How to pay off student loans in 5 years: A step-by-step guide

Paying off student loans takes time but it doesn’t have to take decades. And the faster you pay them off, the more you can save in interest and the sooner you can free up money to put toward other financial goals, like saving for retirement or buying a home.

Although the standard repayment term for most federal student loans is 10 years, it’s possible to pay them off in five years with planning, motivation and discipline.

How to pay off student loans in 5 years

The first step in paying off your loans is finding out your current student loan balance and interest rate. To get this information for federal student loans, you can check the National Student Loan Data System that’s run by the U.S. Department of Education, or log in to your online account on your loan servicer’s website.

If you have private student loans, you’ll need to contact your loan servicer(s) or log in to your online account for this information. The Consumer Financial Protection Bureau recommends reviewing your credit reports if you don’t remember who your servicer is. You can check your credit reports weekly for free through April 20, 2022, by visiting AnnualCreditReport.com.

Once you have your current balance and interest rate, plug the information into a student loan interest calculator to get an estimate of how much you’d need to pay monthly to achieve your goal.

Find out your payoff date

It takes about 21 years on average to repay student loans, according to a 2013 study by the One Wisconsin Institute. But since financial circumstances and loan terms vary, your student loan repayment schedule is likely different. For private student loans, you can find the payoff date by reading your loan term agreement or contacting the lender.

If you have a federal student loan, contact your loan servicer or check its website. You may have been assigned a repayment plan when you first started repaying your loan if you didn’t select one, so double-check the payoff date. With your payoff date and current balance, you can start making a five-year repayment plan.

Create a budget

A budget can help you determine whether you can afford to put extra money toward your monthly student loan payments. If you don’t have one, start by listing all your set expenses and streams of income. Review your spending over the last few months to see how much you’ve spent.

Next, separate your expenses into "wants" and "needs." For example, a need can be food, but a want could be eating out at a specific restaurant each month.

Then, separate your expenses into categories and give each one an amount based on your current spending habits.

Here’s a list of budgeting tips and tricks you can use to stay on track.

• Use a budgeting app. Don’t feel like writing down your budget? Use an online budgeting software tool to automatically categorize and track your expenses.
• Download a budgeting template. If you prefer paper and pencil, consider printing out a monthly budget template to keep track of your expenses.
• Get a budget accountability partner. Although creating a budget can be easy, sticking to it can be hard. Ask a spouse, family member or friend to meet with you each month to review your progress.
• Automate your savings. If you’re looking for an easy way to save more money to put toward your loans, set up an automated transfer from your checking to savings account each month.

Reduce unnecessary expenses

To free up some extra cash to pay off your student loan debt in five years, find ways to cut expenses.

Here are some common ways you can reduce your spending.

• Get rid of cable. Canceling cable could potentially save you hundreds of dollars a year.
• Cancel your gym membership. If you cancel your gym membership and work out at home, you could free up some extra cash from gym fees. For example, if your gym membership is $65 a month, you could save $780 a year.
• Get a roommate. Your housing cost is likely your largest expense. If you love your home or apartment and don’t want to move to a cheaper place, consider sharing the costs with a roommate. If your monthly rent or mortgage payment is $1,600, you could save $800 a month if you split it two ways.
• Bike to work. Car ownership can be expensive. Between fuel costs, car insurance and repairs, you can spend thousands of dollars. To reduce these expenses, consider biking to work, if it’s an option.
• Use your local library system. If you’re looking to trim your entertainment budget, visit your local library. Some library systems allow you to borrow movies and magazines for free. In addition, you’ll likely find free activities for adults and kids.
• Limit credit card use. It’s easy to swipe your card without thinking about how much money you have in your account. If you’re guilty of this, keep your credit card use to a minimum. This can also help you avoid multiple loan debts.

Make biweekly payments and enroll in autopay

Automatically paying your federal student loans gives you a discount and some private lenders also have an autopay discount. Although you’re only required to make one monthly payment, paying biweekly can be an easy way to put extra cash toward your student loan without much effort on your part.

