Tips for managing and paying off student loan debt
Quick insights
- Whether you have federal or private student loans, there are several potential ways to pay them off.
- Enrolling in autopay, refinancing student loans and applying extra payments toward the principal are a few ways to help reduce interest costs.
- If you’re struggling with federal student loan repayment, an income-based plan or a forbearance may provide relief.
Looking to pay off your student loans? Generally, choosing the standard repayment plan and making more than the minimum payment may limit the money you pay toward interest, but it's not always feasible for every borrower.
Thankfully, it’s not the only way to get ahead of your student loans. Below, we’ve gathered some strategies to help you pay off college debt as quickly as possible.
How you can pay off student loans
There are several potential ways to save on interest and pay down debt quickly. Here are some of our tips.
Enroll in autopay
Many lenders, including federal student loan servicers, offer a small interest rate discount—typically 0.25%—when you sign up for autopay. The discount means more of your payments go toward reducing your principal balance (the original amount you owe, excluding any interest or fees).
While the savings from autopay can be relatively modest, it may contribute to faster loan repayment when combined with other strategies.
If your lender doesn’t offer this discount, it still may be worth it to automate student loan payments with a checking account or lender. Setting up automatic payments with your checking account could potentially reduce late payments and any associated fees. Making consistent student loan payments may benefit your credit score.
Stick to the standard repayment plan
Federal student loans usually default to the standard 10-year repayment program consisting of 120 monthly installments. Although other repayment options are available, the standard plan is often the fastest option for paying off your loans.
Income-driven repayment plans may lower your monthly payment but typically extend the repayment period to 20 or 25 years. With these plans, monthly payments are based on your income, and at the end of the repayment term, any remaining balance may be forgiven. Choosing one of these plans could make student loans more manageable for borrowers with financial hardships or those pursuing careers in lower-paying fields.
The Office of Federal Student Aid provides current repayment optionsOpens overlay on their website, as well as tools to help you estimate your monthly payment and repayment timeline under various plans.
Make interest-only payments during school
Private student loans offered by banks or credit unions—different from federal student loans—may have variable interest rates and less flexible repayment terms. Additionally, interest usually accrues while you’re in school. Once repayment begins, this interest capitalizes, meaning it is added to the principal balance of the loan. This can potentially increase the total cost of the loan.
Making interest-only payments while in school may prevent this capitalization, potentially reducing the total loan cost. Alternatively, you can make a lump sum interest payment during the grace period before the repayment process formally begins.
While this approach won’t necessarily make the payoff process faster, it may mean you’ll have a smaller balance to pay off.
Pay more than the minimum
Paying only the minimum on standard repayment plans usually results in higher interest costs over the loan’s life. If possible, paying more than the minimum could potentially reduce interest charges and make repayment faster.
Note that this general recommendation does not apply to income-based repayment plans.
Explore your repayment options if you’re struggling
While the standard repayment plan is generally the fastest way to pay off your student loans, it may not be feasible for everyone. If you’re looking for more flexible payment options, you can check the Office of Federal Student Aid for the current options.
Depending on your circumstances, you may qualify for income-based repayment plans, loan forgiveness, deferment or forbearance options. Missing payments or defaulting on student loans might negatively impact your credit score.
Refinance your student loans
If you have multiple loans with varying interest rates, refinancing can streamline payments and potentially lower your rate.
However, if you refinance federal student loans into private loans, you may lose certain federal student loan benefits. Note that consolidating multiple federal student loans into a single Direct Consolidation Loan usually doesn’t convert them to private loans.
Refinancing may not be the right choice for everyone. If you’re managing multiple student loans, there are two main strategies for paying them down: debt snowball method and debt avalanche method. With these approaches, loans are prioritized either by size (smallest to largest) or by interest rate (highest to lowest) while the borrower continues to make minimum payments on all loans.
Apply extra payments toward the principal
Making extra payments may not automatically speed up loan repayment, as some servicers apply them toward future payments, covering interest and fees first. Applying the payment directly toward the principal balance of your loan reduces the amount on which interest is calculated, which may save you money over the course of the loan.
Instead of making a single monthly payment, some borrowers choose to divide their payment into biweekly installments to better manage their cash flow. By making 26 biweekly payments—each equal to half of the monthly payment amount—over the course of a year, borrowers effectively make one extra full payment. You may want to consider directing this extra payment toward the principal balance.
When making a payment online, some loan servicers give you the option to indicate if you want the payment to go toward the principal.
Work for an employer with a repayment program
A limited number of employers offer student loan repayment assistance as part of their benefits package. Employers typically cap the annual reimbursement amount, so review the details if this benefit is available to you. While not widespread, this benefit could be a deciding factor when choosing between job offers.
In summary
If you’re looking to pay off your student loans quickly, you have several potential options. Opting for the standard repayment plan and making payments above the minimum may be among the fastest ways to pay down this debt.
Additionally, enrolling in autopay, refinancing your loans and directing extra payments toward the principal are a few other strategies that may help you pay down debt quickly. If you’re experiencing financial hardship, you may want to check your eligibility for options like income-based repayment, forbearance or loan forgiveness.
