How to Pay Off Student Loans Fast

Updated September 22, 2021

Once you’ve graduated, found a great job, and started to pay off student loans, you might begin to wonder if there are ways to pay down your loans faster and perhaps save some money on interest payments. Or you might start thinking about this while you’re still in college. Here are several options to explore if you want to pay off student loans more quickly.

1. Don’t take loans you don’t need.

Loans could be a necessary part of the collegiate landscape, but you do have some choices to make when it comes to the amount of loans you take. Some students attend less expensive colleges and work part-time jobs to avoid taking loans, while others skip work entirely and use student loans to pay for everything from tuition and books to living expenses. If you want to reduce the amount of time you spend paying loans after graduation, one way to accomplish your goal is to limit the loans you take during your time in college.

2. Avoid Income-Driven Repayment Programs

If you have federal student loans, you may have considered using an income-driven repayment (IDR) plan to create some flexibility in your budget. Here’s the catch, though – if you switch to an IDR plan, you’ll extend the term of your loan and ultimately slow down your repayment timeline.

Instead, consider signing up for autopay. In many cases, federal borrowers may be able to get an interest rate reduction of .25% when they register for this option. Contact your student loan servicer for eligibility details.

3. Set a budget.

You’ve got a good job, you’re earning decent money, and you have disposable income, thanks to your college education. This doesn’t give you carte blanche to spend like it’s going out of style.

You did the responsible thing and earned a college degree. Continuing to make wise financial decisions will help you to pay off student loans faster. Start by setting a budget and living frugally while you still owe money. With a plan to repay loans and an appropriate budget in place, you have the best chance to whittle down your loan balance as quickly as possible.

Plus, once your budget is in place, if your income increases, you can use the extra money to make additional payments toward your student loans and save on interest costs.

As a final tip for savvy budgeters, depending on your lender, you may even be able to make biweekly student loan payments rather than monthly payments, which can help you pay off student loans early, as well.

4. Start paying as soon as possible.

If you’re lucky enough to enjoy some kind of grace period before loans begin to accrue interest, as with Subsidized Stafford Loans or Perkins Loans, for example, take advantage by paying as much as you can. 

Even if your loans are unsubsidized and accrue interest before repayment begins, paying student loans while in school or during your grace period will result in less interest building up over time. Making interest-only payments during your grace period is a great way to prevent capitalized interest from growing your loan balance.

But where will the money come from while you’re in school? Consider picking up a part-time job or starting a side hustle to boost your budget and speed up your repayment. 

5. Pay more than the minimum.

The minimum payment is merely a suggestion, insomuch as you can always pay more toward the principal (although not less). What happens when you pay more than the minimum required monthly payment? You not only pay down your loan more quickly, but the faster you pay off the principal on student loans, the less overall interest you accrue, lowering your total cost.

Curious how much making extra payments could help you save? Estimate your savings using ELFI’s Student Loan Repayment Calculator.*

6. Avoid additional debt.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 established restrictions on how credit card companies could market to minors and students, ostensibly to stop young and naïve individuals from being lured by seductive marketing and ending up with potentially damaging long-term credit card debt. This won’t protect you once you graduate and credit card offers start rolling in.

It’s all too easy to go wild with credit cards, never fully realizing that every transaction is like taking a loan. Credit cards are not cash-in-hand – they’re debt, plain and simple. Don’t make the mistake of digging yourself into a hole you can’t get out of.

When you handle your credit cards responsibly and use them sparingly, you can continue to build credit while paying off your student loans, as well as pay down loans faster with the money you’re not paying to credit card companies in interest.

7. Take applicable deductions.

Currently, the IRS offers students and graduates paying student loans the opportunity to take advantage of the American Opportunity Tax Credit (AOTC), which was made permanent in 2015 under the Protecting Americans Against Tax Hikes (PATH) Act. 

The AOTC makes certain educational expenses tax-deductible, including tuition and fees, room and board, transportation, books and school supplies. Depending on your circumstances, you could receive a tax credit of up to $2,500. 

For more information and to find out if you qualify for a student loan interest tax deduction, you can locate your local taxpayer assistance center through the IRS website here.

8. Look Into Student Loan Forgiveness

Student loan forgiveness is a complex process, but there are a number of ways in which you could become eligible to receive forgiveness, discharge, or cancellation of student loans, as spelled out by the Office of Federal Student Aid. Generally speaking, you have to meet criteria related to:

• Type of student loan
• Repayment plan
• Payment schedule
• Employment type (such as teaching or public service jobs)

Forgiveness, discharge, or cancellation of student loans could also be related to:

• School closure
• False certification of student eligibility
• Unauthorized payment discharge
• Identity theft
• Borrower defense to repayment
• Total and permanent disability
• Death

Your ability to take advantage of opportunities for student loan forgiveness is entirely dependent on your circumstances, and you may need help navigating these tricky waters. Borrowers expecting their loans to be forgiven often make lower payments early on, which could result in even larger interest payments if they later find that they are ineligible for the program. It’s a good idea to speak with your lender, your school, your employer, or a representative of the Office of Federal Student Aid to find out if you qualify and what steps you should take to seek loan forgiveness.

9. Look for jobs that offer education reimbursement.

Some employers offer student loan repayment assistance as part of a benefits package. Some notable examples include Google, Hulu, Chegg and Staples. Additionally, some U.S. Government employees may be eligible for student loan assistance.

You should always ask if this is offered before selecting a job and find out exactly what the terms are and what criteria must be met in order to take advantage of such offers. Even if your previous student loans are not covered, you may be able to find jobs that offer reimbursement for future graduate school expenses.

Even if your employer doesn’t offer student loan repayment assistance, in some cases, your state may. Certain states offer loan repayment assistance programs (LRAPs) for individuals working in qualified positions. These are a win-win, as they incentivize professionals to take on needed jobs and also provide some repayment help to borrowers.

10. Refinance your student loans.

Refinancing your student loan debt is a great way to help you pay loans off faster. Refinancing could allow you to consolidate student loans, lock in low, fixed rates, reduce monthly minimum payments and/or the term (length) of your loan, and pay less overall. 

When you originally took out your student loans, you were likely given a standard interest rate assigned to all student borrowers regardless of their financial situation. However, qualifying for more favorable rates and terms through refinancing may depend on several criteria, including your income, credit score, loan amounts, and so on. 

Be sure to research the pros and cons of refinancing with a private lender. If you have a reliable income and solid credit history, you might discover that you’re eligible for terms that reward you for your responsible financial habits. You might also find out whether refinancing your student loans could help free up additional money that you could apply to other areas in your budget. 

With ELFI, you can pre-qualify for student loan refinancing with no impact on your credit score to see how much refinancing could save you.** 

Learn more about when to refinance student loans.

The content on this website is for educational and informational purposes only and should not be construed as legal, financial or tax advice. Links to other websites or references to services or applications are provided as a convenience only. A link does not imply ELFI’s sponsorship or approval of any other site, service or application. ELFI does not control the content of these sites, services or applications.

*Education Loan Finance is a nationwide student loan provider offered by Tennessee based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 12-1-2021. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.

**Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 12-1-2021. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. See Eligibility Requirements for more information. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.10 per $1,000 borrowed. Rates are subject to change.