Although student loans are considered a good investment in your financial future, they still need to be repaid. As there are no individuals who like to owe money and give a portion of their earnings toward covering debt, most people strive to repay their student loans faster. Although it's not an easy task, the result is usually worth the effort. Let's learn more about ways to repay your student loan faster and get long-awaited debt relief.

How Long Does It Usually Take to Pay Off a Student Loan?

A common student loan repayment term is usually 10 years. However, it also depends on the type of loan you owe. Federal loans usually offer a loan deferment, so students start repaying their debts only six months after graduation. Private loans require you to make your monthly payments from the moment you get the funds. Thus, private loans are usually repaid faster than federal ones.

Additionally, federal student aid provides direct consolidation loans with terms of up to 30 years. This means that your federal student loan can take you even longer to repay if you face some challenges on your way and will be forced to apply for a consolidation program. According to recent research, the average student loan takes nearly 21 years to pay off. However, it doesn't necessarily mean that it will take you that long. There are some practical ways to shorten the repayment period and get rid of your debt faster.

Do I Need to Repay My Student Loan Faster?

Many people consider repaying their student loans faster a major financial goal. The faster you pay it off, the more time you will be able to enjoy a debt-free life and use the freed up money for other personal needs or important life projects. However, there are situations when you may need to let things take their natural course.

First, many people prioritize their retirement savings, sacrificing extra student loan payments. If your employer offers a 401 (k) plan, it may be a wise solution to contribute what's needed to match a program instead of paying more for your loan.

Also, individuals who are going to purchase a home usually put more money toward their down payments or future home improvement or renovation projects. This way, your student loan payments may also fade into the background.

Additionally, you can sometimes save more by opting for a loan forgiveness program. If your loan type is eligible for one, consider applying for it instead of paying off your debt faster. Loan forgiveness programs are designed in a way to help you pay less. Even if it seems like it will take you longer instead, enrolling in a loan forgiveness program may result in more significant savings.

If all these scenarios don't work for you, paying off a student loan faster can be a reasonable solution.

10 Tips on How to Get out of Your Student Loan Debt Faster

To get out of your student loan faster, you need to create a well-thought-out strategy and stick to it. It requires you to be focused, goal-oriented, and motivated. Below are 10 steps you can take to start moving toward your goal and reach student debt relief faster.

1. Create a Budget

Creating a deliberate budget is a game-changer when it comes to repaying debt. Start with writing down all your earnings and expenses to find out where your money is going. A zero-based budgeting model is a great strategy that will help you start. It works as follows: your total monthly spending should add up to your total monthly income.

Your spending is not only about food, utilities, shelter, and transportation but also includes savings, extras, and various month-specific expenses. This way, nothing will be left to spend mindlessly. Even a $5 coffee should be planned in advance. Additionally, this budgeting strategy will help you determine which expense categories you can sacrifice. Then, you can use these "extra" funds toward your student loan payments.

2. Consider Paying Interest While You're in School

Students who owe federal student loans can use this strategy to reduce the financial burden they will face after graduation. Most federal loans provide deferment periods, meaning that you don't need to make payments while you're at school and up to 6 months after graduation. Even if your loan type provides interest exemption during your in-school period, it can still be difficult to manage your debt after graduation as your financial situation can be unstable.

But if your type of federal student aid comes with accumulating and capitalizing interest during the whole deferment period, you may face exorbitant monthly payments in the end. Thus, your student debt can take a significant toll on your finances. By paying interest while you're in school, you can reduce the amount you will have to pay after graduation. This is because less interest will add to your principal loan balance. This way, it will be easier for you to pay more than the minimum payment required.

3. Try to Make Higher Loans Payments Each Month

Even if you pay a little extra each month, it will help you reduce the total interest you pay. Consequently, this will positively affect the total student loan cost. If you're going to pay more than the required minimum, ask your service provider to allocate your extra payments to a higher-interest loan first.

However, you need to keep in mind that many lenders can use your extra amount toward your next-month payment. This way, overpayments will first go to any late fees and then accrued interest before hitting your principal. Thus, you won't reduce your principal loan amount. To avoid this scenario, you need to contact your service provider and instruct it to apply your extra payment to your principal balance without changing your next-month payment.

