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Student Loan Advice: 10 Tips For Smarter Student Loan Repayment
Updated On October 8, 2022
Editorial Note: This content is based solely on the author's opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.
If you want the best student loan advice, you often have to figure out which strategies to follow. There’s no shortage of recommendations for student loan repayment. However, it’s important that you know the best ways to pay off student loans and get out of debt quickly. From student loan refinancing to getting a lower student loan payment, here’s the latest student loan advice to help you save money.
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These 10 tips for smarter student loan repayment will teach you everything you need to know about student loans, including:
- Use a student loan payoff calculator
- Make student loan payments while in school
- Don’t overborrow student loans
- Enroll in automatic student loan payments
- Explore student loan forgiveness
- Sign up for income-driven repayment
- Learn the snowball method
- Consider the avalanche method
- Refinance student loans: lower interest rate
- Refinance student loans: lower payments
1. Use a student loan payoff calculator
A student loan payoff calculator is an excellent tool to help you with student loan repayment. Student loan calculators help you quickly calculate your monthly student loan payment, show you ways to save money, and how to pay off student loans quickly.
For example, this student loan payoff calculator shows you how much money you can save when you pay off your student loans faster.
Let’s assume you have $100,000 of student loans, an 8% student loan interest rate, and a $1,213 monthly student loan payment. If you pay an extra $100 per month (for a total of $1,313 per month), you could pay off your student loans 1.08 years earlier and save $5,554.
2. Make student loan payments while in school
When it comes to student loan repayment, you don’t have to wait until after graduation to start making student loan payments.
The good news is you can start paying student loans while you’re enrolled in school. This strategy is especially helpful if you have private student loans or unsubsidized federal student loans, which could start accruing student loan interest immediately. If interest accrues on your student loans, your student loan debt can become more expensive.
In contrast, subsidized student loans don’t accrue interest while you’re in school and for a six-month grade period after graduation.
How can you make student loan payments while in school? Consider working part-time or qualifying for a work-study program to start student loan repayment during school.
3. Don’t overborrow student loans
If you want to pay off student loans, it helps to start with a lower student loan balance. If you borrow less student loan debt, your path to financial freedom will be smoother.
College and graduate school are expensive. That said, be careful about how much student loan debt you borrow. For example, let’s assume you’re a medical school student who is evaluating which medical school to attend. Before deciding, you should understand the full cost of attendance, not only the tuition.
For example, you may find a lower-cost program through a state school compared to a private university. Alternatively, one school may offer you more grants, which don’t need to be repaid.
In lieu of student loans, consider working during school. Maximize grants and scholarships before borrowing student loans. Compare interest rates on private student loans and federal student loans. You’ll also want to consider benefits of federal student loans, such as student loan forbearance or income-driven repayment.
4. Enroll in automatic student loan payments
Enrolling in automatic student loan payments is another smart way to pay off student loans faster. Automatic student loan payments, or autopay, means your student loan servicer will automatically deduct your student loan payments each month directly from your bank account.
With autopay, you won’t have to worry about late student loan payments, which can make your student loans more expensive. Autopay is free to enroll, and most lenders will discount your interest rate by 0.25% when you sign up.
For example, let’s assume your student loan interest rate is 4%. When you enroll in autopay, your student loan interest will be lowered to 3.75%. Over time, this 0.25% can save you money due to the lower interest cost.
5. Explore student loan forgiveness
If you have federal student loans, then you could explore options for student loan forgiveness.
There are multiple opportunities to get student loan forgiveness, including:
- Public Service Loan Forgiveness
- Income-Driven Repayment
- Teacher Loan Forgiveness
- Total and Permanent Disability
- Borrower Defense To Repayment
Most student loan forgiveness programs are offered through the U.S. Department of Education, have certain requirements, and apply only to federal student loans. For example, the Public Service Loan Forgiveness program offers student loan forgiveness for student loan borrowers who work for a qualified public service or non-profit employer and make at least 120 monthly student loan payments.
