7 Smart Ways to Pay Off Student Loans Fast

About 70% of today’s four-year college graduates have student loans to repay. The typical recent grad has roughly $35,000 in student loans, according to data from Edvisors.

While it often takes borrowers 10 to 15 years or more to pay off college debt, it doesn’t always have to take that long.

There are several different strategies and approaches student loan borrowers can take to get those loans paid off more quickly.

Here are seven smart ways to pay off student loans fast and with less financial stress.

Tip #1: Pick the shortest loan repayment program you can afford

If you have federal student loans, there are four different loan repayment plans you can select:

  • the standard loan repayment plan, where you pay a minimum of $50 a month and your payments last for as long as 10 years;
  • the extended repayment option, which also requires at least $50 monthly payments, but which lets you pay off your educational loans over 12 to 30 years;
  • the graduated repayment program, which lasts from 12 to 30 years and allows you to pay as little as $25 a month; and
  • the income-contingent repayment plan, which permits you to make payments as low as $5 a month and which lasts for 25 years.

Don’t make the mistake of just picking the option that lets you pay the smallest monthly payment. That may help your cash flow in the short term, but in the long run you’ll pay thousands more in finance charges.

The best strategy: Pay as much as you can possibly afford on your student loans. If you can’t swing the standard repayment plan (with a 10-year payoff), and you have to choose a longer repayment plan, then at least make extra payments on top of your normal monthly payment.

Even if you can only afford to throw an additional $25 or $50 a month on top of your regular payment, every little bit will help. Sending in “extra” payments is a short-term financial challenge, but if you go ahead and bite the bullet now, making sacrifices in the near-run, you’ll be much better off in the long haul.

Tip #2: Have your employer pay off your college debt

Many organizations will do so if you sign an employment incentive contract. This means that as a “bonus” or “perk” to you, your job pays your student loans. In turn, you agree to be a loyal employee and remain with the company for a given time period, say at least two to three years.

Think about it this way: getting an employer to pay off your student loans is just another form of a benefit.

Companies offer workers extra cash all the time – like hiring/signing bonuses, performance bonuses, year-end bonuses or holiday gift money, etc.

Therefore, money provided to knock out student loans is simply another form of cash compensation.

Why are companies willing to consider offering student loan assistance? It’s simple: They want to hire and retain top talent. You may qualify for this perk even if you’ve been in your job for some time.

So the next time you’re up for a raise or performance appraisal, raise this subject with your boss. You can also bring up the matter to a prospective employer when you’re job-hunting; just wait until after you receive a firm job offer, and have started the salary-negotiation phase.

Follow this advice, and you may not have to pay your student loans at all – your employer will!

Tip #3: Get Uncle Sam to pay off up to $60,000 of your college debt

The government’s Federal Student Loan Repayment Program can be a huge windfall to anyone with federal student loans (not private loans).

Administered by the Office of Personnel Management, this program allows any federal agency that you work for to pay off up to $10,000 annually of your federal student loans, up to a maximum of $60,000. For more info, call the OPM at 202-606-1800 or visit http://www.opm.gov.

Here is a listing of 85 government agencies that will pay off your student loan debt.

This link to the specific page on the OPM website will also give you all the information you need to know about the Student Loan Repayment Program: http://www.opm.gov/oca/pay/StudentLoan/.

Be sure to check out the Fact Sheet and the Questions and Answers section on the left side of the website page.

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Tip #4: Get a deferment, forbearance or loan cancellation during periods of economic hardship

Practically anyone with an economic hardship can qualify for a loan deferment or forbearance – and some people with severe, chronic financial problems may be eligible to get their loans canceled altogether.

Student loan company Sallie Mae offers deferments for nearly 20 different scenarios.

Loan payments can be postponed for people who are:

  • unemployed
  • new mothers re-entering the workforce
  • volunteers at non-profit agencies
  • military enlistees
  • those with excessive credit card debt or unusually high personal expenses

There are many other scenarios under which you may qualify, such as if you’ve had a string of bad luck. If, perhaps, you went through a divorce, got laid off, then had a car accident — all of which impacted your finances, you may qualify.

Additionally, having a protracted hardship, such as a lengthy medical illness, the Department of Education may say it’s not worth it to make you pay off your loans — and they can cancel out your loan indebtedness.

To claim an economic hardship and ask for greatly reduced student loan repayments, fill out a simple 2-page form called a Statement of Financial Status. Find it online at the Department of Education, using this link:  http://www.ed.gov/offices/OSFAP/DCS/forms/fs.pic.pdfTip #5: Volunteer

Tip #5: Get your college loans forgiven

If you volunteer or have a job that helps eradicate hunger, homelessness, poverty, crime or illnesses, or you teach in a socioeconomically deprived school, you may qualify to have your student loans forgiven.

The working professionals who could have their loans forgiven include:

  • police officers
  • lawyers
  • teachers
  • nurses
  • doctors
  • many others in the health care field

People who volunteer at AmeriCorpsVISTA or the Peace Corps, or who help impoverished people and those in under-served communities can also have their student loans written off.

More than two dozen loan cancellation and loan forgiveness programs are detailed in my book, Zero Debt for College Grads. Get the book now at Amazon.com.

Tip #6: Negotiate better loan rates and terms

If you’re willing to comparison shop – or to negotiate and ask for more favorable rates and loan terms than you’re first offered – you can find lenders that will agree to charge a lower rate than the federal maximum interest rate.

Every July 1st Congress adjusts the interest rate caps charged on federal student loans. However, contrary to popular belief, Congress doesn’t “set” the rates for federal student loans. Instead, the feds impose a “maximum” interest rate that lenders can charge, then lenders set their own rates based on what the market will bear.

As of this writing, the interest rates on new subsidized Stafford loans are 4.29%.

But you can also ask a lender for lower interest rates based on:

  1. having payments automatically deducted from your checking or savings account,
  2. making a set number of ‘on time’ payments (24 to 48 months of on time payments often qualifies you for a rate cut, and a few lenders will give you a break even sooner), or
  3. earning good grades, or qualifying for any other incentive programs a lender offers

Tip #7: If you refinance or consolidate your loans, do so wisely


You can consolidate federal loans student loans the federal government, and both federal and private loans with private firms.

In recent years, a number of private companies have emerged, allowing borrowers to refinance and/or consolidate their students loans. Some of these student loan companies include Sofi, CommonBond and Earnest. Since many borrowers save $10,000 to $14,000 or more by refinancing with these student loan firms, each offers good value.

Still, you should be careful which loans you roll into one bigger loan. For instance, let’s say you took out federal Perkins loans while you were in school. In most cases, you wouldn’t want to combine a Perkins loan with other types of loans. The reason: Perkins loans have better “loan forgiveness” benefits for people who go into teaching, and you can lose those benefits if you consolidate them.

The major advantage of consolidating student loans is that your monthly payment will be reduced, freeing up some of your cash flow each month. You can even put the extra cash saved each month toward a higher interest rate loan in order to pay it off faster.

The biggest drawback of consolidating with the federal government is that consolidated loans are stretched out over a longer repayment period – up to 30 years. So you’ll wind up paying two to three times as much as you would’ve paid had you not consolidated your loans.

But by picking and choosing the best strategies for your circumstances, you can more quickly wipe out college debt and instead start banking those student loan payments you’d been making.

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