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How to pay off student loans fast – Here are 10 successful guides to apply
In most cases, paying off your student loan can take a thorn on you – and even worse may feel like a mission impossible especially when you have to save for a house, pay your bills and even start a family. All these may make the process of paying your student loan feel overwhelming.
The truth is that it doesn’t have to be and you don’t have to break the bank before you can fully pay off your student loan. However, let’s set out some rules and expectations that can help you out in this process. You need to understand that while you are thinking of how to pay off student loans fast, you don’t need to have a special magic finger or trick to be able to do this.
You should also know that this is not a 30-day game plan because the process is not going to happen overnight, and takes a process. In my own experience, it’ll take lots of time, hard work, patience, a whole lot of sacrifice, and dedication to finally get it over with.
So, if you’re like most borrowers, and you are looking for how to pay off student loans fast so as to put your focus on other things and achieve other goals like buying a car, owning a house, and even getting married, then here are 10 successful ways to pay off student loans fast without it disrupting any of your future plans.
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1. Set Up A College Repayment Fund
Setting up a college repayment fund is a great way to get started, especially for those who are not sure of how much they can devote to their student loans every month. You can set up an automatic transfer monthly to a separate savings account that you have specifically kept for college debt. When you transfer money automatically into an account that’s specific for your loan repayment purpose, it helps you cut off unnecessary expenses and helps you save more for your loan repayment.
This strategy only becomes very effective if you have a separate account. So, try to set up a separate account for paying back your college debt if you want to pay it off faster. Don’t do this on a savings or checking account that you are already using, so that you won’t be tempted to use the money for something else other than paying your student loans.
Before you open the account, try comparing several savings accounts to see which will work best for you, and put your money in a high-yield saving account so that you can maximize your returns.
2. Add More to Your Minimum Payment
I know you probably want this dept settled asap, which is why you are looking for how to pay off student loans fast. Here is the most effective and best approach you can use to pay off your student loan.
Although this may sound easy, it may not be easy to do, that is why you need to make sacrifices and be dedicated.
Because the truth remains that when you only pay the minimum payment required every month, you’ll be far from paying off any time soon. And plus, the interest that keeps piling up, you may even find it difficult to break even. But by adding more money to your minimum payments, you’ll be able to upset the amount you owe at a quicker time.
To find out what will work best for you, start playing around with the Student Loan Payoff Calculator as it’ll help you figure out how fast you can pay off your loans by making extra payments and the exact extra cash you will need to add to achieve the payment in a particular time.
To make this more interesting, you don’t even need to pay double or triple thereby putting yourself in a very tight spot. All you need to do is to add just some extras to your initial required amount say 20 – 30% extra and that will be a great advantage. But while doing this, ensure that it does not put too much stress on you and also make sure your loan servicer is applying your extra payments to your loan principal. While you are doing this, you could also increase the amount or percentage as your situation allows.
A take-home note: When applying this strategy, the student loan servicers usually put that extra amount onto next month’s payment. Which pushes your due date back, with this, you won’t actually pay off your loan any faster. You need to tell your loan servicer to keep next month’s due date the same while applying the extra amount of money to your current loan balance.
3. Create a Budget and Stick to it
Budgeting is a great way to get more done without spending your money on unnecessary things. When you create a budget and work with it, it will greatly help you prevent irrelevant spending and may also give you the ability to add more money to your loan repayment.
This is because when you create a budget that includes student loan repayment, you’ll be extra careful on how you spend and also mindful of where your money goes. This will help you save more money which you can put towards paying off student loans early and you can eliminate debt faster.
If you don’t know how to manage your finances properly you will have issues paying off your loans quickly. A delay in student loan repayment can lead to delays in several areas of your life like pursuing more fulfilling financial goals, getting a house, or even getting married.
Budgeting is easy to create but you need discipline and sacrifice to make the budget work. To do this, you need to know and understand your monthly cash flow, when this is done, you can now carefully plan and create a workable budget that will suit that monthly payment.
Take a general assessment of your spending habits and your ability to keep a budget. If you find it difficult to maintain a solid budget as a college student, you can use a student budget calculator to help you get on track and stay there.
4. Try Refinancing Your Student Loans
Refinancing is the process of getting a new loan at a lower interest rate. So, if you’re unsure of how to pay off student loans fast— or you think it is looking like mission impossible, it may be that you are paying too much in interest.
However, paying the required amount or even increasing your repayment amount while reducing the interest rate, will enable you to pay less in interest in the long term. That’s not all, part of your payment will go toward reducing the principal balance when you use student loan refinancing.
When you use student loan refinancing, you typically consolidate your student loans into one by getting a new loan with a private lender and using it to pay off your original loan. This method allows lots of borrowers to secure lower interest rates because they’re more financially stable than when they initially took out the loan in the first place.
Keep in mind that with student loan refinancing, you give up important protections and you’ll no longer have access to federal programs like income-driven repayment or student loan forgiveness. This means you’ll need to qualify for a new loan based on your income and credit score. But if you’re eligible, the savings from a lower interest rate can be huge.
