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College Students and Recent Grads

Paying Off Student Loans Faster: A How-to Guide

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Whether you’re facing a mountain of student loans or you’re just a few thousand dollars away from finally doing away with the debt, several methods and tactics could help you pay off student loans faster. However, every solution does not fit every situation. Depending on which type of loans you have, what your other debt and financial obligations are and how much disposable income you have, paying off your student loans aggressively may not be the best option.

Consider the pros and cons before you dive in and send every extra penny to your loan servicer.

Pros of paying off student loans quickly

You can save money on interest. Your student loans could be accruing interest every single day, and the quicker you pay off your loans, the more money you could save on interest. Unlike with some other types of loans, student loans don’t have any prepayment penalties, meaning you don’t need to worry about extra fees for paying off your loans ahead of schedule.

It could be easier to qualify for other financial products. Having a student loan payment due each month can impact your debt-to-income ratio (DTI) — your monthly financial obligations divided by your monthly income. Paying off the loan and lowering your DTI could help you get approved for more financial products, such as other loans or credit cards, and may help you qualify for better rates or terms.

You’ll have one fewer debt to worry about. It can be hard to quantify the psychological impact of paying off debt, but there certainly could be benefits to having fewer monthly bills. Even if you still have other debts to repay, striking your student loans from the list could be a relief.

Cons of paying off student loans quickly

It may make more financial sense to pay off other loans first. If you have several types of loans, you may want to focus on other debts before paying off your student loans.

For example, you may have credit card debt that has a much higher interest rate than your student loans. Paying off the credit card could save you more money, and you could then put those savings toward your student loans (or the next highest-rate debt).

It also may make more sense to pay down a secured loan, such as an auto loan, first. Falling behind on your auto loan could lead to your vehicle getting repossessed, which could then snowball into other negative impacts, such as having trouble getting to work. While falling behind on student loans may lead to fees or even wage garnishments, your physical assets aren’t at risk.

There may even be benefits to starting with other unsecured loans, such as a personal loan. If both your personal loan and student loan have the same interest rate, your student loan may actually cost you less overall each year if you qualify for a student loan interest deduction.

You might come out ahead by investing instead. Your student loans may have a low single-digit interest rate. While it’s not guaranteed, you might earn more from investing your money in, say, a 401(k) or IRA than you could save paying off your loans early. However, you’ll need to weigh the risks. There’s no guarantee that your investments pay out, while you know for certain the return you can get on extra student loan payments. The key is to find a balance — pay off your student loans but don’t let that stop you from investing for your future, especially when it comes to funding your retirement account.

You may want to establish an emergency fund first. An emergency fund, generally three to six months’ worth of normal expenses, can help you overcome a financial emergency without having to take on more debt or falling behind on loan payments.

If you deplete your fund, or put off building one to focus on student loan payments, you may have to turn to more expensive forms of debt (such as credit cards) if you’re faced with an emergency.

You may qualify for loan forgiveness. Federal student loans may be eligible for forgiveness and cancellation programs. If you’re on a path towards loan forgiveness, paying off your loans early could lead to paying more than you need to and getting less debt being forgiven.

9 ways to pay off student loans quickly

Paying off student loans ahead of schedule can require planning, hard work and dedication. There’s no single path to success. But whether you can make double your normal payment or are having trouble affording payments at all, there are options and tactics that could speed up the process.

#1 Make additional payments on your loans

Making extra payments when you can or increasing your monthly payment will help you pay off your loans sooner. However, simply sending more money to your loan servicer(s) may not be the best approach.

First, be sure that those extra payments go toward the loan with the highest interest rate. Ask if your loan servicer will allow you to designate which loan the extra funds should go to. Depending on the servicer, your extra payments may be evenly divided amongst all your loans by default.

Also, the servicer may credit your account for future payments instead of putting your payments towards your a loan’s principal. As a result, you might not owe anything next month, but you also won’t be saving as much on interest. To make matters even more confusing, the servicer may continue to withdraw automatic debits from your account even if you’ve already prepaid next month.

Contact your servicer and find out how you can make sure additional payments go toward the principal balance of the loan with the highest interest rate. You may be able to send instructions for how it should apply all your extra payments. Or, if you don’t want to give it a blanket rule, there may be ways to specify how you want each payment applied.

Another option if you can’t afford to make more than your required payment each month is to send loan payments every two weeks rather than once a month. Paying half of the amount early can decrease how much interest accrues during the month, leading to paying less overall in the long run. Make sure you make both payments before the due date to avoid a late payment fee.

