How to pay off student loans early: 12 strategies

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)

Repaying student loans can be a huge financial responsibility, and if you’re like most borrowers, you likely want to pay them off as quickly as possible. Fortunately, you have many options for getting out of student loan debt sooner.

One way is to pay more than the minimum each month. Another option is to refinance student loans to get a lower interest rate. Here are some creative strategies for how to pay off student loans quickly.

If you’re considering refinancing into a private student loan, Credible makes it easy to compare rates from multiple lenders.

• Pay more than the minimum payment
• Find out your payoff date
• Take advantage of tax deductions and credits
• Make bi-weekly payments
• Consider refinancing your student loans
• Get student loan assistance from your employer
• Enroll in autopay
• Start a side hustle
• Make (and stick to) a budget
• Apply for loan forgiveness
• Make extra payments whenever you can
• Take advantage of your grace period
• Should you pay off student loans early?

1. Pay more than the minimum payment

Paying a little extra toward your loan’s principal each month can reduce the amount of interest you owe and help you pay down the balance faster. The key is to ensure your servicer applies those payments to the loan’s principal rather than 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 the principal balance, check your loan servicer’s website to see if it gives you the option of making principal-only payments. If you don’t see that option on the website, call and ask your loan servicer.

Effectiveness level: High

2. Find out your payoff date

Interest on student loans accrues daily. Knowing your payoff date helps you understand how much it’ll cost to pay off your loan — including interest and fees through that date.

Once you know your anticipated payoff date, you can use a student loan repayment calculator to see how extra monthly payments will shorten your timeline and decrease the total cost of your loan. 

Effectiveness level: Low

3. Take advantage of tax deductions and credits

Don’t forget to tax advantage of federal income tax benefits to help offset the cost of higher education.

Student loan interest deduction

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 to take this one.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is available for the first four years of your college education. It’s worth a maximum of $2,500 per student — 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000. 

Eligible expenses include tuition, required enrollment fees, and required course materials.

Lifetime Learning Tax Credit

The Lifetime Learning Credit (LLC) has no limit on the number of years you can claim it. It’s worth a maximum of $2,000 per tax return. Eligible expenses include tuition and fees required to enroll and attend your college or university.

The student loan interest deduction, AOTC, and LLC may be limited if your income is too high. IRS Publication 970 covers those income limitations and other details you need to know to claim tax benefits for education.

Effectiveness level: Medium

4. Make bi-weekly payments

Rather than making monthly student loan payments, consider bi-weekly payments. While you pay the same amount most months, you’ll make an extra payment toward your loans each year.

How does it work? With a monthly payment schedule, you make 12 payments per year. But with a bi-weekly payment schedule, you make 26 half-payments per year (because there are 52 weeks in a year).

You also lower your principal balance more often, which can reduce the interest you’ll pay over the life of the loan.

You just need to make sure you make both halves of your payment by the due date. For example, say you owe $500 per month on your student loan and your payment is due on the first of each month. Two weeks before Jan. 1, you’d pay $250, then pay the remaining $250 on Jan. 1. 

Effectiveness level: Medium

5. Consider refinancing your student loans

Refinancing student loans involves getting a new private student loan with new terms and using that loan to pay off one or more existing private or federal student loan balances.

Refinancing doesn’t always help you pay off your student loans fast. If you’re already paying a low interest rate, lowering your rate might not be an option. And refinancing into a loan with a longer term might lower your monthly payment but cost more in the long run because you’re extending the payoff period and paying more interest.

Refinancing federal loans with a private lender also means losing access to federal income-driven or income-sensitive repayment plans, deferment, forbearance, and federal student loan forgiveness options.

However, if you have private student loans with high interest rates, it’s worth considering whether you can refinance into a loan with a lower interest rate. 

Effectiveness level: High

If you’re considering refinancing your student loans, it’s important to shop around for the best rates and offers available to you. Credible makes it easy to compare student loan rates from multiple lenders — without affecting your credit.

6. Get student loan assistance from your employer

Some employers offer help for employees with student loan debt. The number of employers providing such assistance could grow thanks to recent legislation and the tight labor market.

The CARES Act of 2020 allows employers to repay employees’ student loans — up to $5,250 per employee — as a tax-free benefit. This means the payments are tax-deductible for the employer and aren’t taxable income for employees.

This benefit is available through Dec. 31, 2025.

Ask your employer’s human resources 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.

Effectiveness level: High

7. Enroll in autopay

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 make payments manually each month.

This is an excellent 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.