In this strategy, timing is key. After your graduation, your credit score is typically going to be at its lowest, which is going to make the interest rates you’re offered a bit higher. Also, most lenders require that you have a stable income or employment history to qualify. To get the best, it is important to scout around with several lenders in order to see which offers you the best rates.
5. Take Advantage of Your Job
If you have got a job going and you are thinking of how to pay off student loans fast, then your job may act as a great advantage to you. There are a couple of ways that your day job can help you pay off your student loans. This is because there are some jobs that offer student loan assistance or forgiveness in exchange for working in a service capacity. Some of the categories that may be eligible include public servants, lawyers, nurses, doctors, volunteer organization workers, automotive workers, and federal agency employees. It is important you check whether your career goals align with the criteria for each forgiveness program.
Another great thing is that some employers now offer student loan assistance as part of their benefits package to their employees. So, as you start looking for your next job, you put this into consideration, you could also ask your current employer if they offer or would consider including this into their job package. Although in some cases, it might not be explicitly stated, it is still worth negotiating as you could finally add something to your compensation package.
6. Utilize Tax Deductions and Credits
As a student or someone who just recently graduated, you could take advantage of tax deductions and credit to help you settle your student loan fast. The two major types of school-related tax deductions that can help reduce the tax burden for current students or recent graduates are the Student Loan Interest Tax Deduction and the Tuition & Fees Tax Deduction.
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Student Loan Interest Tax Deduction
With this type of tax deduction method, you are allowed a student loan interest tax deduction of up to $2,500 annually for interest paid on student loans in the year for which you’re filing. But, in order to qualify for this tax deduction method, you must:
- Have been enrolled at least half-time in a degree program when you took out the loan
- Have paid interest on a loan in your name
- Be filing as a single taxpayer or as “married filing jointly”
- Not have anybody else claiming you as a dependent on their tax return
- Have a modified adjusted gross income (MAGI) of less than $70,000 as a single taxpayer or $140,000 if you’re filing jointly
Taking the student loan interest tax deduction based on the actual amount of interest you pay, will generally reduce your Adjusted Gross Income (AGI), which enables you to pay less in taxes.
On the other hand, if your income exceeds $70,000 as an individual or $140,000 if you’re filing jointly, you lose part of the deduction. And if you make anywhere around $85,000 as an individual or $170,000 if filing jointly as a married couple you lose the full deduction.
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Tuition and fees tax deduction
This is the second type of deduction and offers up to $4,000 interest tax deduction per year for tuition and fees. Unlike the student loan interest tax deduction, with this, you can only claim an interest deduction for tax years in which you paid for educational expenses. It means that this option may only be available while you’re in school, or if you go back to school while repaying your student loans.
For you to be eligible for this deduction you must have paid the qualified education expenses of higher education. These expenses should include tuition and fees and exclude room, board, transportation, etc. either for yourself or an eligible student which in this case could be your spouse or your dependent for whom you claim an exemption on your tax return.
Also, those who are still in school or have gone back to graduate school might be eligible for tax credits, which directly reduce the amount of tax owed.
7. Start a Side Hustle to Increase Your Income
A side hustle will enable you to make more money. It doesn’t matter even if the money you are making from it is not much, as long as it adds to your monthly earnings, it is worth doing. With a side hustle, whether you are looking for how to pay off student loans fast or meet up other financial needs, it will be a huge plus for you.
Making more money is never a crime, but getting a job that will pay you more is not easy to come by, especially if you are looking for a way to pay off student loans fast. Starting a side hustle is the key to increasing your income which will also help you add more cash to your minimum required payment
Starting a side hustle does not necessarily mean doing online freelancing, blogging, driving for Uber, or Lyft (although they are great), there are some simple things you can also do like selling your unwanted stuff on Amazon/eBay/Craigslist, delivering with Postmates or Grubhub, or starting a pet training business if you love and know how to train pets. If you have a spare room or an entire apartment, you can also rent it out on Airbnb maybe once or twice a year and put that money toward your student loan payments.
8. Make Extra Payments Whenever You Can
You will never face any penalty for paying your student loans faster or even paying more than the minimum required. However, there is a caveat with prepayment: The student loan servicers, who collect your bill, may apply the extra amount to the next month’s payment.
Doing this will advance your due date and will not help you pay off your student loans fast. This best approach is always to instruct your servicer to always apply any overpayments to your current balance, and to keep next month’s due date as planned. You can contact him online, by phone, or by mail whichever works for you.
Making the extra payments is just an addition to you paying more on your requirement amount monthly which is a huge plus for you in paying off faster. This strategy becomes very easy if you are always laying your hands on some extra cash occasionally. Maybe you have someone who sent you money as a birthday gift, get some cash bonus in your workplace place, or a tax refund, all this extra cash can be put back into your student loans repayment.
Making an extra payment does not have a specific time-bound, you can make an additional payment at any point in the month, or you can make a lump-sum student loan payment on the due date.
