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Updated on Thursday, December 20, 2018
With tuition costs higher than ever, some college grads are finding themselves with student loan balances of $100,000 or more. If you’re one of them, you might be feeling completely overwhelmed about tackling this mountain of debt.
But there are ways to pay off this much without sacrificing decades of your life to student loans. If you’re thinking about how to pay off $100k in student loan debt — or more — read on for some solid strategies that could help you.
1. Write down all the details of your loans, and set goals for repayment
Before you can start conquering your debt, you need to know exactly what you’re dealing with. So your first step should be writing down the details of your loans, from your total balance to your interest rates to your loan servicers.
You can use our personal loan calculator to estimate the long-term costs of your debt. By seeing how much you’re spending on interest, you might get motivated to pay off your loans ahead of schedule. If that’s the case, you can also this Student Loan Hero calculator to estimate how much you’d have to pay each month to shave years off your debt or to save a certain amount in interest. (Note: Both MagnifyMoney and Student Loan Hero are owned by LendingTree.)
If you owe $100,000 at a 6.8% rate, for example, you could pay it off in 10 years with monthly payments of $1,151. But if you increase your monthly payment to $1,500, you could get out of debt three years early. If you can afford to double your monthly payment, you could actually cut your repayment term by five years and nine months and save $22,967 in interest.
Of course, throwing extra money each month at your student debt might not be financially possible at this time in your life. If you’re dealing with a balance of $100,000 or more, you might need to put your debt on an income-driven repayment plan until you can increase your payments in the future.
For now, come up with a repayment plan that works for your current budget, while keeping “stretch goals” in mind for the future. If you eventually start earning more, adjust your plan to reflect the change in your financial situation.
2. Consider the debt snowball or avalanche strategy for debt payoff
The average graduate with student debt has 3.7 loans in their name, according to Experian. So if you’re considering making extra payments, you might not know which loans to pay off first.
When it comes to paying off multiple debts, there are two tried-and-true strategies that are especially popular: the ”debt snowball” and the “debt avalanche”.
With the debt snowball strategy, you target your smallest balances first and then work your way up to your biggest. This approach can be psychologically motivating, since you’ll be able to completely close your individual accounts as quickly as possible.
With the debt avalanche, on the other hand, you would target the student loans with the highest interest rates. By going after high-interest debt first, you’ll save the most money on interest. You might also target variable-rate loans over fixed ones if you see your interest rate is going up.
At the same time, of course, you’ll be keeping up with payments on all your student loans. But the debt snowball and avalanche strategies are useful if you want to make additional payments on one or two loans but can’t afford to pay extra on all of them.
Each of these tactics is effective in different ways, so think about which would work best as you attack your debt.
3. Find ways to reduce your spending
People paying off $100k in student loans (or more) are usually eager to get out the shadow of debt as fast as they can. Throwing extra payments at your student loans could help you chip away at your balance faster, but first you need to find the money.
If you don’t have one already, create a budget to track your earning and spending. Once you’ve written down your major spending categories, search for areas where you can cut back. Maybe this involves moving to a less expensive apartment or cooking at home instead of eating out; perhaps you have to forgo nights out at the bar in favor of inexpensive potlucks with friends.
Although reducing your spending will only take you so far, chances are there are areas where you could save — or at least resist the temptations of lifestyle inflation.
Even though it might involve living like a college student for a few more years, you’ll likely be glad you made the sacrifice once you finally dig your student loan balance down to zero.
4. Get creative about boosting your income
When it comes to budgeting for your student loan payments, spending less is only one side of the coin. The other is increasing your income.
If you took on all this debt to pay for medical school, law school, or another post-graduate program, you might be well on your way to a high-paying job. Whatever your background, though, think about what salary you’re aiming for. By having a clear goal in mind, you can narrow down your job search to positions that are financially feasible for your situation. You’ll also have a clear number to bring to the table during salary negotiations.
And if you’re already working, consider switching employers to boost your salary. In fact, “job hopping” could get you a higher salary than sticking with the same company. Instead of waiting for a 4% raise at the end of each year, you could see a big jump in your income all at once by starting somewhere new.
