How to pay off your student loans faster

You can pay student loan debt off sooner by paying more than the minimum and refinancing. Here’s how to pay off student loans faster. (Shutterstock)

Living with student loan debt can be stressful. It puts a strain on your budget and can keep you from reaching your financial goals, like buying a house or saving for retirement. But it’s possible to pay off your student loans quickly. 

The sooner you pay off your student loan debt, the less interest you’ll pay over the life of the loan. And removing student loan stress from your life can also boost your mental health.

Refinancing is one option for paying down student loan debt faster. Visit Credible to learn more about student loan refinancing and compare rates from multiple private student loan lenders.

5 ways to pay off student loans faster

If you have student loan debt, you don’t have to spend decades paying it off. With the right strategies in place, you can pay off your student loans much faster — even before the end of your repayment period. Here are five ways to pay off your student loans quickly. 

1. Pay more than the minimum every month

You’re going to have to make more than the minimum payment each month if you want to quickly pay off your debt. If you don’t have a lot of extra money to put toward your debt, don’t worry — even an extra $50 to $100 a month will help you make progress. 

You can also start making bi-weekly payments instead of monthly payments. With bi-weekly payments, you’ll pay your loan every two weeks. You won’t feel like you’re paying any extra, but this strategy means you’ll end up making one additional payment per year. 

It’s a good idea to automate your monthly payments so your lender will automatically deduct your payments from your account. Not only does this ensure that your student loan payments are made on time, but many loan servicers offer an interest rate discount for automated payments. 

2. Pay off capitalized interest

Capitalized interest happens when unpaid interest is added to your student loan principal. This increases your overall student loan balance, which means you’ll pay even more interest in the future. 

Capitalized interest usually happens during loan forbearance or during your grace period after graduating from college. Paying off this capitalized interest can reduce your overall loan amount and allow you to repay the debt sooner.

3. Avoid extending your repayment period

If you have federal student loans, one of the benefits of enrolling in an income-driven repayment plan is that it helps make your monthly payments more affordable. IDR plans extend the time it takes to repay your loans in full. If you apply for deferment or forbearance, this will extend your repayment window even more. 

But this also means you’ll end up paying on your loans longer. If your goal is to pay off your loans as quickly as possible, you might want to avoid making payments under an IDR plan.

4. Consider refinancing

When you refinance, you replace your current loans with a new, private loan with different rates and terms. Refinancing can help you pay off your student loans faster by lowering your interest rate or shortening your repayment period. To qualify for refinancing, you’ll need a good credit score, stable income, and a low debt-to-income ratio.

You can refinance federal loans, private loans, or a combination of both into a new private loan. But keep in mind that if you refinance your federal student loans into a private student loan, you’ll lose federal benefits, like deferment and loan forgiveness.

If your goal is to pay off your student debt faster, be careful not to extend your repayment term. Refinancing into a longer repayment term will give you a smaller payment amount, but it’ll increase your total interest costs and the time it takes to pay off your loans.

Credible makes it easy to compare student loan refinance rates from multiple lenders, without affecting your credit score.

5. Get help paying off your student loans

You may be able to access other resources to help you pay off your student debt faster. For example, ask your employer if it offers any student loan repayment benefits. Some plans offer employees up to $5,250 annually in student loan repayment, but it depends on the employer.

Certain professions may even be eligible for loan forgiveness. For example, the Public Service Loan Forgiveness Program is available for federal student loan borrowers working full-time for a qualified government or not-for-profit organization. After you make 120 qualifying payments under an income-driven repayment plan, your remaining loan balance will be forgiven. 

And you may qualify for student loan discharge if you have a total and permanent disability. To be eligible for a total and permanent disability discharge, you’ll have to complete an application and supply the necessary documentation.

Reasons why paying off student loans early is a good idea

Paying off your student loans ahead of schedule comes with a number of benefits, including:

• Reduce stress — Studies have shown that student loan debt can lead to long-term stress and mental health issues. Borrowers may wonder if the cost of their degree was even worth it. Paying off your student loans quickly will reduce this stress and free up room in your budget.
• Pay less interest — The longer you carry student loan debt, the more the interest will continue to accrue. Paying off your loan before your repayment period is up can save you quite a bit of money in interest.
• Improve your debt-to-income ratio — By getting rid of your student loan debt, you’ll improve your debt-to-income ratio. This is the percentage of your monthly income that goes toward debt repayments and is a major consideration for things like buying a home.
• Reach other financial goals — While paying off student debt, many borrowers are forced to delay major life milestones, like buying a home or starting a family. By paying off your student loans sooner, you’ll be able to pursue other financial goals.

To get started on refinancing your student loans, visit Credible and compare prequalified rates from multiple lenders.