How to Pay Off Student Loans: The 8 Best Steps to Take

Stanley Tate smiling.

Stanley tate

Student Loan Lawyer

$400M+ student loans managed

listen to this post

You should pay off your student loans if at all possible. To pay off your student loans, the easiest first step is to sign in to your student loan servicer’s website and enroll in autopay.

Many handy tips can make paying off your student debt easier. Below, I’ll share eight ways you can make paying off student loans a lot easier, such as student loan refinancing and which jobs offer financial aid loan repayment assistance.

How can I pay off my student loans faster?

  1. Pay more than the minimum payment
  2. Consider income-driven repayment
  3. Refinance or consolidate
  4. Find a job that offers loan forgiveness
  5. Enroll in autopay
  6. Live on a detailed budget
  7. Land a side gig
  8. Pay it all off if you can

Firstly, don’t wait for Congress to forgive federal student loan debt. It might sound like a good idea not to pay student loans because some politicians have promised to wipe out federal student aid. However, until that happens, don’t let your credit take a hit due to missed payments.

Second, be careful where you get student loan advice. Reddit and other online sources can help, but it isn't a bad idea to get an educated answer from an attorney who specializes in student loans.

Disclaimer: I am a student loan lawyer, but this article contains generalized information and should not be taken as legal advice. If you want legal advice that pertains to your specific situation, you should schedule a free consultation with me. I recommend some products with affiliate links in this post, but I’ve seen them work over years of experience as a student loan lawyer. I started this business to help a friend, and I’ll treat you with the same respect.

1. Pay more than the minimum payment

If at all possible, always pay more than the minimum monthly payment on your student loans. Consider paying extra payments, such as twice a month instead of only once.

Overpaying will reduce the time you take to pay off your loans and lower the loan's overall cost by avoiding extra student loan interest charges.

Current college students, start making payments now and all through your 6-month grace period. The more you pay now, the less you’ll pay later.

The only exception to this rule is if you’re on an income-driven repayment plan, which forgives all the unpaid student debt at the end of 20-25 years — no matter how much you overpaid. Income-driven repayment options are only available to federal student loan borrowers.

How much money will I pay in interest on my student loans? Typically, you’ll pay 3%-7% annual interest on your student loans. For a $28,000 loan you pay off over 10 years with a fixed interest rate of 5%, you’ll pay over $7,500 in interest.

2. Consider income-driven repayment

Monthly payments too much? Enroll in an income-driven repayment (IDR) plan that lowers your monthly bill in accordance with your income.

If you make too much yearly income, you may not qualify for an IDR. A good rule of thumb is that you are eligible if your annual income is less than the total loan amount.

There are 4 income-driven repayment plans available for most federal student loans:

  • Income-Based Repayment Plans (IBR Plan)
  • Pay As You Earn Repayment Plans (PAYE Plan)
  • Revised Pay As You Earn Repayment Plans (REPAYE Plan)
  • Income-Contingent Repayment Plans (ICR Plan) are the only IDRs available to Parent Plus loan borrowers.

The PAYE and IBR plans are preferable, but not everyone qualifies. Whereas the standard repayment plan lasts for 10-years, IDR loan programs last for 20 or 25 years.

Once you complete 20-25 years of on-time monthly payments, the rest of your federal student loan debt is forgiven — no matter how much is left. As of 2021, your forgiven federal student debt is not taxable.

How can I pay off student loans with a small salary? You can pay off student loans with a small wage by enrolling in an income-driven repayment plan. Monthly payments are tied to your personal finances, so you’ll never be required to pay more than you can handle.

3. Refinance or consolidate

Combining multiple student loans into a single new loan can reduce your monthly payment. Finding a lower interest rate can reduce the amount of money you pay over time.

For private student loans, you should look for a refinance loan that offers you a lower interest rate and a single monthly payment. Loan terms typically include 5, 7, 10, or 15 years. Check out my picks for refinance loans below.

You can technically refinance federal student loans, but I do not recommend it because you lose access to IDRs and forgiveness programs.

For federal student loans, consider consolidating multiple loans into a Direct Consolidation Loan. A Direct Consolidation Loan does not lower your interest rate. But it does offer only one monthly payment — especially if you’re on an income-driven student loan repayment plan.

4. Find a job that offers loan forgiveness

The federal government offers student loan forgiveness in several circumstances, usually depending on your employment or income.

The Public Service Loan Forgiveness (PSLF) Program is for workers in a government organization at federal, state, and local levels, as well as non-profits performing a qualifying service.

Federal agencies can offer to pay up to $10,000/year per employee for federal loans, but not to exceed $60,000 overall.

Volunteer organizations like the Peace Corps, AmeriCorps, and VISTA offer student loan awards to pay off a chunk of your student debt. You can usually apply after you’ve completed your term of service.

Other jobs that may offer loan assistance or loan forgiveness include:

5. Enroll in autopay

Virtually every student loan lender (servicing private and federal student loans) offers an autopay discount.

If you schedule automatic payments from your bank account every month, you should expect an 0.25% discount on your student loan’s interest rate.

The average student loan borrower ($28,400 in debt) can expect to save $3 every month, or $250-$350 over 10 years. That doesn’t sound like much, but your savings go up if your debt is higher.

Save every penny you can get.

6. Live on a detailed budget

Make a detailed budget that considers your income, necessary expenses, savings, and non-essential expenses.