Alternatively, you could look for ways to supplement your income with a side hustle. According to Bankrate, more than 44 million Americans are working some kind of side hustle. (Incidentally, about the same number of Americans have student loans.)
From driving for Uber to renting out a room on Airbnb to freelancing online, the side hustle possibilities are endless. Consider where your skills and interests lie, and get creative about ways to monetize them.
Once you set up another income stream, you could put those earnings right toward paying off your $100k+ in student loans.
5. Refinance your student loans for lower interest rates
If you’re dealing with a large student loan balance, then you know that keeping up with interest is half the battle. Over 10 years, for example, a $150,000 debt at a 6.8% interest rate accumulates a whopping $57,145 in interest.
But if you could reduce that rate to 3.0%, then the interest cost plummets to $23,809. How can you lower your interest rates? That’s where student loan refinancing comes in.
When you refinance student loans, you essentially give your old loans to a bank and take out a new one in their place. Depending on your credit and income, you could qualify for much lower rates than you have now. Or you can apply with a cosigner if your credit isn’t up to scratch.
And along with potentially snagging a lower interest rate, you might also be able adjust your monthly payments with new repayment terms, typically between five and 20 years. And you don’t have to refinance just once — you can refinance multiple times as your circumstances or goals change.
All that said, refinancing does come with a significant risk: When you refinance federal student loans, you turn them private. As a result, you lose access to federally sponsored programs such as income-driven repayment plans and federal loan forgiveness.
So before trading your government loans for private refinancing, make sure you’ve weighed the pros and cons. If you’re not relying on any federal programs, however, refinancing could be a savvy way to save money on your student debt and perhaps even pay it off faster than you originally planned.
6. Consider working toward loan forgiveness or repayment assistance
Instead of diligently paying off your student loans each month, what if you could get your entire balance — or at least, a big chunk of it — forgiven?
Federal forgiveness programs such as Public Service Loan Forgiveness and Teacher Loan Forgiveness will discharge all or part of your federal student loans in exchange for service in a given field or for certain employers.
What’s more, some states offer student loan repayment assistance programs (LRAPs) that pay off a chunk of your federal or private student loans after a set period of qualifying work. Some universities also have LRAPs for graduates, especially those who work in public service or non-profit organizations.
Of course, choosing to work in a non-profit for the sake of getting loan forgiveness could limit your long-term earning potential. So before pursuing these programs, think carefully about your professional and financial goals to make sure everything lines up.
Outside of forgiveness programs, you could also seek out an employer that offers a student loan benefit. Much like a 401(k) matching benefit, some employers will match part of your student loan payments every month to help you pay off your debt faster.
When it comes to how to pay off $100,000 in student loans, the more help you can get, the better. Explore your options for student loan forgiveness or repayment assistance to see if any could help you conquer your debt.
7. Use a windfall to pay down your balance faster
In mid-2018, the Consumer Financial Protection Bureau took a look in its Data Point report at how borrowers repay student loans. It found that borrowers who pay off a student loan ahead of schedule make a final payment that’s 55 times larger than their scheduled payment.
In fact, 94% of borrowers made a final payment that exceeded what was due. When the end is in sight, you might feel motivated to make a lump sum payment to crush your remaining balance once and for all.
Even if you’ve still got a ways to go on your debt, making a lump sum payment can speed up repayment and cut down on the long-term costs of interest. So if you get a cash windfall, such as a bonus from work or a lucky lottery ticket, consider putting that toward your loans.
Just make sure your loan servicer applies the payment correctly, so you don’t end up paying off interest when you meant to cut away at your principal.
8. Focus on your end goal of a debt-free life
When you’ve got $100,000 or more in student loans, it can feel like there’s a huge weight holding you down. But hopefully you can use your hard-earned degree to build a career you love while earning money to pay down your debt.
Or if you’re drawn to public service or non-profit work, you might qualify for forgiveness of your student loans. Whatever your approach, paying off this amount of debt might require some sacrifices along the way.
But while it can feel disheartening to stay in a cheap apartment or forgo vacations for a few years, remember that your efforts are bringing you closer to a debt-free life. Ultimately, your hard work will be worth it when you see that student loan balance finally disappear.