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How to Pay Off Student Loans
Updated On January 26, 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 borrowed student loans for school, you may be wondering the best way how to pay off student loans. The good news is there are many options for student loan repayment that can help you pay off student loans faster and save money. From income-driven repayment and student loan refinancing to student loan consolidation and student loan forgiveness, let’s help you master paying off your student loans with confidence.
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Here’s how to pay off student loans:
- Determine your student loan balance
- Evaluate student loan repayment goals
- Use the student loan grace period
- Enroll in autopay
- Make extra student loan payments
- Make lump-sum student loan payments
- Consider student loan consolidation
- Refinance student loans
- Explore student loan forgiveness
Determine your student loan balance
The first step on how to pay off student loans is to determine your student loan balance. Specifically, you want to gather the following information:
- Your total federal student loan balance
- Your total private student loan balance
- Which student loans are federal student loans
- Which student loans are private student loans
- Who your student loan servicer is for each student loan
- Your minimum monthly student loan payment
- The interest rate on each student loan
You can check your student loan balance and learn more information about your student loans through the National Student Loan Data System (NSLDS).
Evaluate student loan repayment goals
When you decide to pay off student loans, you will want to evaluate your student loan repayment goals. For example, when evaluating student loan repayment options, some student loan borrowers will have different preferences based on their current financial situation and financial goals.
Specifically, you should answer these questions about your student loans:
- How much money do I owe?
- Which types of student loans do I have?
- How much can I afford to pay?
- What are my financial goals?
For example, if you are struggling to pay off student loans and need more time, you might prefer a lower monthly student loan payment. There are many ways how to lower your student loan payment. For example, an income-driven repayment plan such as IBR, PAYE, REPAYE or ICR could be best for your federal student loans. With an income-driven repayment plan, your student loan payment is based on your income and family size. After 20 years or 25 years, you can get student loan forgiveness for your federal student loans.
Alternatively, you may want to pay off student loans faster. This could help you save interest and get out of debt more quickly. In this case, student loan refinancing could be your best option.
Use the student loan grace period
When you graduate school or leave school, most federal student loans come with a six-month grace period. Think of the grace period for student loans as a time period to get organized about student loan repayment without having to pay student loans. However, not all federal student loans have a grace period. For example, here are several types of federal student loans and if your student loan has a grace period.
- Direct Subsidized Loans: have a six-month grace period
- Direct Unsubsidized Loans: have a six-month grace period
- PLUS Loans: no grace period
- Grad PLUS Loans: six-month deferment
- Parent PLUS Loans: you can request a six-month deferment
- Perkins Loans: check with your school regarding any grace period
Importantly, during your grace period, student loan interest accrues on your student loan balance. While student loan payments aren’t required during the grace period, you can choose to pay interest on your federal student loans during the grace period. If you don’t pay interest on your federal student loans, the interest will capitalize. This means the student loan interest will be added to your student loan balance at the end of your grace period.
For private student loans, check with your lender to determine if there is any grace period for student loan repayment once you graduate or leave school.
Enroll in autopay
Enroll in autopay with you student loan servicer (which is the company to whom you send your student loan payments). Autopay, or automatic payments, is the process of connecting your bank account to your student loan account with your student loan servicer. Each month, your student loan servicer will automatically debit your bank account for your student loan payment.
For example, most lenders will give you a 0.25% interest rate discount for enrolling in autopay.
Enrolling in autopay also will help you avoid late payments, which can hurt your credit score. Therefore, making automatic student loan payments every months means you won’t have to worry about remembering when to make payments or hurting your credit score if you make a late payment.
Make extra student loan payments
One strategy to pay off student loans is to make extra student loan payments. If you make any extra student loan payments, which are optional, always make sure to make your minimum student loan payment each month. Otherwise, extra interest and possibly late fees could accrue.
You’re not required to make extra student loan payments beyond one student loan payment each month. For many student loan borrowers, making one student loan payment every month can be challenging. However, if you have any extra money each month, you could make an extra student loan payment to pay off debt faster.
This student loan payoff calculator shows you how much money you can save when you pay off your student loans faster.