#2 Start making payments as soon as you can

You don’t need to wait until after you graduate, or until your grace period is over, to start repaying your student loans. Making payments while you’re in school and during the deferment could lead to significant long-term savings.

Aside from subsidized federal loans, interest will accrue on your loans while you’re in school and during other deferment period. Once you start making full payments, the interest could be added to your principal balance (i.e. capitalized) and your interest rate will now apply to that larger balance.

If you can afford to make payments on your loans while they’re in deferment, you can limit how much interest will accrue and capitalize.

#3 Avoid deferment and forbearance

You may qualify to temporarily stop making payments and place your loans into deferment or forbearance for various reasons, such as returning to school, losing your job or following a medical emergency. However, as with the initial in-school deferment, unsubsidized loans will continue to accrue interest that will capitalize once you start making full payments. Even subsidized loans accrue interest during forbearance.

Continue making payments if you can afford it. Or, even if you have to put your loans into deferment or forbearance, try to make at least partial payments when you can. Doing so will limit how much interest accrues and could keep your loans from growing.

If you’re having trouble affording your payments, you also may be able to switch your federal student loans to an income-driven repayment plan. Depending on your income, doing so could decrease your monthly payment amount and let you continue paying down your loans and avoiding debt default or placing them in deferment and forbearance.

Even if your monthly payment is only a few dollars, with four of the income-driven repayment plans, the remainder of your loan’s balance could also be forgiven after 20 to 25 years of payments. Your monthly payments may also qualify you for other federal forgiveness and cancellation programs.

#4 Increase your income and cut expenses

Whether you can negotiate a raise at work, take on extra hours, find a higher-paying job or start working a side gig for extra income, the more money you have coming in, the more you can afford to put toward your student loans. There are many opportunities to make money online, and while they don’t all pay especially well, they’re often flexible and can be squeezed into your normal routine.

On the other side of your personal cash flow statement, you could try to cut your expenses. There are a lot of ways to go about doing this, everything from looking for fee-free financial accounts and ending subscriptions, to changing your dining and grocery habits.

#5 Consider consolidating your federal student loans

Consolidating (i.e. combining) your federal student loans can be one way to make it easier to manage multiple student loans at once. However, it may not save you money in the long run. That’s because when you consolidate your loans, you’ll be issued a new loan for the total balance with the weighted average interest rate of the loans you’re combining.

If you keep your loans separate, however, you can focus on paying down the loan with the highest interest rates first. Doing so could help you save money, which you can then put toward paying down the next highest rate loan. But that’s not an option if consolidate all your loans together.

Also, consolidation could result in a much longer loan term and lower monthly payment. While you can still make extra payments each month and pay off the loan early, it may be easier to stick to your plan if you don’t have to regularly schedule extra payments.

There are pros and cons to this approach. Consider whether it’s worth it based on your unique situation.

#6 Stay on the standard federal repayment plan

Federal student loans may be eligible for a variety of repayment plans, including plans that base your monthly payment amount on your income. You may want to stay with the standard 10-year repayment plan, as generally the income-driven plans will lead to lower monthly payments and a longer repayment term.

There is a middle ground, though. If you can’t afford the monthly payments on the standard plan, switching plans could help you avoid late payments or missed payments, which could result in fees and potentially hurt your credit. However, you can still pay more than the minimum and pay off your loans faster.

#7 Look into loan forgiveness programs and options

Federal student loans may be eligible for several forgiveness and cancellation programs which could help you get out of debt sooner. Only certain types of federal loans may qualify, and you may need to meet a variety of qualifications and requirements before the Department of Education forgives your remaining debt. Generally, the programs are restricted to those who take on some sort of service work, whether that be as a teacher, government worker or nonprofit employee.

You might also find employer- or government-backed programs that could help you repay your private and federal student loans. These can range from industry-specific opportunities for attorneys and health care workers to more general loan repayment programs that companies offer as an employee benefit.

In some cases, it may make sense to switch to an income-driven repayment plan and decrease your monthly payments to take advantage of a forgiveness or repayment program. You won’t necessarily pay off your loans as quickly as possible, but it could be a worthwhile trade-off if you can pay less out of pocket overall.

#8 Sign up for automatic payments

Many student loan servicers offer a 0.25 percent interest rate discount if you sign up for automatic payments. It may not make a huge difference in your overall costs, but every little bit counts.

