7 Creative Ways to Pay Off Your Student Loan Debt

How to pay down your student loans faster

If you want to get out of student loan debt but aren’t ready to fully pay off your loan, you can do it by paying a little extra each month. Making extra payments, along with your regular monthly payments, may reduce the total amount you pay for your loan or help pay your student loan off faster.

You don’t need to make an extra payment every single month to pay down your student loan faster—do it whenever your budget allows. The easiest way to do this is to make a one-time payment online, by phone, or by mail.

Paying extra will also reduce the Current Amount Due shown on your next billing statement(s). Even if there’s no required amount due on the billing statement, continuing to make payments will reduce your Total Loan Cost.

Note: If you’re enrolled in auto debit or have requested the pay-ahead feature for your loans to be turned off, the Current Amount Due will not be reduced in the following billing period(s).


2. Explore Student Loan Forgiveness and Related Options

How would you like to have your student loans totally or partially forgiven? This may sound like one of the most exciting and creative ways to pay off student loans, but student loan forgiveness programs come with strict eligibility requirements. They only apply to federal student loans.

Federal Student Aid highlights the following ways to cancel, discharge or forgive your student debt:

  • Public Service Loan Forgiveness.
  • Closed School Discharge.
  • Teacher Loan Forgiveness.
  • Perkins Loan Cancellation and Discharge.
  • Discharge Due to Death.
  • Total and Permanent Disability Discharge.
  • Discharge in Bankruptcy.
  • Borrower Defense to Repayment.
  • False Certification Discharge.
  • Unpaid Refund Discharge.

The Public Service Loan Forgiveness (PSLF) program is one of the most common. It applies to select individuals employed at the federal, state, local, or tribal level or in select not-for-profit organizations. The requirements are strict, so be thorough in checking the program and considering all your options.

4. Refinance to Lower Your Interest

Borrowers can refinance their student loans to lower their interest rates and pay off their loans sooner.

Consider an average loan of $36,400 on a 10-year repayment plan. Borrowers paying the average federal loan interest rate of 4.66% would pay $9,200 in interest. But by refinancing to a 2.59% interest rate, borrowers can save $4,250-$6,750 in interest, depending on how quickly they pay off the loan.

Loan consolidation may also help borrowers lock in lower interest rates and pay off their student loans faster. Before you refinance or consolidate any loans, look into how the change will affect your monthly payments and the full repayment date.

8. Adjust Your Repayment Plan

There are different repayment plans that can help you manage your student loans. Because student loan interest is accrued based on the principal, adjusting your monthly payment can ultimately impact the amount you owe over the course of the loan.

When you graduate from college, you may have a number of options to choose from for federal student loans, including standard repayment plans, income-based repayment plans, graduated repayment plans and extended repayment plans.

Graduated and extended repayment plans may seem appealing, especially because they typically come with a lower monthly payment. An affordable monthly payment can be a priority for college graduates, so these plans can help with achieving that goal.

However, while graduated or extended repayment plans offer you lower monthly payments up front, these plans either extend your repayment timeline or set you up to make larger payments in the future. In both of these cases, it can mean that you will pay more over time.

If you can afford the monthly payments—and don’t qualify for or want to be on an income-based repayment plan—a standard repayment plan may result in the least overall interest. It can also help you pay off your student loans faster. If you wish to switch to a standard repayment plan, it’s a good idea to talk to your loan servicer.

3. Use the Grace Period to Your Advantage

Whether you have a grace period and how long it lasts with private student loans depends on the lender. The grace period is the time frame in which you aren’t required to make payments on your loans.

With federal student loans, the grace period typically lasts for the first six months after you leave school. With private loans and unsubsidized federal loans, keep in mind that interest is still charged during your grace period and will be capitalized—added to the total amount you owe—after the grace period ends.

One way to make the grace period work for you is to make advance payments against your loans. Paying down some of the principal means less interest that accrues later. At the very least, try to make interest-only monthly payments in the grace period to cut down on what you owe.

Note that interest on student loans from federal agencies was temporarily suspended until Aug. 31, 2022, which should help reduce the total amount you owe when you graduate. This relief was also extended to loans in the Federal Family Education Loan (FFEL) program. Even with federal loans, it still makes sense to try to pay down federal loan principal during this period.

What is your highest degree?

Why do we ask?

Some lenders determine your eligibility and interest rate based on the type of degree you have.

Sign up for Automatic Debit

Did you know you can reduce your interest rate by
Did you know you can reduce your interest rate by 0.25% by signing up for automatic debit?

If you sign up for automatic debit, your student loan servicer will automatically deduct your student loan payment from your bank account each month. Not only does this help ensure that you make payments on time, but you may also be able to get an interest rate deduction for enrolling. Contact your loan servicer to see if your loan is eligible for this interest rate reduction.

2. Consider When to Start Paying Off Student Loans

You can usually start paying off your loan as soon as you receive the funds. But most federal student loans don’t ask you to start paying until after you graduate or your enrollment status changes. Private student loans don’t necessarily follow the same process.

If it works for your budget, you might consider making payments before they’re required. That’s because interest can still accrue, or build, on what you originally borrowed while you’re in school. It can also happen during grace periods—and even when loans are in deferment or forbearance.

Depending on the type of student loan you have, you could be responsible for paying that interest thanks to a process called capitalization. And that could have a big effect on the total amount you owe and how interest is calculated.