9. Cut Down Unnecessary Expenses
If you are desperately searching for how to pay off student loans fast and you are a big spender then you will go nowhere in repaying your student loans. If you really want to cut down the number of years on your student loan repayment, you will need to reduce your monthly spending wherever possible.
It doesn’t matter how much reduction, but doing this will help you in the long run. Whether it is $50 less every month as a result of canceling your cable TV or cutting off an extra $200 of spare cash from unwanted expenses or budgets that are not very important, you just need to look for that extra room in your budget, get something off it and put that toward your student loans repayment.
10. Stay Motivated at All Times!
Whether you are paying back student loans or paying back any other debt, it is never an easy task to accomplish. Most times, you may feel tired and frustrated especially when you know there are several important aspects of your life that are calling for financial support.
Worst of all, you may not even have anyone who is supporting you in this journey. This is where self-motivation comes to play. I know, there are times when you just want to use that extra cash and put it into something else, but then you need to think about it, if being debt-free is what you truly want, at this point, your priority should be on paying off the loans.
Do not allow anyone to talk you down or make you feel you are the worst person because you borrowed money to see yourself through school. Remember most of the richest people today also started from somewhere. This is your starting point after school, you should be proud that you are now done with school. It means that the money you borrowed was not a waste but rather put to good use.
As such when paying back, always be proud of what you have achieved and know the reason for your debt. This will even help you hustle more to raise more money and pay off your student loans fast rather than listening to negative side talks.
Frequently Asked Questions on How to Pay Off Student’s Loans
How long should it take to pay off student loans?
The time it typically takes to pay off a student loan balance varies from anywhere between 10 to 30 years. Although this is an estimated time frame, some of the major determining factors include your loans’ interest rates, your total balance owed, your annual income, and your repayment plan.
Among these determining factors, the major contributor that helps lower the time rate is the choice of the repayment plan. This has the greatest influence on how long and how soonest it will take you to eliminate your student loan debt.
It is important to note that the standard student loan repayment timeline is 10 years, however, you can decide to opt for extended and graduated repayment plans for federal loans that last between 25 to 30 years.
There is also an income-driven repayment plan which allows you to pay a percentage of your discretionary income for about 20 to 25 years before ultimately forgiving your remaining balances.
If you have private student loans, then, you can decide to choose a repayment timeline that works best for you, this ranges from 5 years all the way up to 20 years. But if you need more time, you can always choose to refinance your private loans.
Is it smart to pay off student loans early?
Paying off student loans early is great, however, it all depends on the situation you are facing. If you are in a situation that will allow you to pay more than the minimum payment and get over your student loans early without sacrificing other financial goals, then it’s a great idea and you probably should.
Another thing to consider is that student loans come with low fixed interest rates and fixed monthly payments for an extended period of time, meaning you may not be in a hurry to pay them off. In that case, if you have other high-interest debt such as credit cards or personal loans, you should focus on paying those off first so that you will not have to pay more later.
Also, depending on what you decide later, you should always check for what you stand to gain over the other when paying any loans. Below are some advantages and disadvantages of repaying your student loans earlier.
Advantages of paying off student loans early
- When you pay off your student loans earlier, you’ll be able to put more of your effort into other financial needs and focus on things like marriage, retirement, homeownership, and savings.
- By paying off your loan quicker, you will be able to lower the amount of debt to income ratio, and doing this may help you qualify for other funding, like a mortgage or credit cards.
- As you implore faster ways of paying back your loan, it will reduce your interest rate over the life of the loan. This is because, the less time you spend repaying your loans, the less interest you pay on them. Paying off your loans early will easily reduce the overall cost of your loans by hundreds of dollars.
Disadvantages of paying off student loans early
- If you have loan forgiveness through an income-driven repayment plan or Public Service Loan Forgiveness in mind, and you are making extra payments or paying your loan in full, it will reduce the amount you will see forgiven. In some cases, you could lose eligibility for loan forgiveness.
- When you are trying to pay off student loans fast, you could adopt the strategy of paying extra so as to meet up. And when you pay extra, you may not be involved in some good investment opportunity and this could cause you to miss out on gains. And there is a time when you may be able to make more money through investing than what you would save in interest by paying off loans early. But, also bear in mind that investing does come with a lot of risks.
Now, you have learned how to pay off student loans fast. Although it is easy to say, on the contrary, it is not all that easy to do. And some people even think paying off student loans fast isn’t worth it if you have other forms of high-interest debt which may be true. In a scenario where you have a credit card balance with an interest rate of 16 percent, for instance, it is more sensible to add extra payments toward that account rather than toward a student loan with 5 percent interest.
But depending on you as an individual and the type of loans you are dealing with. Once you have decided which loan payoff strategies to apply to your financial situation, you should always put a plan in place that includes regular check-ins to keep you on track.
During the period of your student loans repayment, you may need to make some short-term sacrifices in order to pay off your student loans fast, but then, there is always great benefits once you’re loan-free, and the happiness that comes with it is an experience no one can give you.
In the end, paying off your loans fast requires huge sacrifice, discipline, and motivation. If you apply all this and follow any of the strategies listed above, you’ll be free from debt faster than you can imagine.