Private student loans don’t qualify for federal student loan forgiveness. However, some lenders offer options for student loan forbearance or student loan deferment for private student loans if you have a financial hardship, for example. Contact your lender or student loan servicer for more details on forbearance and deferment.
6. Sign up for income-driven repayment
If you’re struggling to pay off student loans, then income-driven repayment plans could lower your monthly student loan payment. Income-driven repayment plans set your monthly payment based on your discretionary income and family size. For example, with an income-driven repayment plan, your monthly payment could be as low as $0.
There are several types of income-driven repayment plans, including:
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Contingent Repayment (ICR)
Income-driven repayment plans are only available for federal student loans. Private lenders may offer flexible options for student loan payments, but you should check with your lender first.
After 20 years (undergraduate student loans) or 25 years (graduate student loans) of student loan payments through an income-driven repayment plan, you could qualify for student loan forgiveness for your federal student loans.
7. Learn the snowball method
The “snowball method” is a student debt repayment strategy that can help you get out of debt fast.
Let’s assume you owe $400,000 of student loans, including both federal student loans private student loans. Each of your student loans have different student loan balances and interest rates. Which student loan do you pay off first?
With the snowball method, you pay off your lowest balance student loan first. The snowball method works like this:
- Always make your minimum monthly student loan payment.
- Pay off your lowest balance student loan.
- Repeat until you pay off your lowest balance student loan
- Focus on paying your student loan with the next lowest balance.
- Follow this process until your student loans are paid off.
8. Consider the avalanche method
As an alternative to the snowball method, the “avalanche method” is another smart tip to pay off student loans. Rather than focus on student loan balance (with the snowball method), the avalanche method focuses on interest rate.
If you want to pay off your student loans more quickly, rank order your student loans by interest rate from highest interest rate to lower interest rate.
The higher interest rate student loans are costing you more money than the lower interest rate student loans.
Here’s how to use avalanche method:
Step 1: Always pay the minimum payment on all your student loans.
Step 2: If you make an extra payment, pay off the higher interest rate student loans first.
Step 3: After the highest interest rate student loan is repaid, pay off the second highest interest rate student loan next.
Step 4: Repeat this process with any extra payment you make until you pay off all your student loans.
9. Refinance student loans: lower interest rate
Student loan refinancing helps you get a new student loan at a lower interest rate, which potentially could save you thousands of dollars on your student loans.
When you refinance student loans, you combine your existing federal student loans, private student loans, or both into a new student loan that is used to pay off your old student loans.
You can choose a fixed or variable interest rate as well as a student loan repayment term from five to 20 years.
This student loan refinancing calculator shows how much money you can save when you refinance student loans and get a lower interest rate.
For example, let’s assume you have $200,000 of student loans, a 7% interest rate, a 10-year repayment term and a $2,322 monthly payment. If you refinance $200,000 of student loans at a 3.5% interest rate with a 10-year repayment term, your new monthly payment will be $1,978. Through student loan refinancing, you could save $344 each month and $41,334 over the life of your loan.
10. Refinance student loans: lower payments
Student loan refinancing also can help you lower your monthly student loan payment, which can provide more flexibility as you pay off your student loans.
The standard repayment term for federal student loans is 10 years. However, student loan refinancing allows you to change your loan terms, such as your interest rate and repayment term. For example, you could choose a new student loan repayment term between five and 20 years.
A shorter loan term such as five years would increase your monthly student loan payments. However, you would save interest costs by paying off your student loans faster. In contrast, a longer repayment term such as 20 years would lower your monthly student loan payment. That said, you would pay more interest over time.
Depending on your specific situation, you could choose a lower monthly student loan payment to meet your current budget. However, the tradeoff is higher overall interest given the longer repayment horizon. That said, you can offset higher interest by refinancing to a lower interest rate, which could save you money.
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