#9 Refinance your student loans

By refinancing your student loans — taking out a new loan to pay off your current debts — you may be able to your lower interest rate and decrease how much interest your loans accrue each month. After refinancing, even if you make the same monthly payments you’ll pay off the loans quicker.

You may be able to refinance your student loans by taking out a new private loan and using that loan to pay them off. There are lenders that specifically offer student loan refinancing.

Just keep in mind if you use a private loan to refinance federal loans, you will be forfeiting your option to use federal repayment programs and may not be able to apply for federal loan forgiveness programs.

If you refinance with a private lender, your loans could still be considered student loans for tax purposes and the interest payments may qualify you for the deduction.

Borrowers who have a good credit score and high income may qualify for the lowest rates when refinancing their student loans. However, don’t assume you can’t get a good rate if that doesn’t describe your situation. You can at least apply for preapproval with a soft credit check from some lenders and see your estimated rates and eligibility without affecting your credit scores.

Also, compare your options before you go through with refinancing. You may find that lenders offer you different rates or terms, and you won’t necessarily get the best rate from the company with the lowest advertised rates.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at louis@magnifymoney.com

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6 Best Reasons to Refinance Student Loan Debt in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Like the beginning of a new year, student loan refinancing can offer you a fresh start.

And this time, you could enjoy a lower interest rate or reduced monthly payment, as well as choosing which lender or servicer helps you reach the finish line.

These are among the six reasons to refinance your student loan debt in 2019.

1. Reduce your rate

After staggering four rate hikes across 2018, upping its benchmark by a full percentage point, the Federal Reserve is expected to impose increases of roughly half a percentage point during 2019.

Although it’s difficult to pinpoint the perfect time to refinance your student loans, this year could be the right time for you, as banks, credit unions and online lenders are still offering relatively low rates.

Don’t simply rely on lenders’ advertising, however. To qualify for the bottom of their best rate ranges, you’ll need a strong credit score and a healthy debt-to-income ratio. A steady, well-paying job helps, too.

You might treat 2019 as the year to strengthen your refinancing application, even if you decide it’s not the year you’ll be able to snag that super low rate.

A lower rate equals greater savings. Say you refinance $30,000 on a 10-year term and manage to cut your original average rate of 8% down to 5%. You’d save $5,494 over the next decade — no small chunk of change.

Check out our student loan refinance calculator to see what your own numbers look like.

2. Stretch your paycheck

Some borrowers see refinancing as a way of lowering their interest rate, but others see it as a pathway to reduce monthly payments.

A smaller monthly due could stretch your paycheck, which could be helpful if debt repayment isn’t your only financial goal for the year ahead.

By refinancing your federal loans and their 10-year standard repayment plan, you could switch to a longer term with a private lender. Most lenders offer you the ability to choose a term anywhere between five and 20 years.

If temporarily lowering your payments via refinancing is your top priority, shop around. You might be surprised by what you find. LendKey, for example, offers interest-only payments for up to four years.

As you seek a lower monthly payment in 2019, keep a couple of caveats in mind. By choosing a longer repayment term, for example, your loan repayment becomes progressively more expensive. That’s because interest will accrue and capitalize onto the principal loan amount.

Say you refinanced that $30,000 loan to a longer, 20-year term. Despite lowering your rate from 8% to 5%, you’d pay an additional $3,839 in interest over the life of your loan.

Also, don’t forget about the federal government’s income-driven repayment plans. With a plan like income-based repayment, you could tie your dues to a percentage of your discretionary income — and hold on to government-exclusive protections, such as access to loan forgiveness programs. It’s a preferable alternative to refinancing for many borrowers.

3. Snag some perks

If you’re considering refinancing federal loans, you might be worried about what you’d be giving up. The list includes access to loan forgiveness, plus the ability to switch repayment plans or receive mandatory forbearance.

Although private lenders won’t offer the same protections, their benefits are getting better and better all the time.

Consider some of the recent innovations being offered by top-rated lenders:

  • SoFi’s Unemployment Protection program lets you pause your loan for up to 12 months, and it includes career coaching support to find your next gig.
  • Earnest allows you to choose your payment due date, select from a much wider assortment of repayment terms than at most lenders, and skip one payment annually.
  • CommonBond has pioneered hybrid loans for student refinancing, offering a loan that blends fixed and variable rates.
  • Laurel Road is among the group of lenders that give a parent the chance to refinance federal PLUS Loans in their child’s name.

If an atypical loan feature makes refinancing right for you, survey the landscape in 2019 to see if any reputable lender offers the benefits you seek.

