Pay Off Your Student Loans

Pay Off Your Student Loans

student loan repayment roadmap

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Look, I’m not going to sugarcoat it for you: Paying back student loans is hard. There’s a reason that the standard student loan comes with a 10-year repayment plan—namely, that it’s hard to do it any faster.

But resigning yourself to the standard 10-year repayment plan means resigning yourself to paying thousands of dollars in interest over the next 10 years, money that you could use to buy a house, start a family, travel the world, or save for retirement. Wouldn’t it be great if you could pay back your student loans as quickly as possible so that you could keep more of that money for yourself, and free up room in your budget for the things you actually want and need?

If you’re brand-new to the world of student loans, you should take a look at our introductory guide that will help you understand all of the student loan basics.

I think so too. That’s why I pulled together this step-by-step guide: So that college students and recent grads know exactly where to begin and what to do to start paying off their student loans faster and more cheaply than your lenders want. Though everyone’s financial situation is different and will require different specifics, the steps below are a great road map that will get you on the path to crushing your student loans.

Student Loan To-Do List

Ready to get started? Below is a step-by-step guide showing you how to pay off your student loans.

1. Trim your expenses while in college to reduce student loan debt.

The first step to paying back your student loans as quickly as possible is to limit the amount of money that you borrow for college in the first place. Obviously the best way to do this would be for you and your parents to begin saving for your education as early as possible. But even if you don’t have any college savings, there are countless ways that you can reduce your college expenses so that you can take out fewer loans (and pay off those loans faster after you graduate).

Need some inspiration? Here are some easy ways for you to cut your college expenses:

    • Take college courses in high school if they are offered.
    • Attend a community college before transferring to a 4-year school.
    • Take winter and summer courses to save time.
    • Live in a state that offers free college tuition.
    • Live at home to cut down on room and board. If you can’t live at home, don’t splurge on college housing.
    • Become a Residential Assistant (RA) for cheaper on-campus housing.
    • Learn to cook to save money on a meal plan.
    • Rent textbooks instead of buying them.
    • Take advantage of tax savings to save money.
    • If you don’t need it, leave your car at home.

Every dollar that you can save now is a dollar that you don’t have to pay back later with interest. Think long and hard to identify places you  can trim your costs: Your future self will thank you.

2. Make payments while you’re in school.

I know, I know. You’re busy studying, making friends, and figuring out how to live away from home for your first time. But by making payments while you’re still in school you can save a lot of money over the life of your student loans. If you have federal work study as a part of your financial aid package, you should really use that money to pay as much off of your student loans as possible while you  are in school.

At a minimum, you should aim to at least pay off the interest that accrues on your student loans each year. If you don’t pay off the interest as it accrues, then when you graduate and your loans exit deferment, the interest will capitalize, which has the potential to make your loans much more expensive. How? Well, when interest is capitalized, it essentially means that it is added to the principal of the loan, and that means that you’re paying interest on top of your interest. If you want to pay off your loans as quickly as possible, then you need to avoid letting interest capitalize at all costs.

If you can afford it, you should also aim to pay off as much of the principal as you can each month as well. Not only will this reduce the amount of interest that accrues, but it can shorten your repayment schedule substantially. If you have both subsidized and unsubsidized federal student loans, aim to pay down the unsubsidized ones first: Unsubsidized student loans accrue interest while you’re in school; subsidized loans do not.

3. Track your student loans before and after graduation.

If you want to be successful in paying off your student loans, you need to be organized. And to be organized, you need to keep track of your student loans. By keeping track of your student loans, you’ll always be able to answer important questions like:

  • How many student loans do I have?
  • How much do I owe on my student loans in total?
  • Are my student loans federal, private, or a mix?
  • If they’re private student loans, is the interest rate variable or fixed?
  • If they’re federal student loans, are they subsidized or unsubsidized?

 Free Student Loan Spreadsheet

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The answers to these questions will ultimately impact the strategies that you use to pay off your student loans, so it’s important for you to quickly and easily be able to access the information. For example, knowing whether your loans are federal or private might impact your decision to refinance; knowing if your federal loans are subsidized or unsubsidized may make you think  twice about entering deferment.

Did you know? The average monthly student loan payment for students aged 20 to 30 is $351.

While you  should obviously organize and keep track of your student loans after you graduate (so that you don’t miss any payments), you should ideally start keeping track of them while you’re still in school. By keeping track of your student loans as you take them out each semester, you won’t need to go hunting for the information after you graduate. Plus, tracking your student loans while you are a student can help you focus on paying down your debt.

4. Pick a repayment plan.

When it comes to paying back student loans, a lot of people are happy with just paying the minimum balance. There’s nothing wrong with that! But paying a little extra each month—even as little as $25 or $50—can add up to big savings. By paying down the principal, you can save a lot in interest payments over the life of the loan.

If you want to pay down your student loans quicker, having a bunch of different loans at different interest rates certainly doesn’t make things easier. You’re probably wondering Which student loan should I pay off first? Should I pay off the student loan with the highest interest rate first? Or should I pay off the student loan with the lowest balance first? Should I pay off my private student loans first, or my federal student loans?

Luckily, there’s no correct answer to this question: It all boils down to your own personal psychology and long-term financial goals. There are a number of common debt repayment strategies floating around out there, but my three favorite are the snowball, avalanche, and benefit-focused methods. Each one will appeal to different needs, so it’s important to choose the one that best matches your goals and stick with it. As long as you pick a repayment strategy and stick with it, you’ll do perfectly fine crushing your student loan debt.

