How To Quickly Pay Off Student Loans And Save Money

How To Quickly Pay Off Student Loans And Save Money

So you've found yourself with a bunch of student loan debt and you're anxious to save money by paying it off as quickly as possible. Good! Nothing feels as great as paying off student loan debt.

You're not alone in your student loan debt. Studies say 7 out of 10 graduates hold student loan debt, with an average debt of roughly $29,500. This debt delays launching into adulthood for many college graduates.

The median age for buying a home is up, the median age for getting married is up, and the median age for having children is also up. A big reason for the increase is due to student loan debt.

Let me share 12 ways to help you quickly pay off your student loans.

How To Quickly Pay Off Student Loans

The average student loan debt is at a record high. Here are twelve ways to quickly pay off your student loans. Details below.

  1. Pay More Than What Is Required
  2. Refinance Your Student Loans
  3. Conduct The Debt Snowball Method
  4. Inquire About Interest Rate Reductions
  5. Meticulously Track Your Finances
  6. Work for an Employer With Repayment Assistance
  7. Avoid Extended Repayment Terms
  8. Utilize Tax Deductions
  9. Make Lump Sum Payments
  10. Use Loan Forgiveness Programs

1) Pay More What Is Required

Paying the minimum is the slowest way to pay off your student loan debt. Most of your payment is going towards interest in the beginning years. Instead of paying the minimum, pay more to help reduce principal balance.

This strategy lowers the remaining amount due and, because interest is calculated on your remaining balance, reduces total interest owed.

Set up an automatic monthly payment for more than the minimum to ensure you always pay a little extra.

To pay off student loan debt quickly, instead of paying your loan monthly, pay off your student loan debt every two weeks. If you do, you end up making 26 payments, which amounts to 13 months of student loan repayments instead of 12 months.

Finally, pay off your student loan debt quicker by paying large lump sum payments of $1,000 or more. Be disciplined about using your tax refund, your year end bonus, or any type of windfall to pay down extra student loan debt. Many people with mortgages do the same thing.

2) Refinance Your Student Loans

Just like how you can refinance your mortgage to a lower rate, you can refinance your student loan debt to a lower rate as well.

If you keep payments the same or increase them, but reduce your interest rate, you’ll pay less in interest in the long term. Further, a greater percentage of your monthly student loan payment will go towards paying down principal with a lower interest rate.

The best place to get real, pre-qualified, competitive student loan rates is through Credible. They are a leading online lending marketplace. You can get a real quote with multiple lenders competing for your business in under three minutes.

How To Quickly Pay Off Student Loans And Save Money

3) Conduct A Debt Snowball Strategy

A debt snowball strategy is where you pay down the highest interest rate student loan first to save money and/or you pay down your lowest student loan balance first to gain momentum.

A lot of people lose their momentum when paying down debt and just quit focusing. It's much like folks who go to the gym in January. By March, most of these folks no longer show up.

5) Take Advantage of Interest Rate Reductions

An interest rate reduction is a benefit many student loan service provides offer if you set up an electric auto-pay. Student loan service providers often will lower your interest rate by as much as 0.25%, which is significant over the long run.

Besides, you want to set up auto-pay because auto-pay makes paying off student loan debt less painful. You will also never miss a payment or have to pay a penalty.

6) Diligently Track Your Finances

Too many people go through life not tracking their finances. They don't have a budget nor do they know where their money went. Is it no wonder that so many Americans wake up 20 years from now and wonder where all their money went?

Definitely create a budget and track your spending with a free wealth management tool like Personal Capital to see where your money is going. Make it a point to allocate a good portion of your budget towards paying down student debt. You can also run a pro forma retirement analysis of your future cash flow with Personal Capital's retirement planner as well.

Personal Capital Budgeting Cash Flow

7) Take Advantage Of Employer Benefits

Given the labor market is so tight, employer student loan repayment assistance is a growing workplace benefit. Some employers offer a student loan payment program by offering a monthly credit. Other employers might be willing to pay off your entire student loan debt after reaching certain time or performance milestones.

I worked at an employer who paid for 80% of my UC Berkeley MBA if I promised to work at my employer for two years after graduation. I got my MBA part-time and really appreciated the benefits.

Make sure you read your company handbook, know all the benefits, and ask your HR manager about any student loan repayment assistance.

8) Utilize Tax Deductions

For most student loan borrowers, you can take a tax deduction of up to $2,500 annually for student loan interest. The $2,500 student loan interest deduction lowers your Adjusted Gross Income by $2,500.

However, there are income limits that allow you to take advantage of these tax deductions. if your income exceeds $65,000 as an individual or $140,000 if you are married filing jointly, you lose part of the deduction. And you lose the full deduction if you make at least $80,000 as an individual or $130,000 if married filing jointly.

The same thing goes for contributing to a traditional IRA tax free or getting a child tax credit. Once your income surpasses a certain amount, you no longer get to benefit.

10) Use Loan Forgiveness Programs

If you work in a qualifying public service job, you can get your student loan debt forgiven after you make 120 on-time payments. This is an attractive program IF you enjoy working at your job and making below what you can make at a comparable private sector job.

There is a risk that your debt may not be forgiven after 10 years because laws could change. You just never know with the government.

If you are considering going to graduate school or haven't started college yet, consider getting an income sharing agreement or ISA. An ISA is an alternative to taking out student loan debt.

BONUS! You Can Ask Your Parents For Money

If you're OK with swallowing your pride, you can simple ask your parents for money to pay back your student loan debt. Many adult children are not only asking for tuition assistance, but free cars, and free homes as well.

If you're good to your parents, I'm sure your parents would be happy to help in some way. Leaving an inheritance while alive is much better than while living.

Just look how rich the older generations are below.

Ask your parents to help repay your student loans

Different Types Of Student Loans

Let's first look at the difference between a Federal Student Loan and a Private Student Loan.

Federal Student Loans versus Private Student Loans

Federal student loans have many benefits, including fixed interest rates and student loan forgiveness programs. Because of those benefits, it often makes sense to prioritize paying off private student loans first if you have multiple student loans. You’ll need to know you know how much you owe and make a personalized plan for your situation.

But the biggest determining factor on which loan to pay off is really the interest rate. As a result, every person with student loan debt should refinance their student loan to the lowest rate possible.

Explore Federal Repayment Plan Options

Finally, let's look at the various federal repayment plan options. A lot of people get into the trap of extending their repayment plan. This is a no, no if you really want to pay off your student debt quickly.

  • Standard Repayment Plan. Has fixed payments and allows you to repay your loans in 10 years. I highly recommend always focusing on the Standard Repayment Plan.
  • ​Graduated Repayment Plan. Allows you to start with lower payments that gradually increase as your income rises.
  • Extended Repayment Plan. Is available for certain borrowers and allows you to repay your loans over a long time period.
  • Income-Driven Repayment Plans. Cap payments at a percentage of monthly income.

Further Reading

Here are some additional articles for further reading.

Always Try And Refinance Your Student Loan Debt

If you want to pay off your student loan debt quickly, I highly suggest taking advantage of low interest rates and refinancing your student loan debt.

The best place to get real, pre-qualified, competitive student loan rates is through Credible. They are a leading online lending marketplace. You can get a real quote with multiple lenders competing for your business in under three minutes.

After you've refinance your student loan debt, pay down extra lump sums as much as you can. Before you know it, you'll have fully paid off your student loan debt.