How To Pay Off A Student Loan Faster
Getting a student loan to help pay for school can be a great thing. But if you don’t keep up with the payments, that little loan can turn into a big debt that follows you around for years. Fortunately, there are ways to pay off your student loans faster—and they involve even more math than you learned in high school!
Prioritize your loans.
There are several ways to prioritize your loan payments. If you have multiple student loans, it’s best to start with the one with the highest interest rate and pay that off first. Next, you should pay off any loans with lower balances (and therefore lower monthly payments) until they’re all paid off or almost paid off. Lastly, if there are still some small balances remaining on different loans with similar interest rates (for example, two student loans at 4%), then it’s up to you how much of your money should go towards each one—but here’s what we recommend:
- Paying more towards the loan with higher interest rates is always better than paying less towards a lower-interest loan; however…
- After that initial goal has been met (or almost), then focus on paying more towards whichever loan has a larger remaining balance—even if its interest rate is higher than another one’s.
Make extra payments.
Making extra payments on your student loans is a great way to save money and pay down your debt faster. The more often you make additional payments, the less time it will take to pay off your loan(s). You can make one-time lump-sum online payments at any time during or after repayment of your loan(s). If you choose this option, all or part of each subsequent monthly payment will be applied toward any outstanding balance on the loan(s) listed under “Pay Now” in StudentLoans.gov.
Make sure that all future payments are made directly through StudentLoans.gov by selecting “Pay Now” from their website (not through their mobile app). Otherwise, interest will continue to accrue without any reduction in principal owed!
Pay more than the minimum due.
Make payments larger than the minimum due. The minimum monthly payment is not the same as the total interest rate, principal balance, or amount you actually owe. The minimum monthly payment is simply what you must pay each month to avoid defaulting on your loan.
Because it may take years to pay off a student loan while paying just the minimum due, consider making additional payments each month. You can do this by writing a check or transferring money from your checking account via direct debit (if that option is available). If you have old loans with interest rates in excess of 8%, there’s a good chance that paying extra will help reduce your overall cost of borrowing and save money in future years when those loans are paid off entirely
Consolidate your loans.
If you have multiple loans, the first thing to do is consolidate them. This will make it easier to manage your payments and see how much money you still owe.
For example, if you were paying off two student loans with different interest rates and different repayment plans, you would have had to keep track of both debts separately until they were paid off. Consolidating these debts into one loan makes it much easier to keep track of everything because there’s only one payment due each month.
The second advantage of consolidating loans is that it allows for more flexibility in terms of repayment options such as extended repayment plans (which lower monthly payments but increase overall costs).
With a little organization and planning, you can have your loans paid off sooner than you think!
When it comes to student loans, you have more control over the repayment process than you might think. There are a few things that can help speed up your payoff time:
- Prioritize your loans. If this is your first time dealing with paying off debt, it’s easy to get overwhelmed and confused by the sheer number of options at your disposal. You may even be tempted to put off payments on one or two smaller loans for months in order to focus on others—but don’t do that! Instead of working from smallest debt to largest (which seems like a good thing), prioritize based on how much each individual loan will cost per month once interest has been accounted for.* Make extra payments if possible.* Pay more than the minimum due each month.* Consolidate multiple student loans into one monthly payment
We hope this guide has helped you to understand the basics of paying off your student loans and given you some ideas for how to get started. Remember that every situation is different, so it’s important to do what works best for your personal finances and career goals. If all else fails, just remember that being debt free feels great!