When you factor in monthly payments on student loans, you will see how much cash flow you are free to spend on eating out, entertainment, shopping, etc.

Budgeting your money helps you avoid missing payments, hurting your credit score, and prolonging the life of the loan.

Alternatively, a budget can show you how much extra you can afford to overpay on your student loans. The more you pay every month, the quicker those monthly payments will go away.

7. Land a side gig

There are virtually infinite side gigs in today’s economy. If you earn some extra income on the weekends, evenings, or whenever, you can spend that money on your student loans.

You can either cover your monthly payment and live on the rest of your income as normal or put that side gig income towards overpaying your student loans.

Popular side gigs include:

  • Drive for Über, DoorDash, Postmates, or Lyft
  • Sell trinkets on Amazon or Etsy
  • Deliver groceries
  • Mow lawns
  • Tutor students, even virtually
  • Manage social media for a church or local non-profit
  • Sign up for TaskRabbit
  • Walk dogs
  • Freelance on Fiverr or Upwork

8. Pay it all off if you can

If you run into extra money, consider paying off your student loans with it — at least a hefty portion of it.

For instance, consider using lump sums of cash you receive from the following to pay off your student loans:

  • Inheritance
  • Winnings from gambling, lottery, contests, etc.
  • Worker’s compensation
  • Money you forgot about, such as a small investment account that has grown over time

If you are only able or willing to pay off a portion of your student loans, make sure to pay off the highest interest loans first.

Is it worth it to pay off student loans? Yes, it is worth paying off student loans because you’re saving money in avoided interest, and you’re freeing yourself from the serious burden of monthly student loan payments.

Options for defaulted loans

  • Repayment: If your loan falls into default (270 days of non-payment), you can repay the loan in full. For most defaulted borrowers, it’s not feasible, but that’s one of your options to fix the problem.
  • Rehab: Student loan rehabilitation helps you pull your student loans out of default. Student loan rehab involves making 9 full-on-time payments in 10 consecutive months. This program removes the default status from your credit report and helps your credit score (slightly). But it does not get rid of the late payments that led to the default.
  • Consolidation: You can consolidate your defaulted federal student loans to pull them out of default. (Sorry, private loan holders.) You must agree to repay the new consolidated loan under an IDR plan, or you can make 3 full-on-time student loan payments in a row on a defaulted loan before you consolidate it.
  • Settlement: You may be able to settle your student loan debt with a lump sum payment. For private lenders, you may be able to pay your defaulted student loans for 40%-75% of the total student loan balance. For federal loans, expect to settle for 90%-95% of the total balance. The government can garnish your wages and tax refund, so they’re less likely to settle anyway.

Can you go to jail to pay off student loans? No, you cannot go to jail for failing to pay federal student loans or private student loans. However, you can go to jail for failing to comply with a court order, such as a judge’s court summons.

I have a lot of experience settling student loans with collections agencies. I’m a student loan attorney with a lot of experience getting rid of student loan debt. Call me for free, and we’ll talk about what I can do for you.

Options for refinancing

  • CommonBond: Generous forbearance periods; Fixed-rate APR 2.59-6.74%; Variable rate APR 2.49-6.84% (APR means annual percentage rate.)
  • SoFi: Job search assistance and career planning, but no cosigner option; Fixed APR 2.74-6.94%; Variable APR 2.25-6.59%
  • LendKey: Generous forbearance periods; Fixed APR 2.95-7.63%; Variable APR 1.90-5.25%
  • Earnest: Option to skip one loan payment every 12 months without due date late fees; Fixed APR 2.50-5.79%; Variable APR 1.88-5.64%
  • Brazos: Parent Plus loan eligibility; Fixed APR 2.15-3.97%; Variable APR 1.87-4.79%
  • EDvestinU: No degree required; Fixed APR 3.91-6.28%; Variable APR 1.81-4.18%

Options for bankruptcy

Student loans (almost) never just go away. Filing for bankruptcy does not automatically wipe out your student debt. However, there are ways to convince a judge to cancel your student debt during bankruptcy proceedings.

Here’s how that process works:

  1. File for Chapter 7 or Chapter 13 bankruptcy. These are the only two types of bankruptcy with which I’ve experienced student loan cancellation.
  2. File an adversary proceeding. You’ll probably need a student loan lawyer or bankruptcy attorney to help you with this.
  3. Prove undue hardship. At the adversary proceeding, you need to convince the judge that your student debt causes “undue hardship.” To increase your chances of success, get an attorney to help you with this undue hardship argument as well.
  4. Hope for a good outcome. If the judge agrees, they can wipe out your student debt via bankruptcy.

Filing student loan bankruptcy is my area of expertise. I’m a student loan attorney with a lot of experience getting rid of student loan debt. Call me for free, and we’ll talk about what I can do for you.

Ready to deal with student loans fast?

If you don’t know how to deal with monthly payments or initiate a student loan settlement, you might benefit from speaking with an attorney. Schedule a free 10-minute call with me to figure out if I can help you using my years of legal experience.

Don’t need to talk? Just want helpful advice? Sign up for my email newsletter and get ready to become a student loan expert. I cover FAQs and loan offers you don’t want to miss.

Stop Stressing.
Get expert help
Stanley Tate outside in snow.
Hey, I’m Tate.

I'm a student loan lawyer that helps people like you with their federal and private student loans wherever they live.

Read a bit about me & how I got started with student loans.

get expert advice