7 Strategies To Pay Off Student Loans

This is guest post by Bash Sarmiento

Tackling your student loans may seem like a mammoth task. Coupled with the feeling of shame many of us feel around our debt, it’s easy to feel hopeless. But that doesn’t mean nothing can be done!

Don’t beat yourself up for taking up student loans. You had your reasons, and whatever those reasons may be, you shouldn’t feel ashamed.

In 2021, 15% of all American adults still had outstanding undergraduate student loan debt, and 7% with outstanding postgraduate student loans. That’s around 38.75 million and 18 million Americans, respectively! And there’s the hope of paying the loans off because 24% or nearly 62 million adult Americans have paid off their student loans.

It won’t be easy, but it can be done.

Here are a few strategies you can do to pay off your student loans. Go ahead, test out a few of these strategies, and pick one that works best for you. You can also modify these strategies to make a customized plan that you can stick to.

Stay Updated and Educated

Before everything else, go ahead and update all your contact information on your StudentAid.gov profile and your lender’s website. This ensures you don’t accidentally miss any important announcements or information regarding your payments. Reacquaint or re-educate yourself with your loan’s terms, grace periods, and total debt. A student loan calculator can help you better visualize your payment timeline and determine how to best move forward.

1. Debt Avalanche

This strategy requires you to focus on your highest-interest debt first. You also get to pay the least overall in the end by reducing the amount you pay towards interest. You do this by paying as much as you can afford towards your loan with the highest interest rate. Of course, don’t forget about your other debts and make the minimum monthly payments on those as well.

Once you’ve paid off your highest-interest debt, move on to the second-highest interest rate debt. Continue making those minimum payments on your other debts. Continue this process until you’ve worked your way from the loan with the highest interest to the lowest.

The trick here is to pay as much as you can afford and pay more than the minimum payment for the primary loan you’re paying off.

Do note that if you make extra payments, be sure to advise your servicer to apply the overpayments to your current balance and not to next month’s payment. This ensures that you’re paying off your loan quicker and not just paying the next month’s bill in advance, defeating the purpose of paying above the minimum monthly payment.

2. Debt Snowball

If you’re overwhelmed by the big numbers and want to ease into the payment momentum, the debt snowball strategy will work well for you.

You focus on your smallest debt first. Similar to the debt avalanche strategy, pay as much as you can afford toward your lowest student loan debt. Go ahead and pay the minimum monthly payments on your other debts. After you’ve paid off your lowest debt, move on to the next-lowest debt while continuing to pay the minimum payments on your other debts.

Focusing on the smaller loans first makes you feel gratification quicker, which can motivate you to continue your payoff journey. The downside is that you do end up paying more in total debt due to the interest fees.

3. Focusing on Accrued Interest First

If you’ve had your student loans for a while and maybe have foregone strategic payment for a bit, you may notice a big chunk of your current payments go towards paying those accrued interests.

Some of these accrued interests can grow VERY big if left unchecked. Somtimes so much so that even if you pay more than your minimum monthly payments, a significant portion of it will end up paying those interest fees and not your actual loan.

By paying off the accrued interest immediately and consistently, you’ll be able to have a better handle on your debt and your payment strategy.

4. Look for repayment assistance programs

If you work for a company, consult your company’s HR and see if they offer student loan repayment assistance or benefits. You can also check your alma mater’s income-based benefit programs and forgiveness programs for alums. Go ahead and check your town, city, or state’s local programs as well.

5. Using cash-back cards for payments

Check with your servicer if you can pay with credit cards or even prepaid debit cards. Some of these bank cards offer incentives like cash back which you can use to your advantage.

On top of making extra payments towards your debt, you can earn cash back from using your card. The money you receive from the cashback incentive can go directly to your student loans, helping you pay them off even faster and with some savings to spare!

Staying on top of your card payments and avoiding overdraft fees is crucial. Carrying a balance will simply negate any savings or benefits you’ve created.

6. Refinancing your private student loans

Refinancing your student loans is one way to pay off student loans fast. You ideally lower your total interest rate by consolidating all your student loans to a single private loan. This only works if you choose a new loan with a better rate and payment term than what’s left of your current loans. You’re refinancing to make paying off your loans more manageable, not to make it harder for yourself.

7. Increase your income

One of the most effective ways to pay off your student loans quicker is by increasing your income to allocate more towards loan payments. You can create a side business or find other ways to make money online.

No “extra dollar” is too small to go towards your debt payments.

In fact, you can also treat any extra money that comes your way as money that can go towards your loans. This includes any bonuses, pay raises, gifts, or tax refunds. You can set aside a bit of the “extra” money for yourself, of course, so you don’t feel deprived of some well-deserved joys. But keep in mind that every dollar counts.

Everyone’s debt journey looks different, but one thing’s clear: staying consistent is important. Soon, you’ll be free from the shackles of student loans, and you’ll be financially independent!