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How to Pay Off Student Loans

By Kayla Korzekwinski

Kayla Korzekwinski is a Scholarships360 content writer. She earned her BA from the University of North Carolina at Chapel Hill, where she studied Advertising/PR, Rhetorical Communication, and Anthropology. Kayla has worked on communications for non-profits and student organizations. She loves to write and come up with new ways to express ideas.

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Updated: April 29th, 2022
How to Pay Off Student Loans

Whether you’re about to enter college or you’re a recent graduate about to start making payments, it can be daunting to tackle how to pay off student loans. The best way to pay off your loans is to do it as quickly as possible. This is easier said than done, but there are many ways to manage your loan payments and allocate your income.

Continue reading to learn how to pay off your student loans and the methods to consider.

Don’t miss: Scholarships360’s free scholarship search tool

1. Know your loans

First, it’s important that you know the details of your loans, especially if you have multiple. Keeping track of your loan details will help you stay focused on which ones to pay off first. For each loan, make a list that includes: the type of loan (federal or private), the lender, fixed-rate or variable-rate, balance, interest rate, term length, total due including interest, and grace period.

Once you have this information, you can determine how and when to pay each loan. You can also calculate your pay-off date so you can focus on moving it up, if you want to pay your loans as quickly as possible. 

 Subsidized vs. Unsubsidized Student Loans: What you need to know 

2. Make extra payments

The most effective way to reduce your debt is to pay more than the minimum. Even if you start small, factoring extra money into your monthly payments will get you closer to being debt-free faster. One way you can do this is by setting up automatic payments with the extra money added in; that way, you don’t have to second-guess adding the extra amount that month.

However, if you decide to pay more, make sure that you instruct your lender to add it to your payment for that month. Some lenders may add the extra amount to next month’s payment. Also, make sure that the extra payment goes toward your principal balance, rather than any other fees or interest.

3. Try biweekly payments

Another strategy for loan repayment is to pay biweekly rather than monthly. This is a great way to pay off your loans faster and keep interest down.

You can calculate the biweekly payment amount by taking your monthly payment and cutting it in half. Then, you can pay that amount every two weeks. For example, if your monthly payment is $400, you would pay $200 every two weeks. This will allow you to pay the same amount every month, but it will add a full extra payment for the year. This is also a good strategy if you receive a bi-weekly paycheck. 

Again, you should make sure that your lender is applying your payments correctly if you choose to use this strategy.

See also: Student loan consolidation vs refinancing

4. Consolidate and refinance your loans

Refinancing your student loans can help lower the amount of interest you pay. 

Refinancing is when a private lender pays your existing student loans, and then you pay that lender through a new loan with different terms. Often, the new terms include a lower interest rate. This strategy can also help you consolidate multiple loans into one so that you have fewer separate payments to make. 

It’s important to note that refinancing may not be the best option, or may not be possible, for everyone. To refinance, you will have to meet the lender’s criteria. In most cases, this includes a high credit score and a stable income. If you don’t have these, you’ll need a cosigner. On the bright side, some lenders will offer you a small discount on interest for refinancing with a creditworthy cosigner. 

You also should not refinance your loans if it won’t actually lower your payments or shorten your payment period. Even if your payments are lower, having a longer payment period will not save you money in the long run.

You can refinance both federal and private student loans. However, be aware that refinancing federal loans may lose you any potential benefits or relief that comes with federal loans. 

There are many tools you can use to determine if you should refinance, and who you should refinance with. Be sure to compare lenders to get the best rate. 

5. Apply for grants

Many people think that scholarship and grant money must always be secured before or during your studies. But did you know that there are grants out there to pay back your loans retroactively?

Private grants such as the Nitro College Repayment Scholarship, as well as government programs such as loan forgiveness for nurses, teachers, and more, can be your best friend. Our guide on grants to pay back student loans can walk you through all of the possibilities out there.

6. Debt snowball vs. debt avalanche

These terms may sound intimidating, but they’re not! They are two different methods of paying your debt. 

Debt snowball approach

The debt snowball approach involves ordering your loans from lowest balance to highest balance. Then, you pay the minimum amount on each loan but the first on your list, the lowest, which you focus on making extra payments on. This method will allow you to pay off your first loan sooner, which can motivate you as you move forward with your next payments. 

Debt avalanche approach

The debt avalanche approach is the opposite, and it targets interest. In this method, you will list your loans from highest interest rate to lowest interest rate. Then, focus on making extra payments on your largest debt, and make the minimum payment on the others. 

Which approach is best?

There are pros and cons to each approach: the debt avalanche will help you keep your interest down. The avalanche method can also help you pay off your loans sooner. The snowball method can result in more interest and a longer payment period, but the milestones of eliminating loans can push you to keep going. 

You can use this student loan simulator to determine the best repayment strategy for your loans.

7. Enroll in autopay

Enrolling in autopay gives the lender permission to automatically take loan payments from your bank account. You can receive a 0.25% discount on your federal student loan interest by enrolling in autopay, and many private lenders also offer an autopay discount. This may not be a significant discount, but any money saved will help.

If you want to make more than the minimum payment, autopay can also help you factor in the extra money. It can also help you stay on top of payments if you struggle with scheduling.

8. Put extra money towards your loans

Throughout your life, there will be times that you come into some extra money. This could be from a raise, tax refunds, inheritance, and more. 

It’s easy to want to spend extra money right away, but you should consider allocating a fraction of your cash windfalls to paying off your debt. This will help you pay off your loans quicker.

9. Don’t forget to look ahead

Student loans can cause stress to many people. It’s important to stay focused and motivated to make your payments as effective as possible. 

Look ahead to the future. Plan for your pay-off date, then focus on moving it up. Picture the career you’ll have with your degree. Imagine what you’ll be able to do when you’re free from monthly payments. You can do this!

Keep reading: Paying off student loans early

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