How to pay off $30K in student loan debt

The average amount of student loan debt stands at about $30,000, according to U.S. News data. Graduating from school and starting a professional career with that much debt can be a big obstacle, especially when it can take 10 years on the Standard Repayment Plan for federal student loans.

Consolidation, deferment, forbearance, income-driven repayment plans, and refinancing may help make monthly payments manageable, but they can also extend the time it takes to pay off your student loan debt. Here are some strategies that could help you pay off $30,000 in student loans and get out of debt sooner.

You can learn more about student loan refinancing and see prequalified rates from multiple lenders with Credible.

• Make extra payments whenever possible
• Consider refinancing student loans
• Try the debt avalanche or debt snowball strategies
• Skip grace periods and deferments
• See if you qualify for loan forgiveness
• How long does it take to pay off student loans?

1. Make extra payments whenever possible

If your budget allows it, you might consider making an extra payment on your loans whenever possible. Here’s why:

Let’s say you owe $30,000 in student loans at an interest rate of 4% and a monthly payment of $304. If you made only the minimum payment each month, it would take 10 years to pay off your loans. You’ll also pay nearly $6,500 in interest alone.

But if you make an extra payment of $304 each month, it would now take four years and seven months to pay off your $30K loan and you’d pay just over $2,800 in interest. If you can’t swing a full extra payment but can increase your minimum payment by $100 each month, you’ll pay off your loan in about seven years and pay a little over $4,500 in interest. Either way, you come out ahead.

Before you decide to make an extra payment, ask your lender if your extra payment will go toward the interest or principal. Most loan servicers apply an additional payment to interest first, then to the principal balance. If you’d rather have your extra payment go to the principal balance first (which is preferred), visit your loan servicer’s website and indicate your preference.

While still in school, you might also consider making partial payments or interest-only payments, which can make the total you owe upon graduation much lower. A student loan repayment calculator can help you better understand how making extra payments can affect your total.

SHOULD YOU PAY OFF YOUR STUDENT LOANS EARLY?

2. Consider refinancing student loans

Another way to help save money over the life of your loans is with student loan refinancing by a private lender — bank, credit union, or other financial institution. Refinancing can possibly give you a better repayment term and a lower interest rate, plus you can combine multiple loans into one monthly payment instead of several.

But if you refinance your federal student loans with private loans, you forfeit the benefits of federal loans, like income-driven repayment (IDR) plans. You also can’t qualify for student loan forgiveness programs, federal deferment, or forbearance. And you’ll likely need good to excellent credit to qualify for the best interest rates and terms when refinancing with a private lender, unless you use a cosigner.

SHOULD I REFINANCE MY FEDERAL STUDENT LOANS?

3. Try the debt avalanche or debt snowball strategies

There’s more than one way to pay off debt. The debt avalanche method can help pay down and pay off multiple student loans faster, which means you’ll shell out much less interest over the life of your loans. With this strategy, you’ll pay extra toward the loan with the highest interest rate. Once you’ve paid off that loan, you put all your extra funds toward paying off the loan with the second-highest interest rate, and so forth — thus the avalanche.

If seeing your student loan balances disappear brings a smile to your face, you might take a look at the debt snowball method. With this strategy, you put extra toward paying off your smallest loan balances first. It’s possible you’ll pay more in interest over time than you would with the avalanche method, but the psychological boost you’ll get from seeing your loans disappear may be worth the cost.

4. Skip grace periods and deferments

Grace periods, deferment, and forbearance are all meant to make it easier for you to repay your student loans by allowing you to wait until you can better afford your student loan payments. But the downside is that interest can continue to accrue while you’re waiting to begin payments.

Because of the financial challenges, job loss, and economic hardship brought on by COVID-19, the federal government enacted the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act. The act suspended most federal student loan payments, waived interest, and stopped all collections on defaulted loans for a set time. Currently, payments and interest are expected to resume on May 1, 2022.

It’s important to understand that any payments you skip will be tacked onto your loan balance, which you’ll eventually have to pay back.

Plus, your loan servicer may decide to recalculate your monthly payments after deferment if your loan has a traditional debt repayment plan, including a Standard, Graduated, or Extended plan. This can increase your monthly payment. That’s why it may be better to continue to pay your student loan balance during deferment if your budget allows.

5. See if you qualify for loan forgiveness

Loan forgiveness is only available for federal student loans, not private ones. But not all federal student loan borrowers will qualify. That's because most programs come with very specific eligibility requirements for borrowers of Direct Loans, Federal Perkins Loans, and FFEL Program loans. It can take several months to go through the application process, and even then, there’s no guarantee you’ll be approved. But if you do qualify for cancellation, forbearance, or discharge of your loans, you’re no longer responsible for making your loan payments. If you’re approved for cancellation of only part of your loan, you must still repay the remaining balance.

Two of the most popular programs include:

Public Service Loan Forgiveness

Public Service Loan Forgiveness is available to students with federal Direct Loans from the U.S. Department of Education. If you’re employed by a not-for-profit organization or by any federal, state, local, or tribal government body, you may qualify to receive loan forgiveness through the Public Service Loan Forgiveness (PSLF) Program.

PSLF forgives the remaining balance on your Direct Loans after you make 120 qualifying monthly payments under a qualifying repayment plan, while working full-time in an eligible job for a qualifying employer.

Teacher Loan Forgiveness

Educators with Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, or Unsubsidized Federal Stafford Loans may be eligible for Teacher Loan Forgiveness of up to $17,500. But you must meet the eligibility requirements, including teaching full-time for five consecutive and complete years in a low-income elementary or secondary school or educational service agency.

Keep in mind that you can’t receive forgiveness for the same period of service or qualifying payments for both Public Service Loan Forgiveness and Teacher Loan Forgiveness. However, the limited PSLF waiver may temporarily waive this restriction if you previously received Teacher Loan Forgiveness.

How long does it take to pay off student loans?

Current student loan debt in the U.S. is about $1.75 trillion and rising. To put that into perspective, that’s about $440 billion more than total auto loan debt in the U.S. While $30K isn’t even close to these figures, it’s an enormous sum when you’re just starting your career and on a tight budget.

But by squeezing every penny out of your salary, getting a side hustle or a new roommate, and scrimping on an extravagant lifestyle, you might see your total debt disappear faster. How fast depends on several factors, like employment status and your approach to the repayment process.

Repayment plans for federal student loans can range from 10 to 30 years. Private student loan lenders typically offer shorter terms of five to 15 years, with some lenders offering terms of 20 to 25 years. You’ll generally pay less interest if you pay your loans off earlier. If you refinance but extend the payment term, you’ll pay more in interest over the life of the loan.

What to know about income-driven repayment plans

If your student loans amount to a significant portion of your annual income or you’re on an IDR plan but need to make a change to your plan or recertify, you might qualify for an income-driven repayment plan.

You can choose from four types of plans:

• Income-Based Repayment Plan (IBR)
• Pay As You Earn Repayment Plan (PAYE)
• Income-Contingent Repayment Plan (ICR)
• Revised Pay As You Earn Repayment Plan (REPAYE)

If you have Parent PLUS loans or your student loans are in default, you can’t apply for lower monthly payments through any of the IDR plans. These plans can make your monthly payments more manageable, but they won’t help you pay off your debt any faster.