4. Consolidate Your Multiple Student Loans or Consider Refinancing

By making a student debt consolidation or refinancing, you can combine all your current student loans into one, often at a lower rate. This strategy has several benefits. First, it will be easier for you to manage your loan payments. You only need to pay one lender each month instead of covering several debts from different loan providers. Second, a lower interest rate comes with a lower total loan cost. A penny saved is a penny earned. Thus, the freed up amount can be used toward paying extra each month.

But keep in mind that a decrease in the monthly payment can be the result of increased loan terms. In this case, debt consolidation or refinancing won't help you get out of your student debt faster. Try to consider only those programs and options that offer a lower interest rate but don't increase the repayment period.

5. Pay Bi-Weekly

Paying bi-weekly will help you pay more in the long run. Additionally, it may be a convenient strategy as most people are paid bi-weekly too. This way, you need to simply allocate a portion of your paycheck to your student loan payment each two weeks instead of paying once a month. Even if the amount of overpayment won't be very huge, you can definitely feel the difference over the course of the year.

6. Set an Auto-Payment

An automatic debit from your bank account is a great way to ensure that you make payments on time. You can choose a debit frequency and set a fixed amount that needs to be withdrawn each month or set a percentage of each amount credited to your account.

Additionally, you may be able to get an interest rate deduction for enrolling. This is because federal student loan servicers offer a quarter-point interest rate discount to students who let them automatically collect payments from their bank accounts.

7. Use Your Tax Refund Toward Student Loan Payments

Your tax refund can be considered windfalls, which are unexpected cash you get. Thus, it can be used towards your student loan payments in order to become debt-free faster. Besides tax refund, you can make it a rule to use any unaccounted and unexpected sum you get to pay a little more to your student loan provider. You can either use the whole amount or set a percentage or a fixed sum if you need to cover immediate necessities or build an emergency fund.

8. Prioritize Your Expenses

Paying off big debts often comes with some financial sacrifices. It doesn't mean that you need to deny yourself everything or completely change your regular lifestyle. However, some expense categories may be temporarily cut. Take a look at your budget once again. Are there some expenses that you can easily do without? It may be anything, from unused subscriptions to Starbucks coffee, late-night dollar menu.

Another great option is to find a roommate. If you have a guest room that is not used much, make it a profit. This way, you will pay half as much for rent and utilities, which can leave you more cash on hand to use towards your loan payments.

9. Use The Debt Snowball Method

This method can be applied to any debt you have, including student loans. Many people note that it has helped them get rid of their debts faster and regain control of their finances. The debt snowball method works as follows: you list all your student loans from smallest to largest and start with paying off the smallest ones. All extra money you get should be thrown into covering the smallest loan. During this period, you will make only the minimum payments on other loans.

When the first smallest debt is paid off, move to the next smallest one and do the same. And so on until each of your student debts disappears. It may seem like it will take you forever but don't worry. In fact, most people using this method manage to pay off their debts within 18 to 24 months! This typically happens because you can feel the progress. You will be satisfied every time after the next loan is repaid. This way, you can stay motivated longer and pay off your debts faster and more efficiently.

10. Seek Help from Debt Relief Companies

If your debts have gotten out of control or you find it difficult to struggle alone, you can always seek professional advice. There are multiple debt relief companies that can help you create a practical and goal-centered repayment strategy that will work for your current financial situation.

Companies that specialize in debt relief ask their clients to deposit a specified sum into a special savings account each month. This process is known as debt settlement. The main goal is to accumulate an amount of money that can be utilized to pay off obligations in the future.

When debt relief companies speak with creditors on your behalf, they often reach an agreement on less money than you are owed to settle your obligations. You may also be asked to stop paying your loans during this time and keep putting money into your savings account instead. Although this option may have some negative consequences and usually comes with an additional fee you have to pay to a company, it can also help you repay your debt faster and save money in the long run.

What to Do If You Struggle with a Student Loan Debt: Practical Advice

If you find it difficult to handle your loan payments, below are some options that will help you get back on track.

