How to Pay Off Your Student Loans

If you're struggling to repay student debt, you're not alone. Americans' total student loan debt reached an all-time high of $1.76 trillion in 2023. If part of that debt is yours, it's not going to magically disappear but there are definitely ways to relieve the burden.

If you're struggling to meet the payments, there are ways to reduce your monthly bill. If you are juggling more than one loan, you can consolidate them into one. In certain rare instances, forgiveness of federal student loans is available.

In any case, some basic financial strategies can help you cope better with your student debt and still pursue other goals such as a down payment on a home or a retirement nest egg.

Review these nine tips to help you get a handle on your student loans—and even pay them off faster.

Key Takeaways

Know how much you owe, to whom it's owed, and your monthly payment and interest rate for each loan.
Find the best repayment schedule—fast or slow—for your current situation.
Consider making payments during your grace period toward the principal, if you can afford it, or at least toward some of the accrued interest.
Look into payment options that can whittle down your debt, such as paying more each month or making bi-monthly payments, setting up autopay, and applying windfalls such as bonuses, tax refunds, or cash birthday gifts to the principal.
See if consolidating or refinancing your loans can lower your interest rate and speed up the payoff.

Loan Payments Resume

Student loan payments resumed in October 2023 after a three-year pause granted by COVID-19 relief legislation. If you have a student loan, you should receive a monthly bill at least 21 days before payment is due. If you cannot afford to pay, you may be eligible to lower your monthly payments through the SAVE program. In addition, loan forgiveness is available for some public service workers, non-profit employees, and disabled people.

1. Know What You Owe

The first step in repaying student debt is knowing what you owe. If you haven't done this yet, take the time to figure out:

The total amount you owe on all of your loans
Which student loan servicers you owe, and the amount of each loan
Which of your loans are federal and which are private
The minimum monthly payment for each loan
The interest rate for each loan

Once you've done this, you can move on to the next step—choosing a repayment plan.

2. Evaluate Repayment Options

How you repay your loans depends on the type of loans you owe, how much you can afford to pay, and your overall financial goals.

"Financial goals are different for everyone," says Joseph DePaulo, CEO, and co-founder of College Ave Student Loans. "Some may want a longer repayment plan that allows more flexibility in their monthly budget, while others may opt for a repayment plan that allows them to pay off their student loans as quickly as possible."

A range of student loan repayment options are possible. If you need flexibility and owe federal student loans, you might consider an income-driven repayment plan. Several choices calculate your monthly payment based on your income and household size and allow you more time to repay your loans than you'd get on a standard 10-year repayment plan.

Income-driven repayment plans can offer loan forgiveness after a set number of years, but any forgiven loan balance may be treated as taxable income.

On the other hand, if you want to repay your loans as quickly as possible, you might want to stick with the shortest term you can tolerate. The trade-off is that you'll have a higher monthly payment. The best way to evaluate loan repayment options is to use a loan repayment calculator, such as the one offered by the Department of Education.

3. Use the Grace Period to Your Advantage

Whether you have a grace period and how long it lasts with private student loans depends on the lender. The grace period is the time frame in which you aren't required to make payments on your loans.

With federal student loans, the grace period typically lasts for the first six months after you leave school. With private and unsubsidized federal loans, keep in mind that interest is still charged during your grace period and will be capitalized—added to the total amount you owe—after the grace period ends.

One way to make the grace period work for you is to make advance payments against your loans. Paying down some of the principal means less interest that accrues later. At the very least, try to make interest-only monthly payments in the grace period to cut down on what you owe.

4. Consider Consolidating or Refinancing Student Loans

Consolidating and refinancing are two ways to streamline student loan repayment. With debt consolidation (or student loan consolidation), you combine multiple loans at an interest rate that reflects the average rate paid across all of your loans. This can be done with federal student loans to merge multiple loans (and monthly loan payments) into one.

You can refinance federal and private loans together into a new private student loan, but doing so will cause you to lose certain protections on your federal loans, such as deferment and forbearance periods.

Refinancing is a little different—you're taking out a new loan to pay off the old loans, so you still end up with one monthly payment. But if that new loan has a lower interest rate compared to the average rate you were paying across the old loans, you could save some money—provided you don't extend the term.

One thing to note about refinancing private student loans is that you'll need good credit to qualify, which may necessitate bringing a cosigner on board.

Be very careful to avoid student loan scams, which you may run into if you're looking for ways to refinance your loans or investigate loan forgiveness.

5. Pay Your Loans Automatically

Late payments can hurt your credit score. Scheduling your loan payments to be deducted from your checking account automatically each month means you don't have to worry about paying late or damaging your credit.

