Five tips to pay off your student loans fast

There’s no denying that student loans are a drag. Whether you’re a new graduate or you’ve been part of the workforce for a few years, paying down a five or six-figure balance is daunting. These budgeting tips can help you set up a plan to get out from under your debt as quickly as you can.

How to pay off student loans fast

The fastest way to pay off a loan is to pay more than is needed every month. The smaller your overall balance, the less interest you’ll be paying, and the faster the debt will disappear. However, this isn’t always an option unless you have a high-paying job and don’t need to pay for things like housing, food, and transportation. With that in mind, here are some other strategies for paying off your student loans as quickly as possible:

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1. Pay immediately

According to Federal Student Aid, which is part of the US Department of Education, you can start paying down your balance while you’re still in school, even though you’re not legally required to do so. Another option is to make payments during the grace period that exists between when you leave school and when your first payment is due. These actions can lower your overall balance and lessen the amount of interest you accrue.

“Signing up for automatic payments may allow you to reduce your interest rate by 0.25% per month!”

2. Pay automatically

Signing up for automatic payments may allow you to reduce your interest rate by 0.25% per month! This helps ensure that your payments are made on time every month and can help in your monthly budgeting. You may need to check with your loan servicer to see if you are eligible for this rate reduction.

3. Pay extra

There’s no penalty for making extra payments or paying more than the minimum monthly requirement. You can make additional payments at any point in the month or you can make a larger lump-sum payment on your due date. But you may need to be in contact with your loan servicer to ensure that any extra funds aren’t considered a new normal and that overpayments should be applied to your principal balance.

4. Pay more often

Instead of making one large payment every month, you may want to pay half the monthly amount every two weeks. You’ll make an extra payment every year, which will help you pay down the loan more quickly and reduce the overall amount of interest you owe.

5. Pay at a new rate

If you have good credit and a steady job, you can refinance your loans! If you have multiple loans, you can refinance them into one private loan with a lower interest rate. You may opt for one that has a shorter term, which means you’ll make larger payments, but also means you’ll have the loan paid off in less time. Be aware that choosing to consolidate your loans has some pros and cons.

Whether you have a subsidized or unsubsidized loan, doing what you can to pay off your principal and interest in a timely fashion helps you to eliminate debt, which might feel even better than graduating.