4. Simplify your repayment

If you’re holding federal loans, you might be cautiously optimistic about NextGen, the Department of Education’s plan to reorganize how student loan servicing works. If it fulfills expectations when it arrives sometime in 2019, NextGen will allow you to make your monthly payments in one place at one time.

“Cautiously optimistic” are the operative words here. NextGen is a massive undertaking, and government projects can sometimes move more slowly then we’d like, so you might not want to count on the new platform simplifying your repayment.

On the other hand, refinancing offers you that simplicity now. By replacing your federal loans (and private loans, if you have them), you’re not just receiving a new interest rate and repayment term. You’re also simultaneously consolidating (or grouping) them by replacing them with a single refinanced loan.

5. Choose your lender

When you first borrowed federal loans, you weren’t given the option to select your loan servicer.

Refinancing, however, allows you to choose your lender based on whatever criteria matter most to you. For example, you might be seeking a lender that services its own loans or offers a unique perk (see point No. 3 above).

Regardless of what you want in a new lender, remember that this year, you’re in charge. Shop around and hold potential banks, credit unions and online companies accountable for what you want out of refinancing. If they’re unable to meet your needs, move on to a competitor.

6. Gain financial independence

Student loan refinancing is more accessible in 2019 than it has been at any point previously.

In mid-2018, for instance, CommonBond announced it would accept refinancing candidates who are visa holders who have graduated from a U.S. university. Citizens Bank has been refinancing debt for college dropouts. Plus, more and more lenders are removing employment and minimum income from their eligibility requirements.

If you’ve found refinancing to be out of your reach, you might now be in luck. As a creditworthy applicant, you could thank the cosigner on your original loans by removing their name from your refinance application.

If not — maybe your credit score still needs work — take the first months of 2019 to strengthen your application. A cosigner could help you do just that. Plus, through refinancing, you could release that cosigner within a relatively short period. Splash Financial and LendKey are among lenders that offer cosigner release after just one year of prompt payments.

That would give you greater financial independence by 2020 — and put you on a path to becoming debt-free on your own.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
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Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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College Students and Recent Grads, Pay Down My Debt

Student Loan Forgiveness Programs for Doctors

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

As a medical professional, you might have taken on a mountain of debt on your journey to becoming a doctor. The average indebted doctor left medical school in 2016 owing more than $189,000 in student loans, according to the Association of American Medical Colleges.

Even if you’re on your way to a six-figure income, your residency income will likely be far less — in 2017, residents earned an average of just over $57,000. During that time, the interest alone on all your student loans could be equal to your entire disposable income after room and board.

Fortunately, there are student loan forgiveness programs for doctors and other medical professionals that could pay off part or even all of your loans. If you’re looking to cure yourself of medical school debt, turn to these programs for assistance.

National Health Service Corps (NHSC)

The National Health Service Corps can provide up to $50,000 to repay your health profession student loan in exchange for a two-year commitment to work at an NHSC site in a high-need, underserved area. After completing your initial service commitment, you can apply to extend your service and receive additional loan repayment assistance.

In order to qualify, you’ll need to work at least half-time in a designated Health Professional Shortage Area (HPSA). Along with earning loan forgiveness, you could put your medical degree to good use by caring for an underserved community.

Indian Health Services Loan Repayment Program

This federal program offers up to $40,000 in exchange for two years of service in an American Indian or Alaskan Native community. You can also renew your contract and receive additional benefits that could pay off your entire student loan balance.

National Institutes of Health (NIH) Loan Repayment Program

If you work in medical research, you could qualify for $35,000 per year from the NIH Loan Repayment Program. To do so, you’ll need to conduct research at a non-profit organization in an eligible field, such as health disparities, contraception and infertility or pediatric medicine.

Students to Service Program

If you’re still in medical school, you can apply for a major award through the Students to Service Program. This program provides up to $120,000 to medical students who commit to providing primary health care at an approved site for three years after graduating.

Public Service Loan Forgiveness Program (PSLF)

The PSLF program is intended to encourage individuals to enter and continue to work full-time in public service jobs. You could receive forgiveness of the remaining balance of your federal direct loans after making 120 qualifying payments while employed by certain public service employers.

Since you’ll likely have to work for 10 years before you get loan forgiveness, you’ll have to move your student loans off the standard 10-year plan and onto an income-driven repayment or extended repayment plan — otherwise you’ll have already paid off your balance by the time you qualify for forgiveness.

You should also keep up to date with any developments around the PSLF program. While it was signed into law in 2007, the program is not guaranteed to be around forever, and it’s recently drawn controversy over the uncertainty around getting approved.

