11 Strategies to Pay Off Your Student Loans Faster

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Strategies You’ll Learn

1. How refinancing can save you up to $200 a month on loan payments
2. Why sending in a few extra dollars every month can have a big impact
3. How cash-back credit card programs can help you chip away at your debt
4. Which government programs can help wipe out federal student loan payments
5. Which loans to pay off first if you have more than one
6. How to trick yourself into paying more without realizing that you’re doing it
7. A second way to trick yourself into paying more without realizing you’re doing it
8. How to use discounts that can shave a solid year off your loan payments
9. How you can convince people to lower prices for you <<without hypnotizing them>>
10. How to take advantage of a cash-back program that can make direct payments to your lender
11. How to chart your progress, so you can claim your membership in the Free of Student Loans Club even faster

Introduction

Making a ton of money and whacking away at your student loan balances is obviously a great strategy for paying off your debt faster. But let’s get real… for most of us, that “extra money” we’d put toward our student loans often gets funneled elsewhere, and for things that don’t feel like extras.

The good news is that there may be ways to pay off your student loans faster—even if you don’t have piles of extra cash laying around. Let’s talk about some strategies you can use to chip away at your federal and private student loan balances without dipping too far into your monthly cash flow.

1. Refinance Your Student Loans

If you have decent credit, refinancing your student loans at a lower interest rate can not only help you pay off your loans faster, it can help lower your monthly payments. In fact, many people are able to save up to $200 a month on student loan payments. That’s practically like getting a raise. A lower interest rate can shave months or even years off of your loan repayment. Even better: those lower monthly payments can help you gain traction on paying down your loan principal. How does that work? Glad you asked. Your answer awaits in Strategy #2.

2. Add Small Amounts to Your Loan Payments

Let us do the math for you: small amounts of extra payments = big savings + early payoffs.

Paying as little as a few extra dollars every month can make a difference over time. Remember that each monthly loan payment goes toward two things: the interest and the principal. Once you pay the interest, any additional dollars go directly toward reducing principal. Every extra dollar you pay toward your principal is one less dollar you’ll be charged interest on during the following month.

Or, in real math terms … let’s say you send in $20 extra toward your student loan payment every month—that’s $240 per year. That could allow you to pay off a 25-year, $50,000 loan at 4% interest nearly three years earlier. Circling back to Strategy #1: getting lower monthly minimum payments after refinancing means that it will be easier to over-pay your student loans each month. You’ll be writing smaller checks but making faster progress toward repayment. It seems like magic, right? (It’s not. It’s just math.)

3. Multiply Your Earnings with Cash-Back Credit Card Programs

Believe it or not, you can make money while spending money. However, be aware this strategy will require a bit of self-discipline.

Sign up for a credit card that offers a percentage of cash back on your purchases. This strategy works best if you use your credit card to pay a monthly bill, such as a utility bill or a cell phone bill. Even with a 1% rebate, you could make a couple hundred dollars in cash back every year.

Here’s where the self-discipline comes in: you must be sure to reimburse your credit card for the cell phone/trash/what-have-you bill amount every month. Otherwise you’ll end up paying interest on things like garbage collection. Who wants to do that? Certainly not you.

To help avoid unnecessary interest charges, consider setting up an auto payment through your bank’s bill-pay service, or directly through your credit card. That way, you can automatically wipe out the bill amount right after it hits your credit card.

Set a reminder for yourself to go in and collect those cash rewards every few months. Take those sweet, free dollars and send them right over to your student loan.

4. Let the Government Help

If you have federal student loans, a variety of federal government programs may be able help you pay down your loans faster. For example, if you work in the public service sector or for a non-profit agency, you may be eligible to have your federal student loans forgiven after making 120 on-time payments.

However, it’s important to be aware that federal loan forgiveness programs often have very specific eligibility requirements. See if you make the cut by going to studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation.

