How to Pay Off Your Student Loans Faster Than You Ever Thought Possible

If you're carrying tens of thousands of dollars in student loan debt, you're not alone. Here's how to put down that burden for good.

As of April 2022, the total U.S. student loan debt reached $1.75 trillion. NerdWallet found that the average household is being crushed under almost $60,000 of education debt, but if one or more members of that household pursued graduate school, that number skyrockets.

With the cost of a bachelor’s degree continuing to rise even as wages struggle to keep up with inflation, the student loan crisis doesn’t look like it’s going to improve. However, that doesn’t mean that you are powerless to do anything about your student loans. Find out how to pay off your education debt—fast—and move on with your post-grad life.

How Carrying Student Loans Impacts Your Future

Couple buying a home

As new graduates start their adult lives with a mountain of debt, many of them find their choices to be more limited. The National Association of Realtors studied how education debt impacts homeownership, but what they discovered reaches far beyond real estate.

Of the people surveyed, many claimed that “debt has kept them in disliked or uninteresting jobs, forced them to take second jobs, or take a job outside their preferred field.” Almost one-third of respondents said that they were unable to buy a home, a car, or even take a vacation because of their debt.

And 14% of people say that they’ve waited to start a family due to the burden of student loan debt.

While critics have argued that widespread student loan cancelation is unfair and too expensive, it’s clear that education debt is having a negative effect on generations of students. There’s no guarantee that the government will ever cancel that $1.75 trillion in debt, so the responsibility remains with the borrowers. In other words, it’s your problem to solve.

Two Ways to Press Pause on Your Student Loans

Since 2020, all federal students have been paused. While President Biden seems poised to extend that blanket deferment again by August 31st, it won’t last indefinitely. If you truly cannot afford to meet even income-based repayments for your student loans, then there are two options: deferment and forbearance.

tax time worries

Student Loan Deferment

If you apply for deferment, your education loans will both be frozen for a certain period. During that time, subsidized federal loans and Perkins loans will not accrue additional interest. This is preferable to forbearance, and if you qualify for deferment due to financial hardship, you should choose deferment.  

The period of deferment varies and is dependent on a qualifying event, such as losing your job or going back to school. Deferring your student loans does not impact your credit, but it is dependent on approval by your loan servicer.

Student Loan Forbearance

If you can’t qualify for deferment, forbearance might be your next best option. During forbearance, interest will continue to accrue on all of your loans. A period of forbearance is generally limited to twelve months. Like deferment, forbearance won’t impact your credit.

Broadly speaking, if you need to pause your loan payments for just a few months, forbearance is better than simply skipping those monthly payments and putting yourself at risk of default.

Avoid Default at All Costs

Defaulting on your student loans is not a good option. Despite this, about one in ten borrowers will end up defaulting. If you default, you run the risk of destroying your credit score. Worse, your tax refunds can be seized. The government can even garnish your wages! Some state boards can also revoke licenses for medical professionals and teachers if they default on their student loans.

Man looks at a bill in despair

Currently, no one will default on their student loans because all repayments are paused. However, if you’ve already fallen into delinquency or default, then this is a great time to apply for income-driven repayment, consolidation, or loan rehabilitation.

Are You Eligible for Student Loan Forgiveness?

Student loan debt is one of the few types of debt that is immune to bankruptcy filings. While it’s theoretically possible to get your loans discharged in court, you’ll have to prove that there’s literally no way you can ever pay them back. In addition, you need to show that you made a good-faith effort to pay off your loans in the past. That means if you’re already in default, like over 11% of borrowers, you likely won’t have a chance with the court.

Although bankruptcy is off the table, there are certain circumstances that can make your loans disappear. According to the U.S. Department of Education’s Federal Student Aid website, there are only a handful of ways for your loans to be discharged. Those include:

  • Total and permanent disability
  • Closure of the school where you received your loans
  • Death of the borrower

Government and non-profit employees can take advantage of the Public Service Loan Forgiveness Program. This program forgives the balance of your Direct Loans after you’ve made 120 qualifying monthly payments. In other words, if you work for the government or a non-profit organization for 10 years while paying off your loans, whatever’s left will go away.

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Some teachers can qualify for loan forgiveness, too. Full-time teachers who work for five years at a low-income school can apply for forgiveness of up to $17,500 in Direct Loans. However, be advised that the Public Service Loan Forgiveness and the Teacher Loan Forgiveness Programs do not stack, so the five years you spend teaching will not count as part of the 10 years of public service.

Finally, if you’ve kept up with income-driven repayments for a period of 20-25 years, depending on the type of plan, then you are eligible for forgiveness at the end of it. Note that you’ll have to pay income tax on the amount forgiven.

Your First Steps to Start Paying Off Student Loans

If you don’t qualify for forgiveness and want to tackle your student loan debt as quickly as possible, you have options. First, make sure that you know how much you owe. You can check the Federal Student Aid office’s database to see an itemized list of your federal student loans. Any private loans will not be listed there, and you’ll need to pull your credit report or contact the lenders individually.

Once you know how much you owe, it’s time to make a plan. Income-based repayment plans and income-contingent repayment plans are based on your yearly salary. These repayment plans are capped at 10% and 20% of your discretionary income, respectively. While these plans reduce the hardship of paying off student loans, they don’t help you pay them off any faster. Your balance will continue to accrue interest over the years.

young couple reviewing their finances

Paying more than the minimum you owe will help you reach the finish line faster. While increasing your bills isn’t a fun prospect for anyone, it can save you thousands of dollars in the long run. Use a student loan repayment calculator to see how much you can save by increasing your payments.

You may also be able to lower your interest rate by refinancing your loans, but most federal loans already have lower-than-average interest rates. Some loan servicers offer a small discount on interest (typically .25%) if you set up automatic bill pay. That’s not much, but every little bit helps when you’re trying to pay off your loans as quickly as possible.

Proven Strategies to Pay Off Student Loans Fast

The best way to whittle down your student loans quickly is to pay them early and often. That includes paying during the grace period of six to nine months after graduation, but if that window has passed, don’t despair. You can shift your payment date to the beginning of the month or, even better, set up bi-monthly payments to eke out a little extra savings on interest.

If at all possible, pay more than the minimum. That might mean budgeting for a heftier payment every month, or you could get creative. If you find yourself with a windfall, such as a tax refund or a bonus, apply at least part of it to your student loans. You can always pay more than the amount on your bill without any kind of penalty or special paperwork.

Young woman checking bills, taxes, bank account balance and calculating credit card expenses at home
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The jury is out on whether it’s best to use the avalanche or snowflake method for paying off debt. However, in the case of student loans, the interest rates are so low that it might not make that much difference if you don’t have private loans. If you do have private loans, then you should prioritize paying those first.

When paying above the minimum isn’t possible on your current salary, then it might be time to think about changing jobs to earn a better salary, working a second job, or picking up a side hustle. While you can’t go back in time and choose not to take out such extensive loans, you can make choices now to reduce the burden on your future.

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