You could also score some interest rate savings if your lender offers a rate discount for using autopay—federal loan servicers and many private lenders do. The discount may only be a quarter of a percentage point, but that can make a difference in how quickly you pay off the loans over time.

6. Pay Extra and Be Consistent

Paying only the minimum due prolongs your indebtedness. If you're able to pay extra, you may want to target one loan at a time while paying the minimum on everything else. The question is, do you use the debt snowball method or the debt avalanche? Choose which one works for you.

Federal student loan payments were paused and interest was set to 0% until either 60 days after the Department of Education resolved litigation blocking the White House's far-reaching student loan forgiveness program or 60 days after June 30, 2023, whichever was earlier. On June 30, 2023, the Supreme Court ruled that the Biden administration lacked the authority to cancel up to $20,000 federal student debt per borrower. Following the decision and legislation passed by Congress, the three-year forbearance on student loan payments and interest is set to end. Student loan interest will resume starting on Sept. 1, while required payments will be due starting in October.

7. Apply "Found Money" to Loan Balances

Found money doesn't necessarily mean the change you find between your couch cushions. It's money that you didn't budget as part of your monthly income. Using found money is another way to gain traction with student loan repayment. This includes:

Tax refunds
Rebates
Annual salary bonuses
Income earned from a side job
Cash gifts you receive for birthdays or holidays

You can apply these amounts to your loan principal to take out a chunk of your debt in one go. Other opportunities to use found money to pay down loans quickly include inheriting money from relatives or receiving a settlement as part of a lawsuit.

8. Look Into Forgiveness and Reimbursement Programs

Public Service Loan Forgiveness (PSLF) is designed to offer student debt relief for students who pursue careers in public service. You make a set number of payments while working in a public service job, and the remainder is forgiven.

Some student loans may be forgiven if a certain number of monthly payments have been made towards the principal. These income-driven payment plans were also made more generous as part of Biden's SAVE plan, which allows people to reduce their monthly payments to an amount they can afford.

There may be other avenues for your loans to be forgiven. If your school has closed down, you may be eligible to file an application to have your loans waived. The government also has special policies for borrowers with certain disabilities.

If you don't qualify for any of those types of loan forgiveness, you may be able to get help with your student loans through your employer. Talk to your HR department about whether student loan reimbursement is available as an employee benefit and what you need to do to qualify.

In some circumstances, a debt relief company can assist you in negotiating lower payments or even partial debt reduction. This may be an option if your loans are from a private lender. If they're federal loans, you can apply directly for SAVE program benefits.

The Biden-Harris Administration announced the launch of the SAVE plan on Aug. 22, 2023. Under this IDR, payments are based on your income and family size rather than the size of your loan. Undergraduate loan payments are reduced to 5% of your discretionary income and the monthly payments for certain qualifying borrowers are reduced to $0.

9. Try Bi-weekly Payments

Another method to pay off student loans is switching from monthly to bi-weekly payments. Similar to making bi-weekly mortgage payments, you'll make one extra loan payment per year.

You'll need to talk to your loan servicer to find out whether automatic bi-weekly payments are an option, but if not, you may be able to make additional principal payments at any time through your online account access.

The upside of making extra bi-weekly payments yourself versus automatically is that you can make the payments when it fits your budget and skip them if there's a month when you don't have the extra cash.

Is It Smart to Pay Off Student Loans Early?

Yes, if you can pay off your student loans early, it is a smart decision. Paying off your loans early means they will cost less because you'll pay less interest over a shorter period. Having less debt will help in other financial situations, such as applying for a mortgage or a car loan.

How Long Does It Take to Pay Off Your Student Loans?

The time it takes to pay off student loans will vary for every individual as it depends on the amount of the loans, the salary, expenses, and other financial aspects of the individual. Typically it takes 10 to 30 years to pay off student loans. The Standard Repayment Plan for federal loans is 10 years.

What Happened to Biden's Student Loan Forgiveness Plan?

On June 30, 2023, the U.S. Supreme Court ruled that the Biden administration lacked the authority to cancel up to $20,000 in federal student debt per borrower.

On Aug. 22, 2023, the Biden-Harris administration announced the launch of the SAVE plan, which reduces monthly student loan payments to an affordable level based on the applicant's income. Payment can be reduced to $0 per month for qualifying borrowers.

The Bottom Line

Tackling your student loans proactively is key to paying them off sooner rather than later. There are plenty of ways to manage your debt more effectively, but the worst thing you can do is nothing.

"If you find you're having difficulty affording your federal or private student loan payments, don't ignore the problem or assume there are no options," DePaulo says. "Reach out to your loan servicers to discuss your situation and try to create a plan to get back on track."