For example, let’s assume that you have $50,000 of student loans, an 8% interest rate and a $607 monthly student loan payment. If you pay an extra $100 per month (for a total of $707 per month), you could pay off your student loans 1.99 years earlier and save $4,923.
If you make extra student loan payments, inform your student loan servicer in writing to apply any extra student loan payments to pay off the principal balance on your student loans. Without this instruction, your student loan servicer may hold your extra payment until your next student loan payment due date.
Make lump-sum student loan payments
Another strategy on how to pay off student loans is to make lump-sum student loan payments. Rather than increase your student loan payment each month, you could make a one-time student loan payment to pay off student loans.
If you get a bonus, tax refund, inheritance, gift or any other sum, you could consider using it to pay off your student loans.
This lump sum extra payment calculator shows you how much money and time you can save when you make a lump sum payment or extra payment toward your student loans.
For example, let’s assume that you have $50,000 of student loans, an 8% interest rate and a $607 monthly student loan payment. Now, let’s assume you make a one-time, lump-sum student loan payment of $2,000. If you make a one-time, extra payment of $2,000, you will save $1,994 on your student loans. Plus, you will pay off your student loans six months earlier.
Consider student loan consolidation
Student loan consolidation refers to consolidating your federal student loans and is one strategy how to pay off student loans.
With student loan consolidation, you combine your current federal student loans into a new federal student loan called a Direct Consolidation Loan. The advantage of federal student loan consolidation is the ability to organize your current federal student loans into a single student loan. That means you will have one student loan payment, one interest rate and one student loan servicer. Therefore, student loan consolidation can simplify student loan repayment by helping you to organize your student loans.
The downside of student loan consolidation is that you won’t get a lower interest rate. With student loan consolidation, your new interest rate is equal to a weighted average of the interest rates on your current federal student loans, rounded up to the nearest 1/8%.
Read: Learn the difference between student loan refinancing and student loan consolidation.
Refinance student loans
To pay off student loans, you can refinance student loans to get a lower interest rate, pay off debt faster and save money.
Student loan refinancing is best for student loan borrowers with a high interest rate on their student loan debt, a high monthly student loan payment, and good to excellent credit. With student loan refinancing, you can refinance federal student loans, private student loans or both. When you refinance student loans, you exchange your existing student loans for a new, private student loan with a lower interest rate. The proceeds from your new student loan are used to pay off your current student loan debt.
When you refinance student loans, you can choose a fixed interest rate or variable interest rate. You can also pay off your student loans in five to 20 years.
Compare the latest rates for student loan refinancing.
This student loan refinancing calculator shows you how much you can save when you refinance student loans.
For example, let’s assume that you have $100,000 of student loans at a 7% interest rate and a 10-year repayment term. Let’s assume you refinance student loans at a 3% interest rate and a 10-year repayment term. You would save $195 each month and $23,457 overall.
Here are helpful resources for student loan refinancing:
- Best student loan refinance lenders
- Why refinance student loans
- 7 reasons why you should refinance student loans now
- Is student loan refinancing worth it?
- How to refinance student loans
Explore student loan forgiveness
Student loan forgiveness is another option to pay off student loans that you should consider.
(Here’s how to get student loan forgiveness and cancel student loan debt).
There are several ways to get student loan forgiveness through federal programs. Student loan forgiveness is available for federal student loans, but often is not available for private student loans. Most student loan forgiveness programs have requirements such as working as a public servant or working in a disadvantaged community for a certain period of time. For example, two popular programs for student loan forgiveness are the Public Service Loan Forgiveness program and Teacher Loan Forgiveness.
(Learn more in our student loan forgiveness guide).
You can also get student loan forgiveness through an income-driven repayment plan:
- Undergraduate student loans: 20 years of monthly student loan payments
- Graduate student loans: 25 years of monthly student loan payments
Here are some examples of how to get student loan forgiveness:
- Student loan forgiveness for doctors
- Student loan forgiveness for dentists
- Student loan forgiveness for pharmacists
- Student loan forgiveness for nurses
- Student loan forgiveness for teachers
How to pay off student loans: latest rates for student loan refinancing
If you want to know how to pay off student loans, compare the latest rates for student loan refinancing and find the best lender for you.
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