8 ways to pay off your student loans faster

Paying for college is costly, and more than half of college students take out a student loan at some point to cover some of the expenses. In the 2020-2021 academic year, 54% of graduates who received their bachelor’s degree left school with an average student loan debt of $29,100. 

With the addition of interest charges and the likelihood of an entry-level salary right out of college, carrying five figures or more of student debt can feel harrowing. In this case, it might seem like a good idea to pay off your loans ahead of schedule — but doing so isn’t always right for everyone.

If you’re wondering how to pay off student loans fast (and if you should), here’s what you should know. 

Is it a good idea to pay off your student loans early?

Whether it’s a good or bad idea to pay off your student loans early depends on multiple factors. One of these is the type of student loan you’ve borrowed — federal or private — as well as your financial situation and goals. 

Paying off private student loans fast is generally advantageous and can help you avoid excessive interest charges. Federal loans, on the other hand, offer government benefits and protections, so it might not be worth it to aggressively pay them down. 

Here are some pros and cons of early repayment to consider:

Pros of fast student loan repayment

• Saves money on education debt overall: The less time you carry a student loan balance, the less interest is charged. Getting out of student loan debt faster means you’ll save money on your total loan costs.
• Reduces DTI ratio: Paying off student loan balances decreases your debt-to-income (DTI) ratio, which compares total monthly obligations every month against your income. Keeping this ratio low is favorable when applying for credit, like a mortgage or personal loan, since it suggests that you can reasonably afford to take on additional debt. 
• Lifts the mental burden of unpaid education loans: Carrying debt for an extended period can be stressful and a heavy weight on your shoulders. Paying off your loans sooner than later is one less financial responsibility to worry about.  

Cons of fast student loan repayment

• Diverts funds from other financial goals: Aggressively paying down student loans means you’ll have less money for other goals, such as growing an emergency fund, saving up for a down payment on a home or investing for the future.
• Forfeits student loan interest tax benefit: Student loan borrowers can claim an above-the-line tax deduction of up to $2,500 or the amount of interest paid during the tax year, whichever is lower. Paying off your loans early means you can’t take advantage of this tax incentive for additional years.
• Doesn’t maximize loan forgiveness: Federal student loan forgiveness programs forgive the remaining balance on qualifying student loans once borrowers meet eligibility criteria. If you’re pursuing forgiveness, it might not be worth paying additional money toward your loans.

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8 ways to pay off your student loans fast

If you believe that paying off your student loans as fast as possible is the best outcome for you, here are several strategies that could help you do it:

1. Make extra or above-minimum payments

Making additional or payments above the minimum required amount can help you pay down your loans faster than you might expect. Generally, there’s no restriction to making extra payments, but it’s always wise to refer to your loan agreement to make sure.

Tip: When making more payments toward your loans, reach out to your loan servicer to officially note how you’d like the payment applied. Request that excess dollar amounts be applied to the principal balance on the account rather than forwarded to next month’s payment.

2. Make biweekly payments

If you can’t afford to make an extra lump-sum payment each month, setting up biweekly payments instead of a monthly payment can help you pay off your student loans faster. 

There are 52 weeks in a year. Splitting your monthly payment into two biweekly payments means you’ll make 13 payments in total by the end of the year instead of 12. It’s a seemingly small adjustment, but it adds up over time to help you get out of student debt in less time.

3. Take advantage of rate discounts

Some student loan lenders offer incentives that reduce the amount of interest you’re charged each month. For example, if you agree to enroll in automatic payments, you might get a rate discount on your loan (typically 0.25%, depending on the lender).

4. Put any extra funds toward your student loans

Allocating any monetary surplus you receive toward your student loans can put a dent in your total outstanding balance. This includes one-off windfalls, like cash birthday gifts from grandma as well as tax refunds. You could also consider putting annual performance bonuses and salary increases toward your student debt. 

5. Use the debt avalanche or debt snowball method

The debt snowball method is a repayment strategy that prioritizes paying down your student loan balances starting from the smallest loan amount to the largest. Each month, you’ll put all extra money toward your smallest student loan while paying the minimum amount due each on the other loans. Once the smallest loan is fully paid, repeat this process with the next-smallest loan to keep your payoff momentum — and so on until your loans are repaid. 

Alternatively, the debt avalanche approach is similar to the debt snowball in that all extra money is funneled to paying down one loan at a time. The debt avalanche, however, focuses your efforts on paying down the loan with the highest interest rate first. After that loan is paid off, you’ll tackle paying down the next-highest interest rate loan — continuing until your loans are paid off. 

Tip: The debt snowball method can be a good option if you’re motivated by small wins. However, it won’t save you money on interest. If you’d prefer to reduce your interest costs and don’t mind it taking a while to see progress, the debt avalanche might be a better fit.

6. Ask your employer about repayment assistance

Employer student loan assistance is growing in popularity as a workplace benefit. Taking advantage of this kind of program can be a good way to reduce your student loan debt — but be sure to talk to your employer to see what the requirements are and how the program works first.

“You’ll want to know if employer payments toward your student loan are considered taxable income to you,” says Patricia Roberts, CEO at Gift of College. “You’ll also want to know if the student loan has to have been taken for your own post-secondary education or whether it can be attributable to a child or grandchild for whom you borrowed funds.”

Tip: If your employer doesn’t offer student loan repayment assistance, it’s worth talking to your manager or a human resources representative to see if it’s a benefit that they’d be willing to provide. Be prepared to show how this can benefit the employer — for example, how it could be an incentive to attract and keep good employees. 

You can also mention this benefit if you’re negotiating your salary with a new employer to see if it’s on the table.

7. Pursue federal student loan forgiveness

Federal student loan borrowers can pursue student loan forgiveness programs that dramatically reduce their loan obligation after meeting certain criteria. 

Public Service Loan Forgiveness (PSLF), for instance, requires you to work full time for a nonprofit or government organization while making 120 qualifying student loan payments. Once these requirements are met, you could be eligible to have your remaining loan balance forgiven, tax-free.

8. Refinance high-interest student loan debt

Refinancing student loans allows you to consolidate one or more existing loan balances into a new private student loan with a different interest rate and terms. Keep in mind that you’ll generally need good to excellent credit (or a creditworthy co-signer) to be eligible for student loan refinancing. 

Having good credit can also help you qualify for better terms — such as a lower interest rate — on a refinanced loan, which can make paying off student debt more manageable.

Keep in mind: Both federal and private student loans can be refinanced. However, refinancing federal loans means losing access to federal protections, such as income-driven repayment (IDR) and student loan forgiveness. 

Frequently asked questions (FAQs)