5 Tips for Paying Off Student Loans Faster

by Raptor Staff on August 2 2022

Every borrower dreams of paying off their student loans as early as possible. Nobody ever wants to be in debt longer than they have to. Being debt-free can take a huge load off your mind. No more stressing over having enough money every month to cover the loan repayments. No more payment deadlines to keep track of. Your money is yours to spend or save as you like.

Do you want to pay off your student loans quickly but don’t know how? These tips for paying off student loans faster will help.

Celebrating paying off a student loan.

How To Pay Off Student Loans Faster – 5 Effective Ways

 1. Pay More Than The Minimum Every Month

The best way to pay off your student loans faster is to make larger payments every month.

Your repayment terms are set at the time of taking the loan. That’s the minimum amount you’re expected to pay back every month before the due date. Lenders will charge you a fine and interest if you pay less than the minimum. But no lender will object to receiving more than that. If you have a high-paying job, put that extra cash to pay off your student loans.

There’s one important thing to remember when making additional monthly payments. You must specifically request the lender to apply the extra payments towards the principal. This will cut through the principal, allowing you to clear your debt earlier.

Without clear instructions, lenders usually apply the additional money towards the next month’s payments. This will not help you pay off your student loans earlier. It will only advance the due date.

There are two ways to make additional payments every month. One way is by paying the money any time during the month regardless of the due date. The second way is to add the extra money to your regular loan repayment on the due date. Both ways are equally effective at paying off those loans earlier.

2. Start Paying Your Loans While Attending College

Paying your loans while you’re still in college is one way to keep student loan debt in check.

Repayments on student loans start only six months after graduation day. You’re not expected to make any payments before that. However, that doesn’t mean the loans won’t be accruing interest. Interest starts from the day the funds are disbursed. They keep accruing until the debt is completely paid off. By the time you even start repayments, your total debt would have increased substantially.

Paying off what you can while attending college can help reduce that rising balance. If your schedule allows it, take up a part time job. Use whatever you earn to get a head start on paying down your balance. As before, remember to instruct your lender to put it towards the principal.

3. Consider Refinancing

Refinancing is a great solution to paying off student loans faster without making additional payments. But this will only work if you have good credit and a steady, high-paying job.

Refinancing involves exchanging your current student loans for a new loan. The lender sets your interest rate based on your finances. But you can choose the term of the new loan. You can pay off your loans earlier by choosing a shorter loan term.

One important thing you need to keep in mind if you decide to refinance with a shorter term. When you reduce the loan term, your monthly payments will increase. You must make sure you can afford the higher monthly payments before choosing this option. Use a student loan refinance calculator to determine your monthly payments at different loan terms.

4. Enroll in Auto Pay

This strategy will not shorten your loan term by a lot. But it can work when used together with other tips for paying off student loans faster. The added benefit is that you’ll save a lot in accrued interest. Saving money while reducing your loan term a little – why not?

Auto pay is a way of making your monthly loan payments through your bank. You instruct your bank to transfer the loan amount from your account to the lender. Every month, the bank will transfer the money to the lender on schedule. You don’t have to keep track of due dates or anything. All you need to do is make sure that your account has sufficient balance to honor the transfer.

Most lenders offer a 0.25 % to 0.5 % rate discount for setting up automatic payment. The rate rebate is to motivate borrowers to choose this option as it ensures the lender will receive on-time payments every month.

The rate discount may seem negligible. But it does add up to significant savings over the life of the loan. The lower interest means you’ll have that much less to pay back. When used together with other strategies it can help pay off student loans faster.

5. Use ‘Found’ Money to Pay Off Your Student Loans

Found money refers to any extra money you get during the year. This could be a one-time work bonus or cash you received for Christmas or your birthday. Or it could be income you earn with a side-hustle. It will take some discipline not to spend the extra cash on a new gadget or a quick getaway. But it’s worth it. When you’re debt-free earlier, you’ll be glad you put that extra cash toward your student loans.

If you struggle with saving, consider using money-saving apps. These can help you set spending and saving goals.

Paying off student loans early is a good goal to set and work towards. Talk to your lender or loan servicer about other tips for paying off student loans faster. Lenders are always happy to get their money back sooner rather than later. They will work with you to find a solution that works for both parties.

Want help planning your financial future? Talk with one of our financial advisors today.

We hoped you enjoyed this article! Remember, you can and potentially lower your monthly student loan payments and save money.