How to Pay Off Student Loans

Being proactive about paying off your student loan debt could help you reach your future financial goals.

Written by Kristen Kuchar / February 11, 2022
Reviewed by Mark Kantrowitz

Quick Bites

  • Federal student loans offer more repayment options than private student loans.
  • Making interest payments on your federal or private student loans while you’re still in school can help keep the balance from going up.
  • If you’re a teacher or work in public service, you may qualify for loan forgiveness for federal student loans.
  • To pay off your student loan debt as fast as possible, pay more than the required monthly payment.

Carrying student loan debt can be overwhelming and impact your life in many ways. Having student loan debt can affect how much you’re saving for other financial goals, such as buying a home, continuing your education or even getting married.[1]

But it’s possible to gain more control over your student loan debt.

By understanding the options for your loans and creating a well-researched game plan, you can manage and pay off student loan debt. Here are six strategies to help get you on the path to student loan independence.

Inside this article

  1. Get started ASAP
  2. Choose a repayment option
  3. Explore loan forgiveness
  4. Check with your employer
  5. Consolidation vs. refinancing
  6. Make extra payments

Get started ASAP

If you’re still in college, you can get an edge on loan repayment if you have an unsubsidized loan (meaning you need to pay interest on it): You can begin to pay that interest while you’re in school to keep that balance from growing larger, along with future monthly payments.

This applies to federal and private loans. Or if you’re approaching your grace period (the time frame determined by your lender during which you’re not required to make payments on your loan), you can choose to make payments. If you don’t, that interest will capitalize and get added to your principal balance.[2]

Choose the best repayment option for federal loans

There are a variety of repayment plans for federal student loans. Some have lower payments at the start of your career and increase over time as your salary is expected to increase. Others are based on a percentage of your income and family size.[3]

“The name of the game is paying the least amount over time,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors (TISLA). “For some people that means choosing the lowest payment possible and pursuing a forgiveness program such as public service loan forgiveness. For others that means choosing the plan that’s the most affordable and allows them to pay the loans off as quickly as possible.”

Your payoff strategy can be different as finances and financial goals change. “We recommend borrowers reevaluate their student loan strategy and repayment plan annually—preferably at tax time when all the info needed is already right in front of them,” says Mayotte.

For income-driven repayment plans (IDRs), where monthly payments are determined by your income, you’ll need to confirm your salary and family size each year to qualify. At the end of a set period of time (20 or 25 years depending on your repayment plan), the remaining balance is forgiven and most likely won’t have to be taxed.

“Borrowers should know that if they’re struggling with making monthly payments, income-driven repayment plans are available on federal loans to make payments affordable,” says Jill Desjean, senior policy analyst at the National Association of Student Financial Aid Administrators (NASFAA).

“If even IDR payments are too high,” says Mayotte, “borrowers can temporarily halt payments through deferment or forbearance options available by asking their servicer.”

Choosing a repayment plan can be tricky, and each has its pros and cons. A shorter repayment plan means larger monthly payments, but it also means you’ll pay off loans faster and end up paying less interest. Federal Student Aid offers a Loan Simulator that can help you choose a repayment plan that aligns with your situation and financial goals.

Tip: Creating a monthly budget based on all of your expenses and your income, along with keeping track of your expenses, can help manage student loan debt.

Explore opportunities for federal loan forgiveness

Loan forgiveness is a hot topic. However, there are already programs in place that offer forgiveness to some borrowers with eligible federal loans. Teacher Loan Forgiveness is an option for teachers who meet specific criteria. Public Service Loan Forgiveness (PSLF) is an option for borrowers who work in public service, such as in the government or for a nonprofit organization.[4] You’d have to make sure the type of loan you have, the job you have and the repayment plan allow for PSLF. “Borrowers should ensure they meet the forgiveness requirements if they hope to receive Public Service Loan Forgiveness,” says Desjean.

Desjean adds that temporary waivers in place through Oct. 31, 2022, will put more borrowers on the path to PSLF. To learn more about PSLF waivers, visit the U.S. Department of Education’s website. Borrowers can also take advantage of the PSLF Help Tool to learn more.

See if your employer can help

Along with a retirement savings program and tuition assistance, student loan repayment assistance is a growing benefit offered at companies. With this benefit, an employer can offer a set dollar amount toward your student loan debt, whether you have federal or private loans.

According to the Society for Human Resource Management (SHRM), in 2019, 8% of employers offered this assistance. However, there’s now more incentive for companies to launch this effort: Employers can provide up to $5,250 in student loan repayment benefits tax-free through 2025.[5] One example of a company that offers this benefit: Fidelity Investments, which offers employees up to $10,000 toward their student loan debt.[6]

Weigh consolidation vs. refinancing

Consolidating your loans or refinancing them could be strategies to help you pay off your loan. How do they differ? Here’s a quick look:

Loan consolidation: This process combines your loans into one loan, with an interest rate based on the weighted average of the rates of all of your loans.[7] You can consolidate federal loans but not private loans into a Federal Direct Consolidation Loan.