5. Sign up for autopay.

As soon as you graduate and you are required to start making payments on your student loans, do yourself a favor and sign up for autopay. It’s exactly what it sounds like: You link a bank account to your student loan so that every month, right on schedule, money is withdrawn from your account and applied to your loan as a payment.

Signing up for autopay helps you pay off your student loans in two ways. First, it makes sure that you don’t miss any payments, which will help keep your credit history healthy and will allow you to avoid late fees and penalties that only make your debt more expensive. And second, it can actually make your debt cheaper.

Most student loan servicers and lenders want you to sign up for autopay, because it ensures that they are going to get their money each month (and prevents them from having to pay money to follow up with delinquent borrowers). To encourage borrowers to sign up for autopay, these lenders will often give you an incentive: Namely, they will reduce the interest rate on your student loan. Typically the interest rate reduction will be around .25%, which can easily add up to hundreds or even possibly thousands of dollars over the life of your loan (depending on how much you owe, obviously).

So just do yourself a favor and do it, ‘kay?

6. Cut unnecessary expenses from your budget.

Just like you cut your expenses while you were in college so that you needed fewer loans to pay for your education, if you want to pay off your student loans as quickly as possible then you need to cut your after-college expenses too. This might mean moving back in with your parents or loving with a roommate, foregoing that awesome trip around the world, and sticking with the same laptop that got you through college. Comb through your budget and find any and all possible places to trim the fat. You’ll be needing the extra money for the next step, which is…

7. Use those freed-up funds to pay extra towards your targeted loans.

Now that you’ve freed up some money by cutting your expenses as much as humanly possible, you’ve got to put that money to work. To do that, you’ve got to funnel the extra cash into paying down your student loan principal each month. This is as easy as it sounds: Just add it to your automatic monthly payments, and if you have any extra cash come to you as lump sums you can make a one-time payment by phone, online, or by check.

If you’re looking for some advice that’s a little more nuanced than me screaming “JUST THROW ALL OF YOUR MONEY AT YOUR STUDENT LOANS UNTIL YOUR LOANS ARE DESTROYED!” then okay, how about this? Here are 6 great strategies that you can use to increase your payments and pay off your loans faster:

  • Pay whatever extra you can each month (or week).
  • Round up your payments.
  • Instead of paying monthly, make bi-weekly payments.
  • Apply your raise, bonus, and/or tax refund to your student loan principal.
  • Go nuclear: Pay as much extra as humanly possible.
  • If you’re married and both of you work, use the Starve and Stack Method to pay down your student loans.

8. Don’t forget your other financial goals (including emergency fund and starting to invest).

Okay, so there’s some bad news. I know that you want to pay off your student loans as quickly as possible, and that means that you want to plow all possible resources into accomplishing your one goal of being debt-free. But, unfortunately, I just can’t advise you to do that. If you’ve got other financial goals outside of paying off your student loans (and in all likelihood, you do) then realistically you should be working on all of those goals at once. Two of the most important of these are:

  • Creating an emergency fund: An emergency fund is exactly what it sounds like: A savings account that is meant to be used only to pay for emergencies. Most financial experts will tell you that you should save enough money to cover between three and six months’ worth of expenses in your emergency fund. That way, in the worst case scenario, if you lost your job and had no other source of income you would be able to continue paying all of your bills while you look for new work (it’s also an amount that would be able to pay for most other emergency expenses).
  • Investing for the futureIf you have long-term financial goals like buying a house, sending your own kids to college, and retiring, then you’ve got to start investing money for those goals as early as possible. When you’re young, you’ve got time on your side to help you grow your money; waiting even just a few years can mean the difference of thousands or hundreds of thousands of dollars. (If you’re looking for an easy way to break into investing, I would suggest you take a look at the Acorns investing app or Stash Invest, both great tools for newbie investors.)

Yes, this means that it will take you longer to ultimately pay off your student loans. And yes, that means your student loans will be more expensive. But consider the alternative: If you don’t save an emergency fund then when one inevitably strikes, you will either be sh*t out of luck, or you’ll need to rely on expensive credit cards to cover your ass. And if you don’t begin saving and investing for the future now, then you’ll have to put off major life goals.

9. Don’t forget to celebrate the little wins along the way.

Even if you are plowing every last spare cent into paying off your student loans, there’s a very good chance that it is going to take you years to pay off your debt. There’s just no two ways about it: Debt reduction is a long-term game.

To keep yourself motivated over the long haul, it’s important to celebrate the little wins along the way. Taking the time to celebrate will help you positively reinforce your good behaviors, making it less likely that you’ll revert to the bad, and also just act as a psychological boost along the way. Any time you pay off a student loan or hit a big milestone (say, every time you pay off $5,000 of debt), take the time to pat yourself on the back and celebrate. Treat yourself to a night out with friends, or a fancy meal, or maybe even a reasonable gift (no $2,000 iPads!).

Debt repayment is important, but it’s also important to live and enjoy life along the way. Having mini celebrations as you pay off your debt will let you have fun while also keeping you on track for hitting your goals.

The Bottom Line

If you want to pay off your student loans as quickly and painlessly as possible, then the steps above should be all that you need to get to your goals. It’s not going to be easy, and it’s not going to happen overnight. But by being disciplined and fully committing to paying off your student loans, you will get there.