Paying for college

How to Pay Off Your Student Loans and Alternatives

Today, many students rely on loans to finance their higher education. In fact, recent estimates indicate that college graduates in the United States currently owe more than $1 trillion in student loan debt. This situation stems from the high cost of obtaining a college degree.

Attending many colleges can cost over $30,000 per year when you factor in tuition, fees, room and board, and textbooks. Over a four-year period, this can add up to more than $100,000 in debt. Even if you choose to live at home, you can still accumulate $30,000 or more in debt. In 2015, the typical student loan debt averaged about $30,000.

After graduation, you usually get a six-month grace period before you have to start repaying your loans. When that period ends, it’s time to start paying off your student loan debt. What are some effective strategies to eliminate student loan debt faster? Here are some expert recommendations to help you reduce your student loan balance faster.

Think of your student loan as a mortgage

If your income allows, it’s a good idea to treat your student loan like a mortgage. This means paying more than the minimum required to pay down the principal faster. For example, a $25,000 loan at 6.8% interest over 10 years would require monthly payments of $288. However, if you’re able to put down $700 each month, you could pay off the loan in just three years.

Increasing the frequency of your payments is also beneficial. Instead of monthly payments, opt for biweekly payments. Every additional dollar paid above the minimum reduces both the interest rate and the length of the loan.

Formulate a financial strategy

It’s wise to develop a three- to five-year financial plan for paying off your student loans. Setting a definitive goal, such as paying off all student loan debt within five years, can be financially advantageous.

For example, a couple with a combined annual income of $100,000 and $50,000 in student loan debt could create a budget to cut unnecessary expenses. By consistently paying more than the minimum each month, they could pay off their debt in less than five years, while paying only the minimum could extend the loan term to 15 or 20 years.

Set up a dedicated repayment account

Each month, automatically transfer funds to a savings account specifically for your loan repayment. This strategy is effective because it is mandatory and automatic. It makes it easier to save extra money for debt repayment that might otherwise be spent on eating out or entertainment.

This account should be used exclusively for student loan repayment.

Work part-time while in school

One of the most effective ways to minimize college debt is to work part-time while in school. Earning that income and applying it to college expenses can significantly reduce the amount you borrow and save you a significant amount of interest. For example, saving $1,000 per month equates to $12,000 less in student loan debt per year.

Practice financial discipline

A major obstacle to paying off student loans quickly is the temptation to spend on non-essential “fun” items. Granted, paying off student loans is not fun, while spending on clothes, eating out and socializing is. However, prioritizing additional loan payments over immediate pleasures is the key to paying off your debt years sooner.

Those who successfully pay off their student loans quickly live within their means and save diligently. It’s also worth noting that in many cases, there are alternatives to student loans, which are discussed below.

Student loan alternatives

If you’re currently burdened with student debt, your focus should be on paying it off quickly. If you haven’t yet accumulated student debt, know that there are alternatives to accumulating substantial debt that will take years to pay off. Here are some of the best options. If you’ve already accumulated college debt, exploring these alternatives now could save you a lot of money.

Student Grants

The U.S. government, state governments, and many universities offer substantial grants to needy students. Unlike loans, grants are a form of financial aid that doesn’t have to be repaid. They are available to several groups of students, including those with significant financial need, minorities, women, people with disabilities, and students in high-demand fields. While grants may not cover the full cost of tuition, they can certainly ease the financial burden.

For example, the Federal Pell Grant provides up to $5815 for the 2017 academic year. In addition, state and institution-specific grants are available, and you should contact your financial aid office for more information.


Less than 1% of students receive full-ride scholarships, but many can obtain partial scholarships with some effort. Scholarships can be found for almost any criteria.

Most colleges offer need- and merit-based scholarships, which are typically awarded to students with outstanding academic records or significant financial need. But these aren’t the only groups that offer scholarships. Private organizations, including banks, civic groups, corporations, and individuals, also offer scholarships.

Keep in mind that many students briefly try to apply for scholarships before turning to the faster option of student loans. Treating scholarship applications as a temporary, part-time job can be more rewarding. For example, if you spend 20 hours applying and receive $1000, that’s effectively $50 per hour, saving you not only the initial amount, but also the accrued interest on a loan. Smaller scholarships under $1000 are also worth considering, as they often attract fewer applicants.

Work-Study Programs

Federal work-study programs offer a way to gain work experience and earn money while you study. While many of these jobs are basic, such as working in a college kitchen or library, you may find opportunities related to your field of study.

Income from a work-study program can be used to cover some college expenses, and importantly, it doesn’t affect your eligibility for financial aid. Note that income from regular employment reduces aid eligibility by fifty cents for every dollar earned over $6400 per year.

Frequently Asked Questions

Can I negotiate a lower interest rate on my current student loans?

Yes, you can. You can often negotiate a lower interest rate, especially if you have good credit or if you’re considering refinancing your loans with a different lender. Contact your loan servicer to discuss your options.

Is it beneficial to consolidate multiple student loans?

Consolidating multiple student loans can simplify your payments and potentially lower your overall interest rate. However, you may lose certain borrower benefits on your original loans, so weigh the pros and cons before proceeding.

Are there tax benefits associated with student loan repayment?

Yes, the interest paid on student loans can often be deducted on your federal income tax return, which can reduce the amount of income subject to tax. Consult a tax professional for specific advice regarding your situation.

What happens if I miss a student loan payment?

Missing a student loan payment can have serious consequences, including late fees, higher interest rates, and a negative impact on your credit score. If you’re having trouble, contact your servicer immediately to discuss deferment or forbearance options.

Can volunteering help with student loan repayment?

Certain volunteer organizations, such as AmeriCorps, the Peace Corps, or public service positions, offer loan forgiveness or repayment assistance programs. These programs can significantly reduce your overall debt in exchange for a commitment to service.

Are there strategies for paying off student loans while pursuing further education?

If you’re considering continuing your education, look into part-time enrollment or online programs that allow you to work and apply your income to existing loan repayments. Some employers also offer tuition assistance or loan repayment as part of their benefits package.

Final Thoughts

There are practical ways to accelerate student loan repayment and even avoid loans altogether. Through careful financial planning and exploration of alternatives, you can potentially save thousands of dollars over time and either quickly eliminate debt or avoid it altogether.

  1. Federal Reserve Board of Governors. “Consumer Credit – G19.” Link
  2. Federal Student Aid. “Prepare for Student Loan Payments to Restart.” Link
  3. Federal Student Aid. “Student Loan Forgiveness.” Link
  4. Internal Revenue Service. “Topic No. 431 Canceled Debt – Is It Taxable or Not?”
  5. Federal Student Aid. “Income-Driven Repayment Plans.” Link
  6. Federal Student Aid. “Federal Versus Private Loans.” Link
  7. Federal Student Aid. “Subsidized and Unsubsidized Loans.” Link

By Jayson Peterson

Jayson Peterson is an experienced pharmacist, naturopathic physician, medical examiner, and minister. After earning his Doctor of Pharmacy degree from the Medical University of South Carolina, Jayson Peterson completed clinical rotations at several prestigious healthcare institutions and has been affiliated with several pharmacy chains throughout his career. His main passion and zeal is focused on providing world-class patient care by giving precise details and thorough instructions to those who need it most.