Keep in mind that if you’ve made payments on your federal loans under an income-driven repayment plan, or qualifying payments toward PSLF, consolidating your current loans means you’ll lose credit for any payments made toward income-driven repayment plan forgiveness or PSLF.

Loan refinancing: This option combines your loans, private and federal, into a new private loan, with a new servicer and a new interest rate. There is no option to have a refinanced loan that’s still a federal loan.

Mayotte rarely recommends refinancing a federal loan into the private program—even if that means a lower interest rate. “Doing so means losing access to options for relief, such as lower payment options, discharges and forgiveness programs,” she says. “And once you do so, you can’t ever get it back into the federal program.”

But if you don’t have federal loans, refinancing can be beneficial. “Borrowers with private loans should consider refinancing if they have a high interest rate or want to release their cosigner from liability from their loans,” says Mayotte. “Borrowers with a solid, on-time repayment history, and a good-to-great credit score and debt-to-income ratio are in the best position to get the lowest interest rates on private loan refinancing.”

Tip: Most loan servicers for federal and private loans will reduce your interest rate by 0.25% when you sign up for automatic payments.

Make extra payments

If your ultimate goal is paying off your student loan debt as fast as possible, the quickest way is to pay more than the required monthly payment on your federal and/or private loans. The following example, from lender Sallie Mae, demonstrates how paying extra could help. You can see a comparison for your own loans by using the loan calculator at Private Student Loans Guru.

Say you have a student loan with a current balance of $10,000 at an interest rate of 8% and a repayment term of 10 years.

If you pay the amount due every month:

  • You’ll make 119 monthly payments of $121.32, with a final payment of $119.89.

  • You’ll pay off your student loan in 10 years and you’ll pay a total of $14,556.97.

If you pay an extra $20 a month:

  • You’ll make 96 monthly payments of $141.32 with a final payment of $7.10.

  • You’ll pay off your student loan in eight years and one month—almost two years earlier than with the standard repayment term—and you’ll save $983.15.[8]

If you decide to pay more than the minimum, talk to your servicer first. You may need to indicate that you want the extra payment applied to the principal balance instead of counting it as a future payment.

While paying as much as you possibly can toward your student loan debt is the fastest way to be debt-free, there are other things to consider. Managing student loan debt often isn’t the only financial goal on your plate. You may want to pay off other high-interest debt, build an emergency fund and save for retirement. Talk with a financial professional on how to best balance your money goals while carrying student loan debt.

Article Sources
  1. Arielle Kuperberg and Joan Maya Mazelis, “The Difference Debt Makes: College Students and Grads on How Student Debt Affects Their Life Choices,” Council on Contemporary Families, March 24, 2021, https://sites.utexas.edu/contemporaryfamilies/2021/03/24/college-student-debt-brief-report.
  2. “Five Ways to Pay off Your Student Loans Faster,” Office of Federal Student Aid, https://studentaid.gov/articles/pay-off-student-loans-faster.
  3. “Repayment Plans,” Office of Federal Student Aid, https://studentaid.gov/manage-loans/repayment/plans.
  4. “Student Loan Forgiveness,” Office of Federal Student Aid, https://studentaid.gov/manage-loans/forgiveness-cancellation.
  5. Joanne Sammer, “Will Student Loan Repayment, At Long Last, Be a Game-Changer?” Society for Human Resource Management, Jan. 4, 2022, https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/will-student-loan-repayment-at-long-last-be-a-game-changer.aspx.
  6. “Fidelity Tackles Student Loan Debt,” Fidelity Investments, https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/StudentLoans_infographic.pdf.
  7. “Direct Consolidation Loan Application,” Office of Federal Student Aid, https://studentaid.gov/app/launchConsolidation.action.
  8. “Pay off Your Student Loan Faster,” Sallie Mae, https://www.salliemae.com/student-loans/manage-your-private-student-loan/understand-student-loan-payments/pay-off-your-student-loan-faster.

About the Authors

Kristen Kuchar

Kristen Kuchar

Kristen Kuchar is a journalist, covering money, travel and the beverage industry. Kristen has previously contributed personal finance and business content to Money.com, Money Under 30, The Simple Dollar, Saving for College, Credible, The Brad’s Deals Blog, Outdoor Business Magazine and more.

Full bio
Mark Kantrowitz

Mark Kantrowitz

Mark Kantrowitz is a nationally-recognized expert on student financial aid, the FAFSA, scholarships, 529 plans and student loans. His mission is to deliver practical information, advice and tools to students and their families so they can make smarter, more informed decisions.

Full bio

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