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Updated May 25, 2016

23 Best Ways to Pay Off Student Loans Fast

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Paying off student loans takes hard work, but you can do it. Learn how to pay off your debt faster with these 23 smart strategies.

Did you graduate college only to be saddled with tens of thousands in student loans?

You’re entering your new adult life full of freedom and opportunities. But you’re entering it weighed down with debt before you’ve even received your first paycheck.

Nearly 70% of students graduate with education debt, and the average loan amount totals close to $30,000. This is a huge burden for any young adult to take on.

And plus, the longer you’re carrying around this debt, the longer you put off making any progress on other lifetime goals, like saving for retirement or buying a home.

But the good news is that paying back student loans is not a forever thing.

Paying Off Student Loans Fast

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Paying them off as quickly as possible can help you free up some extra cash in your budget and save up to thousands of dollars in interest. All it takes is discipline and a better repayment strategy.

Here are 23 things you can do to say goodbye to your debt sooner:

DITCH FEDERAL LOANS FASTER

Federal loans make up the bulk of student loan debt in the U.S., including loans taken out by students and PLUS loans owed by parents.

If you've got federal loan debt, here are some options for paying it off more quickly:

1. Don't wait to pay
Federal student loan borrowers are typically granted a grace period before their first payment is due, during which time no interest accrues on your loans.

It may be tempting to not pay anything at this time (especially if you’re just getting your footing in an entry level job), but throwing even an extra $20 a month at your debt reduces your principal and shaves some time off your repayment period.

2. Be wary of repayment plans
Income-based repayment plans were introduced to offer relief to cash-strapped students who couldn't afford to pay under the standard 10-year plan. These plans lower your monthly payment, but lengthen your repayment term. And our goal here is to pay off the loan fast.

Consider this only if you are having trouble making the minimum payments. Otherwise, it's much better to save and find extra money to pay off the loan as fast as possible.

3. Consider a career in public service
Nearly a quarter of young adults expect their student loans to be forgiven at some point. Sounds like a pipe dream, right? But it can actually happen if you work in the public sector.

Under the public service loan forgiveness program, any remaining balance you owe would be canceled after you've made 10 years’ worth of payments. This can be a major plus if you borrowed heavily to complete your education.

4. Make your monthly payments automatic
Opting to have your monthly student loan payments drafted right out of your bank account is an easy way to reduce what you're paying in interest and get out of debt faster. The Department of Education offers a 0.25% interest rate reduction for borrowers who enroll in automatic payments.

5. Pay before the due date
Your federal loan servicer will assign you a specific due date each month, but getting your payment in earlier can work to your advantage. The interest on your federal student loans is calculated on a daily basis. Making your payments ahead of the due date reduces the principal faster and cuts the amount of interest you're being charged, so you're not stuck paying as long.

6. Opt for biweekly payments
Splitting your monthly loan payment in two is another easy strategy for eliminating the debt more quickly. For example, if you owe $30,000, your monthly payment would be around $300 on the standard 10-year plan. If you broke that up and paid $150 every two weeks, you'd shave a whole year off your payoff time and around $700 off the interest.

7. Consolidate to a lower rate
If you're juggling multiple federal loans, consolidating them can streamline your monthly payments and lower your interest rate. Rates are fixed for the life of the loan, and you still have the option of going with an income-based repayment plan if you need to.

8. Get tuition assistance from your employer
Many private companies offer tuition assistance or reimbursement to employees who are either attending grad school or have earned their degree. The federal government also sponsors loan reimbursement programs for teachers and nurses who work in under-served communities.

MANAGING PRIVATE STUDENT LOAN DEBT

When you've maxed out your federal student loan eligibility, turning to a private lender may be the only way to finance your degree. Unfortunately, private loans typically lack the low interest rates and range of repayment options that federal borrowers enjoy.

Paying them off more rapidly isn't a piece of cake but it can be done with these tips:

9. Use a loan aggregator to track your balances
When you have multiple private loans, it can be much more difficult to map out your repayment strategy. Linking all of your loans to an app like Tuition.io makes it easier to see what you owe, what you're paying in interest, and how much time and money you stand to save by making extra payments each month.

10. Start with the most expensive loans first
Private student loans tend to carry much higher interest rates than federal loans, with some capping out at 18%.

Therefore, it’s a good idea to target the private loans over federal loans. Getting the smallest loan balance out of the way first can give you a sense of accomplishment, but paying down the one with the highest interest first will ultimately save you the most money in the long run.

Try this strategy: pay as much as you can on the loan with the highest interest, and just the minimums on all the others. Once that first loan is paid off, roll over the payment amount to the next loan with the next highest interest.

11. Refinance with a different lender
If you're carrying higher rates on your private student loans, refinancing them with a different lender can lower your interest rate. There are both fixed and variable rate loan options available (with rates as low as 2.13%), and most lenders will allow you to refinance both undergraduate and graduate school loans together.

12. Take advantage of a 0% credit card offer
When refinancing your private loans isn't an option, you can shift some of the balance to a zero-interest credit card. Credit card companies routinely use 0% promotional offers to attract new customers. Taking advantage of this can give you a breather from higher interest rates.

But before you take this action, make sure you have a plan in place to pay off the balance before the promotional period ends. Otherwise, you will be stuck with an interest even higher than that of student loans.