Effectiveness level: Low

8. Start a side hustle

When you’re just starting your career, it can be tough to come up with extra cash for your student loans. Fortunately, the gig economy offers many opportunities to make a little extra each month, including:

• Drive for a rideshare company
• Walk dogs or pet sit for busy neighbors
• Find babysitting jobs
• Deliver groceries or takeout orders in your downtime
• Rent out your car when you’re not using it

Hire out your website development, graphic design, writing, and other skills. You might also consider selling unused items or flipping items found at thrift stores and garage sales on online auction spaces. Use the extra cash to pay down your student loans without sacrificing your emergency fund or other saving goals.

Effectiveness level: Medium

9. Make (and stick to) a budget

If you’re struggling to cover living expenses, student loan payments, and some occasional fun, you might benefit from budgeting. 

You have many options for budgeting, and they don’t all involve complicated spreadsheets and tracking every penny. Here are a few to consider:

Envelope system

With an envelope system budget, you plan how you’ll spend your money each month and put cash in an envelope for each spending category. For example, if you decide you’ll only spend $500 at the grocery store this month, you put $500 in your groceries envelope on the first of the month. Each time you shop, you pay for your groceries with cash from the envelope. When you run out of money, you need to live off what you’ve already purchased or take cash from another envelope.

50/30/20 rule

This budgeting method allocates:

• 50% of your budget to needs (housing, utilities, insurance, groceries, transportation, and minimum student loan payments)
• 30% of your budget toward wants (hobbies, dining out, entertainment)
• 20% of your budget toward savings (emergency fund, retirement savings, additional principal payments on student loans, investing)

Zero-based budget

After calculating your monthly income, subtract your monthly spending. Anything left over goes to savings, leaving you with $0 left over at the end of the month. This method is the most time-consuming since you need to account for every dollar spent, but apps are available to help simplify the process.

If this is your first time making a budget, start by reviewing the last few months of bank or credit card statements and categorize your spending into different budget categories. The process might open your eyes to some changes you can make to pay off your student loans faster.

Effectiveness level: Medium

10. Apply for loan forgiveness

Most income-driven student loan repayment plans lower your monthly payments by lengthening your loan term. While this might help in the short term, it’ll take you longer to get out from under your debt. Plus, you could end up paying more interest overall, particularly if you don’t qualify for loan forgiveness.

While private student loans aren’t eligible for loan forgiveness, many federal student loans are. These programs allow all or some of your loans to be canceled after a set number of loan payments or time spent working in a particular occupation — usually five to 20 years.

Check out the following loan forgiveness programs to see whether you might be eligible to apply:

• Public Service Loan Forgiveness (PSLF)
• Teacher Loan Forgiveness Program
• Student Loan Forgiveness for Nurses
• National Health Services Corps (NHSC)
• Department of Justice Attorney Student Loan Repayment Program

Effectiveness level: High

11. Make extra payments whenever you can

Planning to pay more than the minimum payment each month can chip away at your student loan debt over time, but what about unexpected cash windfalls? You might win a cash prize, get a cash gift from a relative on your birthday, or receive extra money from a tax refund or insurance claim.

Rather than spending that unexpected cash windfall, consider using it to pay off your student loan debt faster.

As with planned principal payments, make sure your extra payment goes toward the loan principal rather than accrued interest.

Effectiveness level: Medium

12. Take advantage of your grace period

Most federal student loans give you a six- or nine-month grace period after graduating before you must start making payments. If you have the means, consider making payments during the grace period rather than waiting until they’re required.

For most loans, interest accrues during this grace period, so making payments prevents interest from being added to your principal balance.

Effectiveness level: Low

Some private student loans have grace periods, while others don’t. The availability of a grace period is one more thing you should consider when comparing private student loans. With Credible, you can easily compare private student loan rates from multiple companies.

Should you pay off student loans early?

Paying off your student loans early means paying less interest, which is almost always a good thing. But when you’re putting extra cash toward student loans, you have less money available for other financial goals and obligations.

Paying off your student loans early may not make sense if it’s going to leave you with less money for important financial priorities like: 

• Building an emergency fund — Set aside enough money to cover three to six months' worth of expenses in an easily accessible bank account. Having money available to cover sudden expenses, such as an unexpected car repair or job loss, ensures you don’t have to turn to high-interest credit cards.
• Paying off credit card debt — Credit cards tend to come with much higher interest rates than student loans, so paying off those balances should be your priority.
• Getting the employer match in your 401(k) — Some employers offer 401(k) matching, meaning if you contribute to the plan, they’ll match up to a certain amount or percentage. Make sure you’re contributing enough to qualify for the full match before making extra payments toward your student loans. Otherwise, you miss out on free money.