How to Pay Off Student Loans Fast

Student loan debt can impact your life in a big way, but there are a number of ways to accelerate your repayment.

There are simple methods, like making a budget and paying more than the minimum each month, and more significant changes like loan refinancing. Here's how you can save money by paying off your student loans faster.

Key Takeaways

1. Make a budget: Having a budget gives you an overview of where your money is going, and it can keep you from overspending. A budget is an important tool if you want to pay down debt more quickly.
2. Enroll in autopay: Autopay helps ensure that you never miss a payment, and some lenders even offer discounts for enrolling in automatic payments.
3. Refinance your student loans: Although student loan refinancing has its risks, it can also allow you to get a lower interest rate, which reduces the overall amount you have to pay and can lead to speedier repayment.
4. Pay more than the minimum payment: Paying extra each month, even a small amount, can have a big impact on your overall repayment timeline by reducing the amount of interest you need to pay.
5. Consider biweekly payments: This method has a few risks as well, like not being able to use autopay, but budgeting for biweekly payments means you'll make one extra loan payment per year.
6. Utilize financial windfalls: If you're fortunate enough to come into some extra cash, consider putting it toward your student loans.
7. Take advantage of employer assistance programs: Some employers offer student loan repayment assistance to employees, like matching up to a certain loan payment each month.

1. Make a Budget

Three in five Americans live paycheck to paycheck, and it’s common even for those who earn six-figure incomes. With that in mind, creating a budget—and sticking to it—is an essential task before you can tackle your debt. 

List all of your monthly income and expenses. If you don’t have much money left over after covering your bills and variable expenses, you may have to trim your spending. Or you can boost your income through side hustles or by asking your employer for a raise to get additional money for student loan repayment. 

2. Enroll in Autopay

Student loan companies allow customers to sign up for automatic payments. Each month, on your statement due date, the lender will automatically deduct the required payment amount. Signing up for automatic payments ensures you never miss a payment, which could damage your credit, and helps you plan your spending. 

As an added benefit, enrolling in autopay could help you save money. Federal loan servicers and some private lenders offer discounts for borrowers who sign up for autopay. The discount, if offered, can typically reduce your interest rate by 0.25%. With a lower rate, more of your payments go toward the principal, and you can get out of debt faster. 

3. Refinance Your Student Loans

If you have private student loans or federal loans with high interest rates, student loan refinancing is another way to speed up your repayment. When you refinance your debt, you apply for a new loan with a private lender to pay off your existing loans. If you have good credit—or a co-signer with good credit—you may qualify for a new loan with a lower rate than you have on your current loans. 

The lower rate can lower your overall repayment cost and your monthly payment, and may allow you to pay off your debt faster. 

Consider this example: 

With $39,000 in student loan debt at 5% interest and a 10-year repayment term, your total repayment cost would be $49,639—interest charges would add over $10,000 to your loan cost. 

But say you refinanced your loan. You want to pay off your debt as fast as possible, so you opt for a seven-year term. Thanks to your good credit and the shorter loan term, you qualify for a rate of 3.5%. Your monthly payment would be higher than it was previously—$524 vs. $414—but your overall repayment cost would be just $44,029. Refinancing would help you save over $5,600. And, you’d be out of debt three years sooner. 

Best Student Loan Refinance Companies

Refinancing your student loans is a big decision, but in some cases it may be the right move. See our picks for the best student loan refinance companies below.

4. Pay More Than the Minimum Payment

When you take out student loans, you sign a loan agreement that specifies an annual percentage rate (APR) and repayment term. 

If you want to pay off your student loans faster, paying more than the minimum required is critical. Not only will it help chip away at the principal, but it will also reduce the amount of interest that accrues. 

You don’t have to make huge extra payments to make a difference. Small additional payments can add up. For example, if you had $39,000 in loans at 5% interest and a 10-year term, your monthly payment would be about $414. 

If you increased your payment by $25, bringing it to $439, you’d save over $800 in interest charges, and you’d pay off your debt eight months sooner. 

Use the federal loan simulator tool to find out how much you can save by adding to your monthly payments. 

5. Consider Biweekly Payments

Another option is to make biweekly payments. With this approach, you split the minimum monthly payment in half, and you pay that amount every two weeks. Because there are 52 weeks in a year, you’ll pay the equivalent of 13 monthly payments instead of 12, so you can reduce the time in repayment and save money. The American Institute of CPAs has a biweekly payment calculator you can use to estimate how making biweekly payments can affect your debt. 

Not all companies allow you to enroll in automatic payments if you intend to make biweekly payments, so you may have to manually make the payments instead. That downside can mean losing out on the autopay discount, and you also run the risk of forgetting and missing the payment due date. If that happens, you could incur late fees, and the lender could report the late payment to the credit bureaus which will damage your credit. 

6. Utilize Financial Windfalls

During the year, you may be the lucky recipient of some unexpected windfalls, such as a tax refund or a pay raise. If you put those windfalls toward your debt, you can save money and become debt-free faster. 

For example, the average tax refund for the in-progress 2023 tax season (tax year 2022) is $2,910 as of March 31st, 2023.  If you had $39,000 in loans at 5% interest and a 10-year term and applied the full refund as a lump sum payment, you’d pay off your debt a full year earlier. And you’d save $1,761.22 in interest charges. 

7. Take Advantage of Employer Assistance Programs

Surprisingly, your employer can be an invaluable resource as you repay your debt. According to the Employee Benefit Research Institute, 27% of employers currently offer direct loan repayment subsidies and 44% offer 401(k) contributions tied to your student loan repayment. 

Typically, these plans work as an employer match. Your employer matches your student loan payments, up to a monthly maximum. For example, an employer may pay up to $100 per month toward your loans. The 401(k) contributions should work similarly, but will go towards your retirement and not paying off the loan faster. However, it's still nice to get the extra money for retirement.  

These programs can be an effective way to pay off your student loans quickly without making cuts to your budget. 

The Bottom Line

Your monthly student loan payments may seem big already, and the idea of paying off a large loan more quickly may be intimidating. But there are quite a few easy strategies you can explore, and chances are some of them will work for you.

Paying off your student loans faster can be well worth the effort. Not only will you save money in the long term, being debt-free means less stress and more opportunities to use your money as you see fit, whether that's investing, recreation, or anything else.