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How to Pay Off Student Loans

How to Pay Off Student Loans
Nancy Bilyeau
Nancy BilyeauUpdated April 13, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Approximately 45 million Americans are making payments on their student loans, whether they graduated from college last year or a decade ago. There’s no question that for some, student loan payments are a real struggle.The three-year-long pause on federal student loan payments is expected to end around mid-2023, following several extensions.So no matter whether you’re trying to dig out of a deep student-loan pit or you’re just beginning to set aside money, it’s time to devise a smart strategy for how to pay off student loans. Here are some ideas.

Paying Back Student Loans

As onerous as they can be, student loans have to be dealt with. The alternative is fairly dire. If you are delinquent on your federal student loan payment for 90 days or more, your loan servicer will report the delinquency to the three major national credit bureaus. And should your student loans go into default, your tax refunds may be withheld, your wages may be garnished, and you may even end up in court.One out of every 10 Americans has defaulted on a student loan, and 5% of all student loan debt is in default, according to’s crucial to get out of default — and for those who are not yet in default, but falling behind in their loans or in danger of doing so, to catch up as quickly as you can. You may have the option of negotiating student loan payoff if you’re in that position.Paying off student loans early may reduce the amount of interest that accrues over the life of the loan and free up your money for spending on expenses, saving, and investing.

5 Ways to Pay off Student Loans Faster

Paying off student loans with speed requires a multi-pronged approach, depending on where you are in your education and career. What works one year might not work the next. These five approaches outline different plans of attack.

Begin Payment As Soon As Possible 

It’s possible to make loan payments while you’re still in school, though it’s not required. In fact, a six month grace period goes with most federal student loans. You don’t have to make use of it, however.If you can, while in school or during the grace period, try to pay at least enough to cover the amount of interest you’re accruing each month, advises the Department of Education’s Federal Student Aid. That way, less interest will capitalize and get added to your principal balance when you enter repayment.Some students work a part-time high-paying job while in college to get a leap on their loans.

Make More Than the Minimum Payment

Paying extra each month can reduce the interest you pay and reduce your total cost of your loan over time, says Federal Student Aid. If you can continue making monthly payments even if you have satisfied future payments, you will pay off your loan faster. It’s important to notify your loan servicers to apply overpayments to your current balance and to ask if the additional payment amount can be allocated to your higher interest loans first. One way to make it easier: Set up automatic payments based on the extra payment. This way you won’t be tempted to change your mind.

Use Your Tax Refund & Extra Money

Consider dedicating your tax refund to paying off some of your student loan debt. Part of the reason you may have received a refund in the first place is because you get a tax deduction for paying student loan interest, says Federal Student Aid.A regular side gig dedicated to your student loan will make it vanish faster.

Seek Out Loan Forgiveness and Repayment Options

Sometimes it’s impossible to not only pay extra on your loan but also to cover the minimum. Job loss, a change in life circumstances, there are crises that deal a heavy blow. The federal government has income-driven repayment plans to help reduce student loan payments. Anything is better than falling into delinquency.After submitting the supporting documentation, you may qualify for lower monthly payments. There are other student-loan forgiveness and cancellation programs that, if you meet the requirements, could wipe out the balance of your debt and put you on the road to a post-student-debt financial life. 
  • If you are employed by a U.S. federal, state, local, or tribal government or not-for-profit organization, you might be eligible for the Public Service Loan Forgiveness Program.
  • Under the Teacher Loan Forgiveness Program, if you teach full-time for five complete and consecutive academic years in a low-income school or educational service agency, and meet other qualifications, you may be eligible for forgiveness of up to $17,500 on your loans.
  • If your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan.

Refinance Your Student Loan

Refinancing offers shortcuts to some. With interest rates at low levels, a student loan refinanced with a private servicer may produce payments that are smaller and a repayment time frame that is shorter. If you choose a shorter term, it may actually increase your monthly payment but your debt might be paid off faster and you might save money on interest.The pros and cons to refinancing must be studied carefully. Once a federal loan is refinanced, you no longer qualify for federal loan forgiveness programs, both ones that exist now and ones that may be created in the future.

Refinance Your Student Loans With Lantern by SoFi

When exploring a refinancing option for your student loan, credit rating becomes important as well as income and debt-to-income ratio. With an excellent credit score, you may have a better chance at a low interest loan. But there are deals of all kinds to be found. You can compare student loan refinancing rates to see what you qualify for.

The Takeaway

While the resumption of monthly payments on federal student loans may not come as good news for many people, it provides an opportunity to take a look at your payment strategy. Of course the most important thing is not to become delinquent in payments or go into default.To reap the benefits of paying off a student loan faster, pursue one or more of these five strategies: Begin payments as soon as possible, make more than the minimum payment, use your tax refund and extra money, seek out loan forgiveness and repayment options, and refinance your student loan. Just be aware that refinancing limits a loan holder’s ability to participate in federal forgiveness programs.If you’re exploring student loan refinancing, Lantern can help. With our online tool, you can easily compare rates and terms from different lenders to find one that works for you.
Photo credit: iStock/bymuratdeniz

About the Author

Nancy Bilyeau

Nancy Bilyeau

Nancy Bilyeau writes about student loans, mortgages, car insurance, medical debt and many other finance topics for Lantern. A veteran of the magazine business, she has edited stories on personal finance for Good Housekeeping and DuJour magazines and has written articles for The Wall Street Journal, Readers' Digest, Parade, Town & Country and Lifetime/A&E, among others. She is a graduate of the University of Michigan.
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