How to Pay Back Student Loans Faster

How to Pay Back Student Loans Faster

When you need to make payments varies based on the type of loans you have. Most federal loans have a six-month grace period after you graduate, leave school, or drop below half-time enrollment. You’re not required to make payments during the grace period, but in most cases, interest will accrue. You can choose to pay the interest that accrues during your grace period to avoid it being added to your principal balance.

Grad PLUS and Parent PLUS Loans do not have a grace period, but borrowers can choose to defer payments until six months after graduation.

For specific guidelines about repayment for Federal Perkins Loans, you should check with the school you received the loan from.

With the Coronavirus Aid, Relief, and Economic Security (CARES) Act, all federal student loan payments were suspended, so your grace period may be longer than you initially expected. Currently, the federal student loan freeze is scheduled to end on .

Whether your private loans have a grace period is dependent on your lender and the options you selected when you took out the loan. Many private loans do not have a grace period, so you may have to make payments while in school or immediately after graduation.

Your student loans can be a source of a substantial amount of stress and keep you from putting money towards other financial goals. If you want to pay off student loans faster, use these five tips to accelerate your repayment.

1. Stick to a Standard Repayment Plan

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While it may be tempting to switch repayment plans to get a lower monthly payment, try to stick to a Standard Repayment Plan if you can. Income-driven repayment or extended repayment plans can add to your overall loan cost.

Stick to a budget and look for expenses that you can eliminate to make your student loan payments more manageable so you can stay on schedule with a 10-year repayment term.

2. Use Unexpected Windfalls to Make Lump Sum Payments

Over time, you may receive unexpected windfalls. Whether it’s a tax refund, a bonus from work or a gift from a family member, you can use those windfalls to pay down your loans faster.

For example, let’s say you have $30,000 in student loans with a 5% interest rate, a 10-year repayment term, and monthly payments of $318. If you received a $1,000 tax refund and made a one-time lump sum payment toward the principal, you’d pay off your student loans five months earlier. And, you’d save $635 in interest charges.

3. Pay More Than the Minimum

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When it comes to student loans, There is no magic trick to paying them off faster, says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors (TISLA). The more you pay and the quicker you pay, the less interest you pay over the long run and the faster you get rid of them.

  • Slashing expenses: To make larger payments, cut your expenses by getting a roommate, downsizing, or meal planning to save on food costs.
  • Increase your income: Think about side hustles to boost your income so you can make additional payments. You could walk dogs, tutor students online, deliver packages, or do household chores for others.
  • Use your spare change: There are also some creative strategies you can use to pay off your loans faster, such as using tools like ChangEd. There are apps that round up your purchases and use your spare change to make extra payments toward your loans, says Mayotte. These apps sync to your debit card or bank account and round up each transaction to the nearest whole dollar. The difference in change is held in a ount, the app will make a payment toward your loans.