13. Bump up your payments incrementally
Paying more than the minimum each month is the easiest way to get out of debt faster. But we know it's not always possible to add on a big chunk of change to your payments. Try just increasing your payment by $10 or $20 a month to start, which isn't likely to bust your budget. As you earn more at work or trim your budget in other areas, slowly start to put more in the extra payments.

14. Make sure payments are applied correctly
Paying extra on your private loans won't speed up your debt payoff if your lender doesn't allocate the money correctly.

Pay very careful attention to this. Instead of applying it to the principal, your lender may credit it towards your next month's payment, which won't do much to reduce your interest or make a dent in the balance. Specifically ask to avoid "Paid Ahead" status to ensure that your progress isn't slowed down.

15. Consider a move
If you borrowed heavily from private lenders, relocating to a cheaper city can make managing your payments easier. Some places even offer additional incentives to entice new grads. Niagara Falls and Saskatchewan, for example, have programs that provide loan reimbursement for borrowers who are willing to pick up their roots.

OTHER WAYS TO ACCELERATE YOUR PAYOFF

Digging your way out of student loan debt becomes a lot easier if you're willing to consider some creative solutions beyond just the basic repayment options.

16. Use your credit card rewards
Reward points and cash back are good for more than just shopping or travel. You can also use them to pay off your student loan debt. For example, the Citi ThankYou Preferred Card allows you to convert their reward points into a student loan rebate voucher to make an extra payment.

17. Put windfalls to work
If you received a tax refund, slapping it down on your student loan is the smarter option than spending it on a shopping spree.

For example: if you owe $30,000 in loans, putting an extra $3,000 (the average yearly tax refund) towards the balance all at once would get you to the debt-free finish line a full two years faster. Imagine how much faster you will pay off your loans if you do this every year.

18. Donate your time
Not only is volunteering with a nonprofit a good way to give back and improve your skill set, it can also help you to get out from underneath your loans. It’s the ultimate win-win.

Organizations like SponsorChange and Zero Bound function on a crowdfunding platform. Work on projects you’re interested in, and the more time you put in, the more money donors will apply to your student debt on your behalf.

19. Find areas where you can cut down on costs
Trimming your budget is one of the most effective ways of clearing up extra cash to use towards student loan payments. This is not as hard as most people think.

Is your high rent eating up a good portion of your paychecks? Consider shacking up with a roommate or two. Food costs can also be cut drastically by cooking your meals and bringing your lunch to work. Cancel any “luxury” unnecessary items such as cable TV, gym membership, or daily Starbucks runs. Really, the options are endless.

Tip: If you don't mind moving back in with the parents after graduation for just a short while, you can make serious headway in paying off your student loans. Your parents would also have to be on board and keep you accountable. The trick is to actually use what you would have spent on rent and bills on your student loans. This could be anywhere from $700 - $1500 per month depending on your city. And have a solid plan to move out after an agreed upon timeframe.

20. Take a survey
Taking surveys online is a quick, painless way to pick up a few extra dollars, and there's one site that's designed just for student loan borrowers. SmarterBucks pays out rewards that can be converted to an extra student loan payment just for taking surveys. Friends and family can also sign up and gift any rewards they earn to you so you can knock even more money off your balance.

21. Find ways to make more money
Increasing your income can help you pay off your student loans faster, but that doesn't mean you have to switch careers or get a second job. You just have to be willing to put in some time. Starting a side hustle, whether it's freelancing, pet sitting, or selling your old stuff on eBay, is a pretty easy way to bring in a few extra bucks each month that you can put towards your loans.

If you’re not keen on the idea of working on the side, one of the most overlooked ways to increase your income is to just simply ask for raise at work. Do your research and explain why you think you deserve one. You’d be surprised at what you can get just by speaking up.

22. Let an app do the work
If you’re having trouble finding extra money in your budget to pay your loans, your smartphone may hold the solution. Digit is a new app that links to your bank account and scans your spending patterns to look for money you can save. The app transfers the money automatically to a separate savings account, and you can easily move it back to your checking when you're ready to apply it to your loans.

23. Ask friends and family for help
If your parents or grandparents still give you cash for birthdays or holidays, asking them to redirect the money towards your student loans can get you out of debt faster. Tuition.io, for instance, offers a student loan gift service that allows donors to apply money to your loan balance with just the click of a button.

FINAL WORD

Paying off student debt takes a lot of discipline and hard work. Hopefully, our guide has given you some useful strategies you can use to tackle your debt and pay it off faster. The bottom line is to throw whatever extra money you can manage to earn or save at your loans. You’ll be surprised at just how much time will be shaved off with just a little extra each month.

Yes, paying off debt will take sacrifice, but remember that it’s not something you have to do for forever. So stay motivated and keep a clear understanding of the end goal: financial freedom.

Rebecca Lake is a journalist at CreditDonkey, a credit card comparison and financial education website. Write to Rebecca Lake at rebecca@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped young adults make savvy financial and lifestyle decisions. (read more)

Editorial Note: This content is not provided by Citi. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by Citi.

Disclaimer: The information for the Citi ThankYou® Preferred Card has been collected independently by CreditDonkey. The card details on this page have not been reviewed or provided by the card issuer.

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