Apply for a Loan Forgiveness Program

If you owe a federal student loan, you can apply for a loan forgiveness program. These programs work like loan cancellation, meaning that you no longer need to pay for all or some of your student debts. Each type of federal loan is eligible for its kind of program. Additionally, there are some criteria an applicant must meet to qualify. Below are several types of loan forgiveness programs available:

  • Public Service Loans Forgiveness. This program is available to individuals who are employed by a government or not-for-profit organization. To qualify, you need to make at least 120 qualified monthly payments on your direct loan while working full-day for an eligible company. This way, the remaining loan amount can be forgiven.
  • Teacher Loans Forgiveness. Those who teach full-time in a low-income elementary or secondary school or educational service agency for at least five complete and consecutive academic years can apply for this program. The amount that can be forgiven is up to $17,500 of your Direct or FFEL program loans.
  • Closed School Discharge. Your federal student loan can be discharged if your school is closed while you're enrolled or soon after you withdraw.
  • Perkins Loan Cancellation and Discharge. This program may be available to individuals who work in the public service sector. The amount that can be forgiven is calculated based on your career choice and how long you stay in that job. You can get up to 100% forgiveness under this program.
  • Total and Permanent Disability Discharge. This program allows you to qualify for your loan discharge if you become temporarily or permanently disabled.

For more information, visit the Federal Student Aid website.

Explore Deferment or Forbearance

If you struggle to manage your federal loan monthly payments, this is another option to consider. Deferment usually requires a qualifying event like unemployment, economic hardship, or cancer treatment. Depending on the situation, you can get up to a 3-year relief period. Interest usually accrues during the whole relief period, except for subsidized federal loans and Perkins loans.

Forbearance can be offered to those who experience economic hardships. It can last up to 12 months, with an extension available after the period expires. Interest accrues on all loans within the relief period.

Apply for an Income-Driven Repayment Plan

An income-driven repayment plan is an option that allows you to renegotiate your student loan payment in proportion to your current income. Thus, people with lower incomes can pay less, which will reduce their financial burden.

Income-driven plans are only available to students with federal loans. There are four main types of income-driven repayment plans:

  • Revised Pay As You Earn Plan (REPAYE). This program caps your student loan monthly payments to 10% of your discretionary income. Terms are up to 20 or 25 years for undergraduate study and graduate or professional study accordingly. After this period, your loan will be forgiven.
  • Pay As You Earn Plan (PAYE). Under this plan, your loan payments are limited to 10% of your discretionary income. The repayment period is up to 20 years, and the remaining balance will be forgiven after this period.
  • Income-Based Repayment Plan (IBR). Under this plan, your payments are capped at 15% of your discretionary income. Terms are up to 20 for new borrowers and up to 25 years for not new borrowers (if they applied on or after July 1, 2014).
  • Income-Contingent Repayment Plan (ICR). An ICR plan can be a good choice for those who want slightly lower payments to potentially pay less interest. Payment amounts will be 20% of your discretionary income or fixed payments based on a 12-year loan term, whichever is less. The repayment term is up to 25 years.

If you have any questions, visit the FSA website.

Increase Your Income

Increasing your income can be an option for getting extra cash to put toward your student loan payments. You can find a side gig or become a freelancer and do various jobs online. Check out the list of the best ways to make extra money and choose the one or several that suit you most.

File for Bankruptcy

This option can help those who owe private student loans. Bankruptcy is a legal process of getting a fresh start for those who can't manage their debts anymore.

There are two main types of bankruptcy: Chapter 7 and Chapter 11. Chapter 7 bankruptcy allows you to dispose of your unsecured debts. However, some of your property may be seized, and its cost will be used toward repaying your unsecured debts. Chapter 11 bankruptcy involves creating an affordable payment plan that will make it easier for individuals to pay off their debts. Thus, you will continue to work on debt repayment under the court's supervision.

However, bankruptcy stays on your credit report for up to 7 or 10 years and always damages your credit. This is the reason why it should be used only as a last resort. Additionally, Chapter 7 bankruptcy involves liquidation of your assets, excluding your primary residence, car, clothing, and staff you need for work. Therefore, it's not just long-awaited debt relief but also an option with multiple consequences.

Bottom Line

Repaying a student loan faster is often the main financial goal of many people. If you want to get rid of your student debt before it expires, explore the strategies offered above and stick to them. Also, keep in mind that there are always ways to reduce the financial burden for those who struggle to make their monthly loan payments.