Military loan repayment programs

If you’re serving as a medical provider in the Army, Navy or Air Force, you could qualify for assistance toward your student loans. Here are some of the programs available for military personnel.

Financial Assistance Program (FAP)

The Army, Air Force and Navy all offer the FAP, a program that grants loan repayment assistance and a living stipend to medical residents.

If you’re a medical resident in the Army or Air Force, you could get at least $45,000 per year of service, plus a monthly stipend of at least $2,000. And although the Navy grant can change from year to year, Navy medical residents could also qualify for significant assistance from the Navy FAP.

Active Duty Health Professions Loan Repayment Program

This program offers up to $40,000 per year in student loan repayment over a set number of years. You must be a physician in the Army, Navy, or Air Force to qualify.

U.S. Navy Health Professions Loan Repayment Program (HPLRP)

The Health Professions Loan Repayment Program (HPLRP) provides medical personnel in the Navy with aid for their education loans. If you meet the program’s criteria, you could receive repayment assistance of up to $40,000 per year, minus about 25% in federal taxes.

State Loan Repayment Assistance Programs (LRAPs)

Many states also run programs that grant student loan repayment assistance in exchange for working in a high-need or underserved area. A good place to check the medical loan repayment and forgiveness programs available in your area is through the AAMC database.

Here are just two examples of the many state-specific programs:

  • The Arizona Loan Repayment Program offers up to $65,000 in exchange for a two-year commitment from physicians.
  • The Kansas State Loan Repayment Program offers up to $25,000 per year of contract toward your outstanding education debt. After completion of the initial two-year service obligation, you may be able to extend your contract in one-year increments.

Check with your state to find out if it has an LRAP for doctors, nurses or other medical professionals. Depending on where you live and work, you could qualify for significant assistance toward your student loans.

Do the math before committing to a loan forgiveness program

As you take a look at each loan forgiveness program, remember to weigh salary considerations against any amount you’d receive in student loan assistance. Opting for a job with a $75,000 salary to earn $25,000 in loan forgiveness wouldn’t be as lucrative as going after a job with a $200,000 salary and no loan forgiveness, for instance.

Unless you’re driven to work in a high-need area or with an underserved population, you might not benefit from sacrificing a high salary for the sake of qualifying for loan forgiveness. Consider your career goals and your wants and needs in a job.

Refinancing student loans can also help

Whether or not you’re working toward student loan forgiveness, you might also consider refinancing as a strategy for managing your debt. Through refinancing, you could reduce your interest rates and save money on your loans beyond whatever forgiveness you can get from these programs.

Because of their steady incomes, doctors tend to be especially strong candidates for student loan refinancing. Along with lowering your rate, you could choose new terms and adjust your monthly payments.

But refinancing with a private lender also means you’ll lose access to federal programs and repayment plans, so make sure you’re comfortable with this sacrifice before making any changes to your debt. If you decide refinancing is right for you — or simply want to learn more about the process — check out the best lenders to refinance student loans here.

Rebecca Safier contributed to this article.

Our Top Picks for Refinancing Student Loans

You can learn more about what these lenders have to offer by checking out the best options to refinance student loans here.

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

3.90% - 7.95%


Fixed Rate*

2.47% - 7.17%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on SoFi’s secure website

EarnestA+

20


Years

3.89% - 7.89%


Fixed Rate

2.57% - 6.97%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on Earnest’s secure website

CommonBondA+

20


Years

3.67% - 7.25%


Fixed Rate

2.61% - 7.35%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on CommonBond’s secure website

LendKeyA+

20


Years

5.23% - 8.97%


Fixed Rate

2.68% - 8.77%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
Learn more Secured

on LendKey’s secure website

Laurel Road BankA+

20


Years

3.50% - 7.02%


Fixed Rate

3.24% - 6.66%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on Laurel Road Bank’s secure website

Citizens BankA+

20


Years

3.90% - 9.99%


Fixed Rate

3.01% - 9.75%


Variable Rate

$90k / $350k


Undergraduate /
Graduate
Learn more Secured

on Citizens Bank (RI)’s secure website

Discover Student LoansA+

20


Years

5.74% - 8.49%


Fixed Rate

4.99% - 7.99%


Variable Rate

$150k


Undergraduate /
Graduate
Learn more Secured

on Discover Bank’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Steven D. |

Steven D. is a writer at MagnifyMoney. You can email Steven at steven@magnifymoney.com

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