Paying for college is costly, and more than half of college students take out a student loan at some point to cover some of the expenses. In the 2020-2021 academic year, 54% of graduates who received their bachelor’s degree left school with an average student loan debt of $29,100.
With the addition of interest charges and the likelihood of an entry-level salary right out of college, carrying five figures or more of student debt can feel harrowing. In this case, it might seem like a good idea to pay off your loans ahead of schedule — but doing so isn’t always right for everyone.
If you’re wondering how to pay off student loans fast (and if you should), here’s what you should know.
Is it a good idea to pay off your student loans early?
Whether it’s a good or bad idea to pay off your student loans early depends on multiple factors. One of these is the type of student loan you’ve borrowed — federal or private — as well as your financial situation and goals.
Paying off private student loans fast is generally advantageous and can help you avoid excessive interest charges. Federal loans, on the other hand, offer government benefits and protections, so it might not be worth it to aggressively pay them down.
Here are some pros and cons of early repayment to consider:
Pros of fast student loan repayment
- Saves money on education debt overall: The less time you carry a student loan balance, the less interest is charged. Getting out of student loan debt faster means you’ll save money on your total loan costs.
- Reduces DTI ratio: Paying off student loan balances decreases your debt-to-income (DTI) ratio, which compares total monthly obligations every month against your income. Keeping this ratio low is favorable when applying for credit, like a mortgage or personal loan, since it suggests that you can reasonably afford to take on additional debt.
- Lifts the mental burden of unpaid education loans: Carrying debt for an extended period can be stressful and a heavy weight on your shoulders. Paying off your loans sooner than later is one less financial responsibility to worry about.
Cons of fast student loan repayment
- Diverts funds from other financial goals: Aggressively paying down student loans means you’ll have less money for other goals, such as growing an emergency fund, saving up for a down payment on a home or investing for the future.
- Forfeits student loan interest tax benefit: Student loan borrowers can claim an above-the-line tax deduction of up to $2,500 or the amount of interest paid during the tax year, whichever is lower. Paying off your loans early means you can’t take advantage of this tax incentive for additional years.
- Doesn’t maximize loan forgiveness: Federal student loan forgiveness programs forgive the remaining balance on qualifying student loans once borrowers meet eligibility criteria. If you’re pursuing forgiveness, it might not be worth paying additional money toward your loans.
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8 ways to pay off your student loans fast
If you believe that paying off your student loans as fast as possible is the best outcome for you, here are several strategies that could help you do it:
1. Make extra or above-minimum payments
Making additional or payments above the minimum required amount can help you pay down your loans faster than you might expect. Generally, there’s no restriction to making extra payments, but it’s always wise to refer to your loan agreement to make sure.
Tip: When making more payments toward your loans, reach out to your loan servicer to officially note how you’d like the payment applied. Request that excess dollar amounts be applied to the principal balance on the account rather than forwarded to next month’s payment.
2. Make biweekly payments
If you can’t afford to make an extra lump-sum payment each month, setting up biweekly payments instead of a monthly payment can help you pay off your student loans faster.
There are 52 weeks in a year. Splitting your monthly payment into two biweekly payments means you’ll make 13 payments in total by the end of the year instead of 12. It’s a seemingly small adjustment, but it adds up over time to help you get out of student debt in less time.
3. Take advantage of rate discounts
Some student loan lenders offer incentives that reduce the amount of interest you’re charged each month. For example, if you agree to enroll in automatic payments, you might get a rate discount on your loan (typically 0.25%, depending on the lender).
4. Put any extra funds toward your student loans
Allocating any monetary surplus you receive toward your student loans can put a dent in your total outstanding balance. This includes one-off windfalls, like cash birthday gifts from grandma as well as tax refunds. You could also consider putting annual performance bonuses and salary increases toward your student debt.
5. Use the debt avalanche or debt snowball method
The debt snowball method is a repayment strategy that prioritizes paying down your student loan balances starting from the smallest loan amount to the largest. Each month, you’ll put all extra money toward your smallest student loan while paying the minimum amount due each on the other loans. Once the smallest loan is fully paid, repeat this process with the next-smallest loan to keep your payoff momentum — and so on until your loans are repaid.
