Are monthly student loan payments taking a big chunk of your paycheck, and yet you still find yourself not making a dent in the principal? With 42.5 million people carrying $1.661 trillion in federal student loan debt, you're not the only one who wants that payment to go away. The good news is there are strategies that will show you how to pay off student loans fast and take control of your finances. Our guide will walk you through those steps and explain the jargon so you can pay those loans off faster and potentially save thousands in interest.
Tips to Paying Off Student Loans Fast
Don’t fall into the minimum payment trap. Golden 1 will walk you through the best way to pay off student loans faster with tips that save money and shorten loan terms.
Understand Your Student Loan Details
Before you start paying off student debt, you need to know what you're working with in terms of your loan(s). Log into your loan servicer’s site and make note of each loan’s:
- Type:
- Federal Subsidized: Don’t accrue interest while you’re in school.
- Federal Unsubsidized: Accrue interest immediately.
- Federal PLUS: Higher borrowing limits for graduates or parents of undergrads. Interest accrues immediately.
- Private: Have variable or fixed rates and fewer protections than federal loans.
- Interest rate
- Repayment term
- Balance
Having this information handy will guide your payoff plan. For example, you may want to prioritize paying off high-interest loans because they usually cost you the most over time. However, timing also matters when you start your payments. Federal loans often have a grace period before payments begin. This is a temporary postponement of payments after you graduate, leave school, or drop below halftime enrollment. This deferment period typically lasts six months.
Choose the Best Repayment Strategy for You
Knowing how to pay off student debt the right way can help you save money in the long run by reducing your total interest. Consider optimizing your repayment plan using this checklist:
- Use Federal Benefits First: If you need income-driven repayment (IDR), deferment, forgiveness, or Public Service Loan Forgiveness (PSLF), prioritize federal plans like SAVE or IBR .
- Refinance Private Loans: Refinance private student loans if you can lower your interest rate and term.
- Only Refinance Federal Loans If Beneficial: Refinancing with a private lender means permanently forfeiting federal protections and flexible options. Only do this if you can lock in a substantially lower fixed rate with a shorter term.
- Implement a Payoff Strategy: With loans optimally structured, use a method like:
- Debt Avalanche: Target highest-interest first. Best for reducing total interest owed.
- Debt Snowball: Smallest debt receives extra payment while all others get minimum payments. Best for motivation and small psychological wins.
Create a Budget
A simple monthly budget will give you an overview of how much money you have coming in (income, side gigs) and going out (bills, debt payments, expenditures). Use this to set a fixed amount to put towards loans every month. You'll want to pay as much as possible without straining your finances and well-being. If your loan payment takes up more than 10-15% of your take-home pay, try saving money in other areas:
- Cut back on delivery and eating out.
- Cancel or pause subscription services you don't use.
- Buy generic or store brands.
- Take advantage of discounts and coupons.
- Shop around for better insurance, utility, and phone rates.
Begin Repaying Student Loans During the Grace Period
Use your grace period to help pay off student loans and get ahead. Depending on your federal loan type, you can use this period to your advantage by:
- Paying down the principal on subsidized loans. Since no interest accrues, every dollar goes directly toward reducing the principal.
- Paying accrued interest on unsubsidized and PLUS loans. This prevents capitalization where unpaid interest gets added to your principal balance, increasing the total amount you owe interest on.
If you have different types, focus on unsubsidized or PLUS loans because the interest is already accruing. You can also tell your servicer to apply extra money toward the principal on a specific loan to lower that balance faster.
Pay More Than the Minimum
First, make minimum payments on all loans and consider automation to prevent late fees. Then, if it fits your budget, pay extra toward your highest priority loan. Whether you're using the avalanche or snowball debt method, you must specifically tell your loan servicer to apply extra money toward the loan principal and not future payments.
If you get a bonus or tax refund, consider putting it toward paying down the principal of your loan to cut interest and shorten the term. Even an extra $25–50 per month can save hundreds in interest in the long run.
Leverage Forgiveness and Assistance Programs
There are several types of programs and jobs that can help you repay your student loans. Options include:
- Teacher Loan Forgiveness offers up to $17,500 in forgiveness for teachers who meet qualifications.
- Public Service Loan Forgiveness (PSLF) provides complete loan forgiveness after 120 qualifying payments for government or 501(c)(3) nonprofit employees.
- Service-based loan repayment programs offer assistance to clinicians (e.g., National Health Service Corps, Indian Health Service, state LRPs).
- Military and AmeriCorps benefits provide education awards and loan cancellation options.
- Employer student loan repayment perks offer assistance as an increasingly popular workplace benefit.
- Income-driven plan (IDR) forgiveness will forgive your remaining federal balance after 20 or 25 years on a plan.
Monitor Your Credit Score
Paying your student loans on time is a good way to build your credit score. However, just one 30-day late payment can negatively affect your score. Aside from collection fees and wage garnishment, default and delinquency can stay on your credit report for up to seven years. Check your credit reports every month, and if you're struggling, look into forgiveness or assistance programs before you miss a payment.
Balance Loan Repayment with Other Financial Goals
Don't neglect your other financial goals while paying off your loans. You should also work on:
- Building a starter emergency fund of around $500 to $1000.
- Paying off high-interest credit card balances until they’re gone.
- Saving for retirement by contributing to a 401(k) or Roth IRA.
- Protecting against unexpected expenses with appropriate insurance (e.g., health, renters, disability).
- Saving for future goals, like a car or home downpayment.
Focus on the emergency fund and high-interest first. Then, gradually build up your retirement savings as you maintain your loan payments.
Get a Roommate
Housing is usually the biggest expense, taking up 30% of your monthly budget. Splitting rent, utilities, and other household expenses with a roommate can free up hundreds per month. The savings could go straight towards loan payments and paying down the principal of your highest interest loans.
Can You Repay Student Loans Early?
Federal student loans have no penalties for paying them early. Paying student loans early is preferable because it will lower your total interest and shorten the loan term. If you pay extra, tell your servicer to apply it to the principal of a specific loan. Otherwise, they will apply it to future payments. Most private loans don't have a prepayment penalty, but check your promissory note to be sure.
Resources & Tools to Help You Pay Off Your Student Loans
The best strategy to pay off student loans is the one that fits your budget and goals. Whether that means targeting high-interest loans for bigger savings or tackling small loans for quick wins, choose a method and stick to it. If you want to compare options, use Golden 1’s personal debt consolidation calculator to see your potential savings. If you'd like to get expert guidance on refinancing or debt consolidation, a Golden 1 rep can walk you through the trade-offs so you stay on track with your payoff plan. With the right strategy and consistent effort, you can successfully eliminate your student debt.
