Most student loan borrowers owe $40,000 or less in federal student loans, according to the U.S Department of Education. But a whopping 900,000 are juggling balances of $200,000 or more. Keep in mind that those numbers don’t take into account private student loan debt.
If you’re facing substantial student loan debt, it’s critical to pay down your loan balances quickly. High-balance loans accrue more interest and keep growing until they’re paid off. And they can keep you from achieving other important financial goals, like buying a house or saving for retirement.
"Compound interest is working against you every month — and sometimes every day," says Laurel Taylor, CEO of student debt solution FutureFuel.io.
If you’re considering refinancing as a way to pay off student loan debt faster, Credible makes it easy to see student loan refinance rates from multiple lenders.
- How to pay off $200,000 in student loans
- How much is the monthly payment on a $200,000 student loan?
- How long will it take to pay off $200k in student loans?
Paying off a six-figure student loan debt is never easy, but there are ways to do it — and quickly. Having a plan, making extra payments and exploring alternative repayment options can all help you whittle down that balance and inch closer to student loan freedom.
Want to speed up your student loan repayment? Take these steps after graduation:
Pursue student loan forgiveness
Some student loan borrowers can have their federal student loans partially or even entirely forgiven.
You may qualify for loan forgiveness if you fall into one of the following categories:
- You’re a government or public-service employee and have made at least 120 on-time monthly payments on your loan.
- You’ve been a full-time teacher for at least five years in a low-income elementary or secondary school, or educational service agency. The amount of forgiveness is limited to $17,500.
- Your college or university closed while you were enrolled or soon after you withdrew.
- You have federal Perkins Loans and meet employment or volunteer service requirements.
- You suffered a total and permanent disability.
Student loan forgiveness is only available for federal loans, and you’ll need to meet specific requirements to qualify. If you qualify, though, you could reduce your debts significantly — or, in many cases, avoid further repayment altogether. To apply for forgiveness, contact your loan servicer.
Consider an income-driven repayment plan
Income-driven repayment plans, or IDRs, are an option if you have federal student loans. With these programs, your monthly payments are set at an affordable amount based on your income level, rather than your total student loan balance and the number of years on the loan. In many cases, your payment can be reduced to 10% or less of your monthly income.
IDRs make it easier to make payments if you’re struggling, but there are some caveats. First, an IDR will likely extend the time it takes to pay off your loan. Because of this, it may also increase the amount of interest you’ll pay over the life of the loan (this depends on exactly what repayment plan you qualify for, though).
Income-driven repayment plans come in several different forms, and eligibility requirements vary for each. To see if you qualify for one, submit a request online at StudentAid.gov or contact your student loan servicer.
Consolidate federal student loans
Consolidating your federal student loans can also make them easier and more affordable to pay off. This essentially rolls all your federal student loan balances into a single Direct Consolidation Loan, with one interest rate and one monthly payment.
The big benefit of consolidation is that it allows you to spread your student loan payments out over a longer period of time — up to 30 years, which lowers your monthly payment. In some cases, it can also give you access to additional income-driven repayment and loan forgiveness programs.
On the downside, it often extends your payoff timeline and could result in higher interest costs in some cases. You may also lose credit toward Public Service Loan Forgiveness. You can apply for a federal Direct Consolidation Loan at StudentAid.gov.
Refinance your student loans
Refinancing your student loans essentially replaces your existing loans — both federal and private — with a new private student loan. This can give you a lower interest rate and monthly payment, change your loan’s length or both, often making it easier to afford your loan payments. Or if you opt to keep making your old, higher payment amount, you could even pay off your new loan faster.
But refinancing into a private student loan may not always be the best choice. If you refinance federal student loans with a private student loan, you lose the many benefits of federal loans, including income-based repayment plans and possible loan forgiveness.
Refinancing also relies heavily on your credit score. If your score isn’t great, you can bring in a cosigner with a higher credit score to share the loan’s responsibility with you. This can often qualify you for better rates and terms than you’d get on your own.
"Student debt impacts the lives of entire households," Taylor says. "You’re not alone, and your spouse, mom, or favorite auntie may be willing to throw you a bone when he or she discovers that just $25 a month can shave two years and a near $5k off your student debt."
Make extra payments
One of the best ways to pay down your student loans quickly is to make extra payments, whether you’ve refinanced or not. This might mean one extra payment per year, switching to biweekly payments or even just putting a few hundred dollars toward the loan when you can.
You can apply extra payments to lower your principal balance, reducing the total interest that accrues, too. Depending on how many payments you make, it could shave months or even years off your repayment schedule.
Increase your income
Earning more money can allow you to make larger monthly payments and pay down your student loan debt faster. You might start by asking your boss for a salary increase or additional hours. If that’s not a possibility, consider taking on a side gig, like driving for a rideshare company.
Any extra you can put toward your loan balances will speed up repayment and reduce your long-term interest costs.
Tighten your budget
Cutting back your spending and reducing living expenses can help free up cash that you can then put toward your debts.
Some strategies for doing so include:
- Swapping meals out for cooking at home
- Canceling unnecessary subscriptions, like streaming services or subscription boxes
- Cutting cable for a few months
- Shopping around for new, lower-cost insurance providers
- Take the bus or subway to work instead of driving
Keep track of where you’re able to reduce expenditures, and put those savings directly toward your student loan debt. It’ll reduce your balance and interest costs and help you pay off that debt faster.
Apply ‘found money’
"Found money" — extra money you weren’t expecting to receive — allows you to make additional student loan payments without cutting back or impacting your daily life. Sources of found money include bonuses at work, tax refunds, cash gifts, inheritances or even the recent child tax credits offered by the government.
If you want to pay down your student loans quickly, commit to putting these extra earnings straight toward your debt. In many cases, this can reduce your payoff schedule by many months, especially if you do it regularly.
Follow the debt avalanche method
If you have multiple student loans, the debt avalanche method can be a smart way to pay them off quickly, while also minimizing your interest costs.
With this strategy, you focus on paying off the highest-balance loan first, putting all extra funds there while making only minimum payments on the rest. Once that larger loan is paid off, you move to the next-highest balance and so on. This minimizes your interest costs and helps you pay down your debt faster.
Because interest rates fluctuate over time and your credit score affects lender decisions, the monthly payments on a $200,000 student loan can vary widely depending on when you took out your loan and your credit score at the time.
For example, if you took out a 10-year federal loan for $10,000 five years ago, you may have received a 5.28% interest rate. This would mean a $107 payment per month.
If you were to get that same 10-year loan with a private student loan lender today, you might receive a rate of around 3.36%. This would result in a monthly payment of about $98.
This discrepancy in rates is a big reason why refinancing can help you pay down your balances faster. In the above scenario, not only could refinancing shave almost $10 off your monthly payment, but it could save you about $1,100 in interest over time. But remember, replacing a federal student loan with a private student loan means giving up certain advantages like income-driven repayment. Be sure to carefully weigh the benefits of refinancing a federal loan against the sacrifices.
Refinancing can help lower student loan payments. Using Credible, you can quickly compare refinancing rates from multiple student loan companies.
While federal student loans generally start off with a standard 10-year repayment term, and private student loans typically have repayment terms of five to 15 years, many factors can influence the timeline for paying off your student loans.
How long it takes you to repay your debt depends on your original repayment term (the length of the loan), any income-driven repayment plans you take advantage of and whether or not you refinance. Your earnings, ability to put extra payments toward the loan and other factors can impact your repayment timeline as well.
Keep in mind that certain actions can also extend how long it takes to pay off your loans. Income-driven repayment plans, forbearance and refinancing can all add to the amount of time it takes to pay off your student loan debt.