For example, if you follow a monthly payment schedule, you’ll make 12 student loan payments a year. But if you switch to a biweekly payment schedule, you’ll make 26 half-payments, which equals 13 payments in a year.

Take up a side hustle

Boosting your income is another way to free up extra cash to pay off your student loans quicker. Start by looking for promotion opportunities at your current job. If you want to earn money faster, consider getting a side hustle. Here are some ideas.

• Drive for a rideshare service. If you own a car, consider driving for a rideshare company on the weekends or evenings to earn extra money. Ridesharing platforms give you the option to make deliveries if you’re not comfortable picking up people.
• Rent your car. Another way to earn money from your car is to rent it out while you’re not using it.
• Rent a spare bedroom. If you don’t want a permanent roommate and have an extra bedroom, you can earn money by listing it on a rental platform.
• Become a virtual assistant. Do you enjoy performing administrative tasks? Consider becoming a virtual assistant — someone who provides support for a business from a remote location. You can find jobs by searching online career platforms.
• Sign up to be a beta tester. If you love testing new apps, products and websites, sign up to become a beta tester through BetaTesting or test IO. You can earn up to $50 for every issue you find.

Consider refinancing your loan

Refinancing a private student loan involves taking out a new loan with a different interest rate and repayment term to replace your existing loan.

If you have good credit and a steady job, you might qualify for a lower interest rate. Choosing a shorter or similar repayment term could help you pay off your principal balance quicker and save on interest over the life of the loan.

Another benefit of student loan refinancing is that it can help you consolidate federal and private loans into one, making it easier for you to keep track of your loans. The downside of refinancing federal and private student loans into one is that you give up federal protections, so think carefully about whether this makes the most sense for your situation.

If you only have federal student loans, you may be able to combine them into one loan with a Direct Consolidation Loan. But you may not receive a lower interest rate than the one you’re currently paying — when you consolidate your federal student loans, your new loan will have a fixed interest rate based on the average of all the loans you’re consolidating.

How much can refinancing save you?

The amount you can save from refinancing your private loan varies based on factors such as your credit score and income. Say you have a 10-year loan on $20,000 like this one:

• APR: 6.0%
• Monthly payment: $222
• Total interest: $6,645
• Total amount to repay: $26,644

You could refinance to a five-year loan and reduce your interest rate and the total amount you have to repay:

• APR: 5.2%
• Monthly payment: $379
• Total interest: $2,756
• Total amount to repay: $22,755

As you can see, refinancing could save you $3,889 in interest over the life of the loan in this scenario. Plus, you can pay off your student loan debt in half the time.

Before you refinance, make sure to weigh the pros against the cons. Keep in mind that refinancing a federal student loan means giving up federal benefits, such as access to income-driven repayment plans and student loan forgiveness programs.

If you decide that refinancing is right for you, be sure to shop around to compare rates from multiple lenders.

Loan forgiveness: An alternative to paying off student loans

Repaying your student loans early isn’t the only option you have to save money if you have federal student loans. They typically come with access to student loan forgiveness programs (unfortunately, private loans don’t). To qualify, you must meet specific criteria, like working a particular job.

Here are some federal student loan forgiveness options.

• Public Service Loan Forgiveness (PSLF) — The PSLF program is available to borrowers who have Direct Loans and are employed full-time by a government or not-for-profit organization. If you qualify, you can receive forgiveness in as little as 10 years by making 120 "qualifying monthly payments" under an income-driven repayment plan.
• Teacher Loan Forgiveness Program — If you’re a teacher, you could receive up to $17,500 in loan forgiveness on your Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. To qualify, you must work full-time for five consecutive years at a low-income school or educational service agency. If you’re unsure whether your place of employment qualifies, check the Teacher Cancellation Low Income Directory.
• Income-driven repayment (IDR) plan — This type of repayment plan is designed to make your monthly loan payments affordable based on your income and family size. There are four IDR plans to choose from and repayment terms range from 20 to 25 years. Once the repayment period ends, any remaining balance you have is forgiven.

Whether you pay off your student loans early or want to take advantage of student loan forgiveness, you have plenty of options.