You're staring down a mountain of student loan debt, and it seems impossible that you'll be able to pay it off at all, let alone quickly. But take a deep breath. With the right strategies and a steady job, it's possible to pay off your student loan debt faster than you expected. Here are seven things you can try.
1. Make more than the minimum payment
The simplest way to pay down your debt more quickly is to make more than the minimum payment each month if you can afford to do so. Just be sure your loan servicer is applying the extra money to your principal balance instead of putting it toward your next month's bill. Otherwise, it won't shorten your loan repayment period by much.
If your current budget doesn't allow for extra payments, look for areas where you can cut costs to free up extra cash. For example, you might cancel some subscriptions or get a cheaper cellphone plan. Alternatively, you could pick up a side hustle to get more money coming in.
2. Stick to the standard repayment plan if you can afford it
The standard federal student loan repayment plan requires you to pay a fixed monthly amount for 10 years. There are income-driven repayment plans available to those with federal student loans who cannot keep up with the standard repayments, but this may not be your best move if you're trying to pay off your loan quickly. Many of these repayment plans offer you a lower monthly payment in exchange for a longer loan term, so you end up paying more in interest overall.
3. Work toward student loan forgiveness, if possible
Those performing a public service, like doctors and teachers, may be eligible for federal student loan forgiveness programs that forgive the remainder of their student loan debt if they work for a qualifying employer, have a qualifying repayment plan, and make 120 on-time payments. Private student loans don't usually offer loan forgiveness unless you die or become permanently disabled, but you may be able to work with the lender to come up with a more affordable repayment plan.
Some employers are now starting to offer student loan forgiveness as part of their employee benefits package, so this could be an option for you even if you don't qualify for federal public service or teacher loan forgiveness. If you haven't accepted a job already, explore your options to see if student loan forgiveness is possible for you.
4. Consolidate or refinance your student loans
Even though you may not need to apply for any new student loans, it still pays to keep an eye on private student loan interest rates. You cannot get a lower interest rate by consolidating your federal student loans into a single federal student loan, but you can switch it for a private student loan if it offers you a more affordable rate. And of course, you can refinance your existing private student loans with a new private student loan at any time. A lower interest rate will slow the growth of your balance, so more of your monthly payments will go toward the principal instead of interest, enabling you to pay the loan off faster.
Consider a $10,000 student loan with a 5% interest rate. You would pay $12,727 over the 10-year lifetime of the loan, but if you were able to refinance after two years and secure a 4.5% interest rate, you'd save yourself $190 in interest, and your monthly payments would drop by $2.
5. Make lump-sum payments when you have extra cash
It's tempting to spend your tax refund or your yearly bonus on a trip, new clothes, or something fun. But you're better off applying this extra cash to your student loan payments.
Consider the previous example of a $10,000 loan with a 5% interest rate. If you made a $500 lump-sum payment, you'd shave off $313 in interest costs, and you'd pay off your loan eight months ahead of schedule.
6. Make biweekly payments
Instead of making one payment each month, consider making a half payment every other week. This may not seem like it would make any difference, but it's actually a simple way to trick yourself into paying more. Two half-payments biweekly adds up to 26 half-payments, or 13 full payments, throughout the year -- one more than you'd make otherwise.
7. Take advantage of interest rate reductions
Some private loan servicers offer a 0.25% interest rate reduction if you sign up for automatic payments. This can help reduce how much you pay in interest over the lifetime of your loan, plus you won't have to worry about forgetting to make your student loan payments. You can still pay extra or make occasional lump-sum payments if you want to pay off your loan even faster.
You don't have to try every one of these strategies, but by using one or two, you can reduce the time it takes to pay off your student loans and the amount you pay in interest. It's worth a try if you have a little extra cash to spare in your monthly budget.