Important note: if you expect to be able to take advantage of loan forgiveness programs through the federal government, you might want to hold off on sending in extra payments as we discussed in Strategy #2. Paying more now on loans that could be partially forgiven later is money wasted. Instead, put your extra cash toward private student loans, your savings, or even a home purchase.

5. Be Strategic About Loan Repayment

Lower interest rates are the best, right? Not if they’re attached to variable rate student loans. Why is that? The reason is simple: the interest rates on these loans could change at any time, meaning you may get whacked with a higher monthly payment, as well as a larger overall debt. If you have more than one student loan, it’s wise to focus on paying down variable interest rate loans first, even if they have a lower-interest rate than some of your other loans.

Another option is to refinance variable interest rate loans to fixed rate loans. (Why is this a good idea? Time travel back to Strategy #1 to find out why refinancing can be a great option.) For fixed rate loans, pay off loans with the highest interest rates first.

Pro tip: if you have multiple loans from the same lender, call customer service to find out if there’s a way to select how your loan payments are distributed. This can allow you to tackle the higher interest rate loans first.

6. Use a Portion of Your Tax Refund to Pay Down Student Loan Debt

Who doesn’t love a tax refund? It can feel like winning the lottery … even though it was your money to begin with. But before you go spend that windfall on a great vacation or a home remodel, siphon off about 10% to put toward your student loans. Consider that the average American receives a $4,000 federal tax refund. If you put 10% of that toward student loans, that’s a painless $400 per year—and you’ll still have $3,600 to use as you please.

And get this: part of your refund probably came from the student loan interest you paid. In fact, you could receive up to $625 annually from interest paid on student loans in your name. So do yourself a favor and check previous tax returns to make sure your student loan interest was properly accounted for. If it wasn’t, file amended returns to claim that money. If you think filing an amended return sounds like a hassle, think of it this way: three years of student loan interest deductions can put an additional $1,875 in your pocket—or toward your loans.

7. Use a Portion of Work Bonuses or Salary Increases Toward Student Loan Repayment

Who wants more painless ways to make a big dent in student loans? It’s you, isn’t it? Check this out: bonus or raise time is a fantastically awesome time to gain serious traction with student loan repayment. Just like with Strategy #6, you won’t know what you’re missing if you funnel some of your new-found cash toward your student loans. Think at least 10%.

8. Take Advantage of Discounts

Here’s a super easy strategy for you. Did you know that many lenders, including the federal government, offer a 0.25% discount for setting up automatic monthly payments? Most of these programs work through direct debit, with monthly loan payments being automatically withdrawn from your bank account. On a $50,000 loan at 4.5%, you could effortlessly knock a year off your payments—at no cost to you.

9. Negotiate Your Regular Bills

Not everything costs what it appears to cost. For example, your monthly cable or cell phone bill may not be set in stone. Because these companies are so competitive, they’re often willing to reduce rates for customers in good standing. How do you make this work in your favor? Call customer service and ask for a lower rate.

Similarly, you can often have your credit card interest rates reduced with a simple phone call. Shopping around for auto, home, and rental insurance rates may also save you hundreds of dollars each year.

10. Upromise: Online Purchases = Cash Back for Loan Payments

Most people know that Upromise.com can be a great tool for socking away money for college. However, if you have loans with participating lenders, you can earn cash back that will be paid directly to your student loans.

How does it work? Sign up for a free account at upromise.com/join/loan-link.com. Then, similar to a credit card cash-back program, you’ll get cash rewards for shopping online, dining out, or booking travel. Those reward dollars will be funneled directly to your student loan to act as extra monthly payments.

Say you earn $300 back in the first year. Maintain that over a decade and you'll have put $3,000 toward your loan debt. Not too shabby.

11. Look at These Forms That We Made for You

You’ve probably heard the phrase “What gets measured, gets done.” Charting your progress using the forms below can help you stay on track and refine your strategies.

But if you’re not the paperwork type, don’t sweat it. Many of the strategies we laid out for you are of the set-it-and-forget-it variety. So choose a few of those and let them work their magic.

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