How to Pay Off Student Loans in 4 Steps
Most graduates leave college in high hopes that their new job will pay off their student loans. But this is not always the case.
With student loan debt in the U.S. totaling more than $1.75 trillion, the average student loan debt for a four-year degree is $36,510 for a public university and $54,921 for a private university.
Around 42% of students at public universities finish their four-year degree without any student debt, while 36% graduate with less than $30,000 in debt and 5% graduate with debt of more than $60,000.
But the good news is that it is possible to pay off student debt and move into a more financially independent future. But it’s going to take some planning and budgeting to get there.
If you want to know how to pay off student loan debt, we have some actionable steps that will get you there.
How to Pay Off Student Loans Fast – 4 Steps
Keep living like a student
Most people live within their means and as a student, you don’t earn much money. You are careful with what you spend and don’t buy many luxuries.
One way to knock your student loan debt down quickly is to continue to live like you earn the same money you did as a student. Put all your extra income directly into paying off your student loan.
This is not a long term solution, but it can reduce your debt load quickly.
Increase your payment amount
If you graduated with a loan of $32,600 and you wanted to pay it off in 10 years, then it will cost you $330 per month, and you will pay over $7,800 in interest alone. That is if you don’t fault any payments within ten years.
If you increase your monthly repayments to $600, you will pay off your loan within five years, saving you over $4,000 in interest payments. Pay as much as you can off every paycheck.
Consolidate your loans
If you have multiple loans from private lenders, chances are you could be paying excessively high interest. One way to reduce the amount of interest you pay on your student loan is to refinance your loans through a consolidation lender.
Loan consolidation doesn’t always help you pay the loans off any faster, but it does create a clear and concise path for your debt repayment.
If you have a federal loan, your interest rates are probably as reasonable as they are going to get, and consolidation wouldn’t be a good move.
Refinancing through consolidation is an excellent option if you have loans from private lenders. Our personal loan calculator helps you compare multiple lenders at once, connecting you to the right company in seconds. Let us do the research for you.
Increase your income
Get a side hustle, one of the best ways to pay off student loans is to increase your income. Working one night extra per week could take years off your student loan payments.
Get creative with what services you have to offer. It could be anything from tutoring through to working a second job. You won’t have to do it forever, but it will help when you need money now.
How Long Does It Take to Pay Off Student Loans?
If you are a student who graduated with a federal loan your debt is automatically added to the Standard Repayment Plan and this takes 10 years.
However, you can change the plan if you need a more flexible repayment.
Federal student loans offer three different repayment plans:
- Standard Repayment Plan: You repay a fixed monthly amount for 10 years*.
- Graduated Repayment Plan: Monthly payments start out low and increase gradually over time, typically every two years. Payments are completed in 10 years*.
- Extended Repayment Plan: Graduated or fixed payments for 25 years.
*Up to 30 years if you have a Direct Consolidation Loan.
Private student loans will have different repayment terms, depending on each lender. Typically, private student loans are repaid within five to 20 years.
If you have any tips or suggestions on ways you have paid off your student loan fast comment below.
How long will it take to pay off my student loan?
This depends on the type of loan you have and how you manage your payments. Private student loans are typically paid off in 20 years, while federal student loans are repaid between 10 and 30 years.
By increasing your payments and following the tips above, you can reduce the time you take to pay off your student loan.
When do you start paying back student loans?
If you have a federal student loan, you typically need to start paying back your loan when you graduate, leave school, or drop below half-time enrollment.
In some cases, you can get a grace period of up to nine months for certain types of loans, including a Federal Family Educatin Loan or a Perkins Loan.