5 Ways to Pay Off Your Student Loans Faster

Education is priceless, but student loans can stay with you for a long time. Some repayment plans can last up to 20 years. It is easy to let student loan debt linger for a long time, but if you’re eager to break free from student loans sooner, you can start taking steps now to pay them off faster.

There are many benefits to doing this. Paying off student loans early can save you money on interest charges in the long run. Once done paying for your education loan debt, you can put your money towards buying a home, retirement, or other investments. Paying off a loan also reduces your debt compared to your income, making it easier to qualify for other loans.

Key Takeaways

• The average student loan lasts for 20 years, but there are ways to shorten this timeline and get out of debt quicker

• Making additional payments, setting up automatic payments, and considering refinancing are some effective strategies for paying off student loans faster

• Sticking to a budget and considering part-time jobs or side hustles during college can help you raise extra funds to put toward your student loan

So, if you want to get started now, we have put together the five best ways to pay off your student loans faster.

If you have decided on settling off your education loan on priority, here are some practical steps to help you along the way:

1. Consider making payments during the grace period or while still in school

Although interest continues to build on your education loan while you are studying, you still have a unique opportunity to get ahead on your loan repayment.

Take advantage of the repayment grace period after graduation to make voluntary payments. This period typically lasts six months. By making interest-only payments during this time, you can avoid interest capitalization.

Begin making payments as soon as possible, even if they are small. Every little bit helps in reducing the principal balance and accruing less interest over time. As such, it won't shorten the repayment time directly but significantly reduces the total loan amount you need to tackle.

2. Make extra payments

As said earlier, even small, extra payments towards the principal balance can make a significant impact over time. It all comes down to budgeting and finding that extra money. While you are on the path to becoming debt-free quickly, here are some key strategies to consider:

• Pick up a side gig: Allowing international students to work part-time is a common practice at universities in destinations like the USA, Australia, and Canada. If you decide to work part-time while studying, the first thing you need to do is consult with your designated school official (DSO). They can check for your eligibility and even assist with finding jobs that fit your skillset.

• Use windfalls: Should you chance upon any extra cash in terms of a tax refund, bonus, or other unexpected lump sum, consider taking out a portion or the complete amount to put down against your education loan.

• Budgeting: take a peek at your budget and look for areas where you can cut back on expenditures like dining out, entertainment, or unnecessary purchases. You can also look for local buy-nothing groups to exchange goods with others without buying, selling, or bartering, which will reduce the need for new purchases.

3. Ask your employer about repayment assistance

Congratulations on completing your course and landing your dream job. Now it’s time to take control of your student loans. Many companies are recognising the value of their employees’ education and are taking initiatives to help them out. Like in the USA, employers can offer up to $5,250 annually in tax-free student loan repayment assistance to their employees through 2025.

Ask your HR department or supervisor about any repayment programmes or assistance options available. You might be surprised to find that your employer offers matching contributions, annual bonuses dedicated to loan repayment, or even refinancing partnerships with financial institutions.

But be sure to check out the eligibility criteria for applying for such programs. Some companies may require a certain tenure or performance level before you can access repayment assistance.

4. Refinance for a shorter repayment term

Refinancing is typically used to pay off existing loans, reduce monthly payments, or tap into home equity. By refinancing, you replace multiple student loans with a single private loan, ideally at a lower interest rate or reduced tenure. A shorter repayment term may increase your monthly payment. But it will help save money on interest.

The key benefits of refinancing to pay off student loans faster are:

• Securing a lower interest rate to reduce overall interest costs

• Choosing a shorter loan term to become debt-free sooner

• Potentially saving thousands of dollars in interest over the life of the loan

Going with the option of refinancing would require you to meet some eligibility criteria, depending on the lender. Mostly, it requires a stable income, which can be demonstrated through documents such as W-2s, tax returns, and pay stubs.

5. Leverage automatic payments

Direct debit or auto debit options work wonders to help you maintain consistency and prevent you from defaulting on payments. Missing a payment or paying less than your monthly repayment without making suitable arrangements can negatively impact your loan status and credit score.

Many education loan lenders allow you to set up automatic ACH (Automated Clearing House) withdrawal of your loan payments. You can even configure the payment settings as per the country you are paying from and that your payments are sent in the currency of your loan.

Students can even monitor the status of the payments, like payment pending, payment initiated, payment received, payment failed, or paid off. So leverage automatic payments to ensure your loan payments are made on time, helping you prevent late fees and penalties that can set back your repayment progress.

In a nutshell, when deciding whether to pay off student loans early, take your financial goals and priorities into consideration.