5. Make extra lump-sum payments whenever you can

Most borrowers simply make the minimum payment each month. But if you come into any unexpected money, whether it's a bonus at work, tax refund, or another windfall, put it towards making an extra payment on your student loans. Again, make sure to specify you want the extra money to go toward reducing your principal. 

6. Pay Down Your Balance While in School

Another trick to go above and beyond the minimum payment plan is to start repaying your loans while in college. Federal loans, and some private lenders, don’t require you to make any payments while you’re still a student. Some college students only earn enough to cover living expenses, but others can start making payments before they graduate.

Be creative with the ways you use your time in college. If you find that you have free time throughout your day, consider a part-time position on campus or a side hustle that could help free up money that could be used to make loan payments before you graduate.

Consider creating a budget in college that helps you find any extra income to put toward your debt. Remember that you can’t make payments on federal financial aid that you’ve received from the FAFSA while still enrolled in school.

8. Research Employer Student Loan Repayment Plans

Some employers offer student loan repayment plans as an employee benefit. This perk can save you money while also paying off your loans faster.

These plans take several forms, according to SHRM. For instance, employers may make monthly payments to the loan servicer in employee-assisted repayment plans. Other employers may make matching contributions, similar to a 401(k) match. Finally, some employers may let their employees choose between a student loan contribution or retirement contribution.

Only a small number of companies offer these benefits. Borrowers on the job market can research employee benefits and ask about student loan repayment plans.

2. Choose your repayment plan carefully

Federal student loans offer a choice of repayment plans, including extended repayment options. If you're hoping to figure out how to pay off student loans fast, you should likely opt for the standard payment plan. That will give you higher monthly payments than many other plans that are available, but it will also ensure your loan is paid in full within 10 years. 

If you have private loans, then you'll have to choose your loan repayment period when you borrow. Choose the shortest loan term you can afford if your goal is to figure out how to pay off private student debt fast. A shorter loan term will usually result in a lower interest rate and, of course, a higher monthly payment that ensures your loan is paid off sooner.

As for student loan forgiveness programs, look for short-term options like Public Service Loan Forgiveness (PSLF) or teacher loan forgiveness. These programs offer forgiveness after just five and ten years, respectively. Compare that to 20 to 25 years for standard loan forgiveness through income-driven repayment plans.

What is your refinancing goal?

Why do we ask?

Please select the option that best describes the financial outcome you would like to achieve by refinancing. Faster payoff and lower lifetime interest are associated with shorter loan terms, while lower monthly payments are associated with longer terms.

Making the monthly loan payments

Every month, you will be making your student loan payments to your loan servicer(s), which are the companies that handle the billing and other services on your loans.

You should already know who they all are but if you don't have their websites/contact information all together, make a list or put that in your student loan spreadsheet. Contact each of them and know exactly how much you owe, what payment is due and when it is due.

Sun of Sun Group Wealth Partners suggests doing auto-pay on your loans to have the amount automatically deducted from your checking or savings account each month. Not only will that ensure you pay them on time, but in some cases you can get a discount on your interest rate with auto-pay. For example, if you have a federal Direct Loan, you can get a discount of 0.25% on your interest rate for setting it up on auto-pay, according to the Federal Student Aid site.

Use Your Tax Refund

Making extra loan payments lowers your overall cos
Making extra loan payments lowers your overall cost.

One easy way to pay off your loan faster is to dedicate your tax refund to paying off some of your student loan debt. Part of the reason you may have received a refund in the first place is because you get a tax deduction for paying student loan interest.

What if Im unable to make a payment?

Say it's six months after the grace period, and you still don't have a job. Or maybe you do have a job, but your necessary day-to-day living expenses are piling up. What on earth do you do if you can't make a payment on time? The worst thing you can do is miss a deadline, the experts say. Williams suggests that you should immediately call your loan servicer and let them know of your current income situation. Be sure to ask your loan servicer about changing your repayment plan. It's important that you know it is OK to ask for help.

While the loan servicer will help you adjust your repayment plan based on your financial situation, you can't just rely on that. Because at the end of the day, you still have to eventually make these payments. It is important that you also are looking for ways to make sure this doesn't happen again.

VIDEO 2:41 02:41 CFPB expects more borrowers to default as student loan payments resumeSquawk Box

You may need to go back to that budget and start looking at how you can cut back on your spending expenses. Or come up with ways to bring in extra income. Do whatever you can to make these monthly loan payments on time, because if you don't there are consequences.

If you are a few days late on a payment, your loans will become delinquent and will remain delinquent until you pay off the due balance.

If you are 30 days late, your loan servicer will charge you a late fee — and that could be up to 6% of your late payment amount.

However, if your payment is 90 days overdue, your loan servicer will report the delinquency to the main credit bureaus, which could significantly affect your credit. And let's be honest, you do not want to have bad credit on top of trying to pay off your student loans.

Even worse, if your payment goes 270 days overdue, the loan goes into default. In this instance, the government can move to garnish such income as paychecks, Social Security checks, federal tax refunds and disability benefits.

The Bottom Line

Tackling your student loans proactively is key to paying them off sooner rather than later. There are plenty of ways to manage your debt more effectively, but the worst thing you can do is nothing.

"If you find you're having difficulty affording your federal or private student loan payments, don't ignore the problem or assume there are no options," DePaulo says. "Reach out to your loan servicers to discuss your situation and try to create a plan to get back on track."