’s still extra money to help pay off student loans fast.

Contact your servicer to enroll or find out if an autopay discount is available.

4. 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.

5. Pay off capitalized interest

Unless your loans are subsidized by the federal government, interest will accrue 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.

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 period or postponement ends. That won’t immediately speed up the payoff process, but it will mean a smaller balance to get rid of.

6. Stick to the standard repayment plan

The government automatically puts federal student loans on a 10-year repayment timeline, unless you choose differently. If you can’t make big extra payments, the fastest way to pay off federal loans is to stay on that 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.

7. Use 'found' money

Whenever you get a raise, a bonus or other 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.

Some employers offer money for loan repayment as an employee benefit. Find out if your company does, and be sure to enroll.

You can also start a side hustle to pay off student loans fast. 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.

Consider setting 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 as well.