Focusing on Loan Repayment – How to Pay off Student Loans


After graduating from college and stepping into the real world, the thought of how to pay off student loans can quickly become overwhelming.

If you’re having visions of your entire paycheck going directly into the account of your lender, you’re not alone. By evaluating your situation, making a plan, and discovering new ways to pay off student loans, you’ll be able to tackle your debt.

Before jumping into your loan repayment plan, it’s important to understand why repayment should be a priority. Investopedia offers a helpful guide to loans and interest, showing how much money you can save and how much more quickly you can be out of debt by making larger monthly payments.

When you make a plan for the best way to pay off student loans, and then follow through with that plan by making debt repayment a priority, you’ll be rewarded with the freedom of being debt-free much sooner. The promise of more disposable income, the ability to travel or save for a home, and being free from lenders can serve as your motivation for paying off your student loan debt quickly.

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Make a Plan

Making a well thought out plan is the first step to being successful in almost any situation, but it’s especially true when it comes to how to get out of student loan debt.

To create a plan, start by being honest with yourself about how much money you owe and what your timeline for repayment should be. There are several tools and tips that can help you.

When making a plan for how to pay off student loans, start by gathering the paperwork for any lenders you’ve borrowed from. Look at your total loans, interest rates, and minimum monthly payments to determine how much money you’ll need to pay to each lender each month.

When advising how to get out of student loan debt, most experts recommend paying off the debt with the highest interest rate first. In an article about debt repayment, CNBC discusses this method.

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Bankrate has a helpful calculator for determining how much money you owe, what your monthly payments should be, and how long it will take you to repay your loans based on those monthly payments. The calculator allows you to experiment with the numbers, showing how to pay off student loans faster by adding money to your monthly payments.

After looking at your repayment options, you’ll need to create a budget to decide how much you can afford to pay each month. U.S. News has an excellent guide for recent graduates to create a budget.

Calculating your fixed expenses and factoring in other monthly expenses will help you decide what payments you can afford.

Know your options. In some cases, those who have a lower income might have alternative ways to pay off student loans through Income-Based Repayment (IBR) programs. Income-Based Repayment programs determine monthly payments based on a percentage of discretionary income.

After a certain period of time, remaining debt is forgiven. For more information about IBR programs, visit IBR Info.

Those who choose a career in public service can sometimes also get a break on loan debt. This is an option for how to pay student loans while doing a job that you love. Nerd Wallet shares a guide for taking part in the programs, which forgive federal loans for those in jobs like nursing, education, and military service.

The program is for those who work in these jobs for at least ten years and follow a repayment plan during that time. Look into these programs if you think you might qualify.

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Set Yourself Up for Success – Best Way to Pay Off Student Loans

When making a plan for how to pay off student loans, there are certain steps you can take to ensure that you’ll be successful. If possible, start the process when you’re applying for loans.

Every student’s needs are different, and you’ll need to decide how much money to borrow based on your individual expenses. Taking less money in loans obviously means that you’ll have less to pay back later.

If you’re still a student, you can start taking control of your debt repayment now. Instead of focusing only on how to pay off student loans after graduating, you can get a head start by making payments before graduating. The benefit to starting to make payments early is that they can cut down on the amount of interest you’ll owe over time.

When you do start making payments, either while you’re in school or after you graduate, be responsible about it. Missing payments or hiding from your loans will only result in late fees and penalties that will create more debt and trouble in the long run. The best way to pay off student loans is to be honest with yourself about how much you owe and how much you can afford to pay, while being diligent in working toward paying down your balance.

If you’re concerned about being responsible for monthly payments, consider setting up an automatic payment. Rather than thinking about how to pay student loans each month, you can have a specific amount of money withdrawn from your bank account automatically on the same day every month. As long as you have the money available in your bank account, it’s one less thing to think about. You might even get a discount on your interest rate for enrolling in auto payments.


Take Small Steps

While everyone is determining how to pay off student loans faster, not everyone will be able to put a large amount of money toward debt repayment each month. If you don’t have a lot of extra cash each month, adding even a small amount of money to your monthly payment is helpful.

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Using the monthly payment calculator to determine how to pay off student loans faster will show you that adding even $5 to your monthly payment will shave months off of your total repayment period.

Investopedia offers an example of how this works. Increasing payments means that you’ll be paying less money in interest over time, reducing the total amount you’ll need to pay for your loans.

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Add to Your Income

The obvious answer for how to pay off student loans faster is to earn more money each month and dedicate that money to loan repayment. That advice sounds great in theory, but how can it be done?

Those with full-time jobs most likely won’t have the time or energy to take on a second job. However, many people find ways to supplement their income and pay down student loans more quickly.

Freelance work and also consulting are great ways to earn extra money, without committing to a part-time job with a set schedule.

With the internet, anyone can become a freelancer and make extra money to put toward loan repayment. If you have talent for writing, graphic design, building websites, or data entry, there are many ways to pay off student loans more quickly.

If your work schedule does allow for a second job, there are some positions that make sense for those interested in how to pay student loans. For example, waiting tables or hosting at restaurants can help you earn extra money while working with a somewhat flexible schedule. Landscaping, retail jobs, and delivery service jobs are also great options, depending on your interests, skills, and schedule.

You’ll need to be willing to give up your nights or weekends (sometimes both), but the extra money toward student loans can be worth it to many recent grads. The New York Times shared stories in 2011 of several people trying to figure out how to pay off student loans faster, struggling to get ahead with their regular jobs, but making it work by taking on second jobs.



