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Paying student loans off is a standard life obstacle for most Americans at this point.
Whether you have $5,000 in student loan debt or $250,000, we can help you make that student loan debt more manageable.
Here are 7 genius tips for paying student loans off…
7 Genius Tips for Paying Student Loans Off
1. Consider a Student Loan Refinance
Refinancing your student loans just means making some change to the terms of your loan. You might be able to get a better interest rate and/or a lower monthly payment.
And how do you change the terms? Usually by finding a private lender. The private lender will pay your student loan debt in full, then issue you a new loan to cover that payment. So instead of continuing to make payments to your original lender, you’ll now make payments to this private lender who paid off your original loans.
You’re probably wondering why these private lenders are paying student loans off in full. It’s because they make good money doing it! They have the cash available to pay off the debt right away (avoiding all the interest on the loans), then they get to charge you interest every month on the new loan. It’s an investment for them. They pay a bunch of money upfront and get paid back, with interest, year after year.
If you can find a lender willing to offer you a lower interest rate than your current loans, not only will you save money every month, but you could save a small fortune in interest over the life of the loan.
But there are a few factors you should be aware of before you run off and refinance. Check out Should I Refinance My Student Loans for a closer look at refinancing.
2. Choose an Employer Who Will Help Repay Your Loans
That’s right, your employer might do more than pay your wages and help with insurance. They can also provide assistance when it comes to paying student loans off.
Some companies (like Aetna, Estee Lauder, Fidelity, LiveNation, PWC, and Staples) now offer student loan repayment as part of their benefits packages. They simply pay off a certain amount of your loan every month (or year, in some cases) while you’re employed there.
Just know that most companies have a maximum limit. Staples, for example, currently offers $100 per month for up to 36 months. So a max of $3,600. While Fidelity offers $2,000 per year with a $10,000 maximum.
Next time you’re interviewing for a job, check to see if student loan repayment is included in the benefits package. And take that into consideration when choosing your employer.
3. Serve Where You’re Needed for Loan Forgiveness
If you need help paying student loans off, and you’re in an in-demand field, consider moving to an area in need to get some of your loans forgiven.
Doctors, nurses, vets, and teachers are desperately needed in certain communities, particularly low-income communities. Not only would you be getting some much-needed help with your student loans, but you’d be making a difference in a community that needs you!
Qualified teachers working in eligible areas can earn up to $17,500 in student loan forgiveness over 5 years. And qualified registered nurses can get 60% of unpaid nursing education debt repaid over two years if accepted to the NURSE Corps Loan Repayment Program.
If you’re in a service industry, run a quick Google search for loan forgiveness programs in your field.
4. Serve the Public for Loan Forgiveness or Repayment
If serving where you’re needed doesn’t work for your career path, you might still be able to get help paying your loans off by serving the public.
Serving in the military is a well-known way to get federal student loans forgiven. But it’s not the only option. Other government organizations and not-for-profits also offer student loan forgiveness or repayment.
Take AmeriCorps for example. AmeriCorps is like paid volunteer work! They have programs all over the US, where you can volunteer part-time or full-time, earning a living allowance and student loan repayments (called education awards).
The amounts vary by location, but in my hometown in rural IL, your living allowance can be as much as $6,100 per term (max four terms). PLUS, you can earn an education award of up to $5,500 per term (max four terms).
And because you’re working with your local program, you can help your local community and build your professional and social networks in the process.
5. Apply for an Income-Driven Repayment Plan
The US government understands that many of us literally can’t afford our student loan payment on our current incomes. And they’re willing to help with paying student loans off.
Here’s how income-driven repayment plans work for approved applicants:
- Instead of paying a flat monthly amount on your student loan debt, you’ll pay a percentage of your income.
- So your payments increase only as your income increases.
- After a predetermined number of payments (often 25-30 years’ of payments), any remaining balance is forgiven.
There are several different income-driven repayment plans available. If you’re struggling to cover your student loan payments on a low income, learn more about the different programs and apply at the US Department of Education.
6. Debt Snowball Your Debt Away
If you were able to work with any of the first 5 methods of paying student loans off…awesome!
This method, the Debt Snowball, will work for you no matter what! You can use it in conjunction with any of the other methods, or rely solely on this to make your debts disappear faster and save yourself a ton of money in interest.
Ok…what is the debt snowball? It’s basically using a little extra monthly money to make a HUGE dent in your debt. We like to call it the Champagne Waterfall around here. And we have a whole post to show you how the average American can use this Champagne Waterfall to get out of debt 13 years sooner and save $38,600 in the process! For the purposes of this post, we’ll just give you the short version of how the Debt Snowball/Champagne Waterfall can whisk your debt away.
Basically, you want to focus on paying your loan down faster by just paying a little bit extra every month (even $25-$50/mo will make a difference, but if you can spare $200/mo, it will change your financial future!). Not only will this help you get out of debt faster, but it will save you a fortune in interest.
There is a trick to this: you don’t want to spread this extra money across all your debts. You want to focus the extra money the debt with the highest interest rate. Because again, the goal is to avoid interest, so by paying off your highest-interest debt soonest, you’ll save the most money.
7. Set Up Auto-Pay and Chill
Warning: Unpopular opinion coming up…
If you follow Savings and Sangria, you know that we aren’t crazy about getting debt-free. We heart smart debt! Smart debt is how you got your education in the first place. It’s how you can buy a home. And it’s how you can buy income-producing rental properties.
As far as we’re concerned, debt isn’t the problem. Interest is the real problem. And if you have low-interest rates on your student loan debt, you might not need to worry so much about paying student loans off.
Why I’m Not Making Extra Payments on Our Student Loans
In a post called I’m $800,000 in Debt…But It’s Fine…, I offer a peek at my personal finances, including the $35,000 of hubby’s student loan debt (we’re a joint finances kind of couple). That post explains in detail why we’re better off investing our extra money than paying down our student loans.
It all comes down to interest rates. If you can make more money investing than you can save by paying down your debt, your extra money should go toward investments.
Our highest student loan interest rate is 6.75%. But my index funds are currently earning around 11%. By investing instead of paying down debt, I get to pocket that 5.25% difference!
So for now, I’m just paying the minimum balance due on those student loans (automatic payments are in place to fool-proof my financial plan, of course), and focusing extra payments toward index funds.
But this won’t always be the case. Markets go up and they come down. We’re about due for a stock market downturn. So when the stock market dips and the returns fall below 6.75%, I’ll start funneling my extra income toward paying down the student loans instead of investing.
Oh, and if the market downturns freak you out, check out What to Do When You’re Afraid to Invest. Spoiler: that post is gonna tell you to invest anyway, but it will explain why you don’t need to be scared.
And that’s it! Those were our 7 genius tips for paying student loans off.
Good luck to you and saying goodbye to your student loans!
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