Alternatively, the debt avalanche approach is similar to the debt snowball in that all extra money is funneled to paying down one loan at a time. The debt avalanche, however, focuses your efforts on paying down the loan with the highest interest rate first. After that loan is paid off, you’ll tackle paying down the next-highest interest rate loan — continuing until your loans are paid off.
Tip: The debt snowball method can be a good option if you’re motivated by small wins. However, it won’t save you money on interest. If you’d prefer to reduce your interest costs and don’t mind it taking a while to see progress, the debt avalanche might be a better fit.
6. Ask your employer about repayment assistance
Employer student loan assistance is growing in popularity as a workplace benefit. Taking advantage of this kind of program can be a good way to reduce your student loan debt — but be sure to talk to your employer to see what the requirements are and how the program works first.
“You’ll want to know if employer payments toward your student loan are considered taxable income to you,” says Patricia Roberts, CEO at Gift of College. “You’ll also want to know if the student loan has to have been taken for your own post-secondary education or whether it can be attributable to a child or grandchild for whom you borrowed funds.”
Tip: If your employer doesn’t offer student loan repayment assistance, it’s worth talking to your manager or a human resources representative to see if it’s a benefit that they’d be willing to provide. Be prepared to show how this can benefit the employer — for example, how it could be an incentive to attract and keep good employees.
You can also mention this benefit if you’re negotiating your salary with a new employer to see if it’s on the table.
7. Pursue federal student loan forgiveness
Federal student loan borrowers can pursue student loan forgiveness programs that dramatically reduce their loan obligation after meeting certain criteria.
Public Service Loan Forgiveness (PSLF), for instance, requires you to work full time for a nonprofit or government organization while making 120 qualifying student loan payments. Once these requirements are met, you could be eligible to have your remaining loan balance forgiven, tax-free.
8. Refinance high-interest student loan debt
Refinancing student loans allows you to consolidate one or more existing loan balances into a new private student loan with a different interest rate and terms. Keep in mind that you’ll generally need good to excellent credit (or a creditworthy co-signer) to be eligible for student loan refinancing.
Having good credit can also help you qualify for better terms — such as a lower interest rate — on a refinanced loan, which can make paying off student debt more manageable.
Keep in mind: Both federal and private student loans can be refinanced. However, refinancing federal loans means losing access to federal protections, such as income-driven repayment (IDR) and student loan forgiveness.
Frequently asked questions (FAQs)
The time it takes to repay student loans depends on the repayment terms of your education loan. The default standard repayment plan for federal student loans spans 10 years; however, other federal repayment plans offer 20- or 25-year terms. Certain loans have terms of up to 30 years.
Private student loans, on the other hand, generally come with terms from five to 20 years, depending on the lender.
Yes, it’s possible to pay off $100,000 in student loans quickly. However, whether this is feasible depends on your financial circ*mstances. Some strategies include making extra payments or directing windfalls toward your loans.
Federal loan borrowers who qualify for federal student loan forgiveness might also be able to significantly reduce their debt — though it typically takes five to 10 years to qualify, depending on the program.
An aggressive repayment approach for student loans can be worth it to save money on interest and shed the mental burden of debt. However, this is generally only the case if you’re financially stable, which includes having steady employment, a reliable income and a comfortable amount of savings for emergencies while also having sufficient funds to cover other financial obligations.
Although paying off student loans is an ideal goal, having a solid savings foundation is a savvy strategy to prepare for unplanned events. Building an emergency savings account of at least three to six months’ worth of expenses can help you get through unexpected unemployment or a costly medical emergency.
While paying off student loans fast can be tempting, you could find yourself in a bind if you’ve put all your extra funds toward your loans and have nothing left over to handle unexpected financial hardships.
No, student loan debt doesn’t go away after seven years. Borrowers are liable for the debt until the balance is paid off — usually at the end of the repayment term unless you’ve made extra payments. Once the loan is paid off in full, it remains on your credit report for up to 10 years after the account closes.