Talk to Your Boss

There are two ways that your employer could potentially help you pay off student loans. First, they could increase your salary. Obviously, this is only an option for those who excel at their job and deserve a raise. If you’ve been putting off negotiating a higher salary based on your work performance, this is the time to have the conversation. If you do get a raise, earmark that money for your student loan repayment.

Some employers may also have programs specifically for helping employees with ways to pay off student loans. These may be established programs for service-oriented positions, like nursing and teaching. They can also be incentives added to benefits packages. Be sure to ask about loan assistance in addition to vacation time, relocation packages, and retirement funds when negotiating.

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Cut Back Where You Can

Adding to your income can help with putting more money toward student loans, but managing the money you’re already making is just as important. We’ve discussed making a budget to determine monthly payments. When it comes to how to pay off student loans faster, there will come a time when that budget should be examined more closely.

When learning more about personal finances, you’ll hear about others making huge changes in their monthly budgets by cutting back in both expected and unexpected ways. Cutting out cable is one of the most common budget savers. By using services like Hulu, you can save money without sacrificing entertainment. Skipping dinners out and seeing movies in a theater and opting for home cooked meals and Netflix movies instead can save a lot of cash each month.

Also, look at every area of your budget. You might be able to save money on groceries by shopping at different stores and using coupons. Downsizing to a smaller apartment or living with a roommate can save money on rent. You can also save money on your phone bill by using a smaller data plan, joining a family plan, and sometimes getting a discount through your employer if you use your phone for work.

Trimming your budget is often the best way to pay off student loans. It creates a larger amount of discretionary funds each month that can be applied to your loan balance, without creating extra work for you. While it may feel like a sacrifice at the time, it will be worth it when your loans are paid off and you can put that money toward new financial goals.



Make a Large Payment

Increasing monthly payments can help to lower your balance and take time off of your total repayment period. Another way to reduce that balance is by using a cash windfall to make a large payment. The money might come from an inheritance, receiving an insurance payout, or even winning the lottery for a lucky few. These windfalls are one of the ways to pay off student loans more quickly, by applying that money immediately to your loan balance.

Not many of us will be receive a large amount of money unexpectedly, but smaller cash windfalls are fairly common. Tax refunds and bonuses at work are two of the most common examples. Applying that money to student loan repayment can make a dent in your balance that you’ll appreciate when you notice the number of months of repayment decreasing.


Don’t Forget About Tax Advantages

According to H&R Block, those who are making monthly loan payments are eligible for up to $2,500 in deductions each year. These deductions include payments made on your student loans or your spouse’s student loans. A $2,500 deduction can also help with how to pay off student loans because when that money is received in a tax refund, it can be applied to your loan balance.

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Consult Your Cosigner

When applying for student loans, you often need a cosigner. That cosigner is usually a parent. If this is the case for you, sit down for an honest conversation about the best way to pay off your student loans. Because the cosigner is also responsible for the loans and their credit could be affected if the loans aren’t paid, they should take an interest in the conversation.

This is an especially important conversation to have if you find that you’re having trouble with making your monthly payments. If your cosigner is able to help you financially, they may be able to make part of your monthly payment for you until you get back on your feet. This can save you from going into default or accruing late fees and penalties. Paying this person back directly as you’re able will be less expensive than dealing with student loan interest rates.


Deferment, Forbearance, and Consolidation

Before looking at these options, remember that the best way to pay off student loans is to make a plan you can stick with, make monthly payments, and funnel extra cash into paying down your loans. For some, the weight of student loans can be too much. When there are no other options, deferment, forbearance, and consolidation can be a last resort.

According to the U.S. Department of Education website, deferment is a period of time when both loan principal and interest are delayed. You need to request deferment and meet certain criteria to qualify. Reasons for deferment include being enrolled in school, being on active military duty, being unemployed, and being in the Peace Corps, among other situations.

The U.S. Department of Education also describes forbearance. Forbearance also puts a hold on loan principal, but interest continues to build over the period of time when payments aren’t being made. You might opt for forbearance in times of unemployment or when dealing with an illness.

When struggling with how to pay student loans, many will hear about consolidation. In theory, consolidation sounds great. It combines all of your student loans into one manageable monthly payment. However, rolling all of your loans into one also means that you won’t be able to pay off higher interest loans first, which is one of the best ways to pay off student loans more quickly. Student Loan Hero goes over this idea in more detail with their Student Loan Myth #4.

While these programs are designed to help those who need assistance or can’t make their monthly loan payments, they are not the best way to pay off student loans. In fact, they can often make students feel more distressed and overwhelmed. Before deciding to choose deferment, forbearance, or consolidation, consult with a professional who will be able to guide you through the process and provide you with alternatives.



Remember Your Goal

Paying down loan balances may not feel exciting, especially when seeing others using their money to have fun or live more extravagantly. However, learning how to pay off student loans faster means that you’ll spend less time on loan repayment and reach your goal of being debt-free more quickly.

As you make your monthly payments, take second jobs, and apply cash windfalls to your loan balance, keep the end goal in mind. Think about the traveling you’ll be able to do, the apartment or home you’ll be able to afford, and the lifestyle you’ll be able to live when those monthly payments are finished.

Discovering ways to pay off student loans is a great first step. Now, get to work and reach you goal.


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