Debt Repayment Strategies For Paying Off Student Loans

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If you’re saddled with student loan debt, you’re definitely not alone. According to Forbes, student loan debt surpassed $1.5 trillion in 2019.  There is a need for some debt repayment strategies, to clear student debt faster. 

In Connecticut, which has the highest rate of borrowers with college debt, the average person owes $38,510. Among all borrowers across the country, the majority owe between $10,000 and $25,000.

Significant student debt can make it difficult to buy a home, build a retirement fund, or start a business. When you pay and pay on it but never really see the balance shrink, it can feel like you’ll never escape it.

However, there are some debt repayment strategies that can help paying off debt. Here are 10 strategies for putting college debt behind you for good. 

Smart money moves for people paying off debt

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How the snowball payoff will help you get rid of debt

Many people have multiple student loans from various servicers. For example, you might have one big federal loan and several smaller, private loans. 

With the snowball debt repayment strategy, you identify the smallest loan and focus on paying it off as quickly as you can.  This can mean making double payments or switching to biweekly rather than monthly payments.

During this time, you also continue paying on your other student loans, but you make minimum payments only.

One you’ve paid off your first loan, you move on to the next largest loan and repeat the same process.  The debt snowball method works for many people because it allows them to see their progress and stay motivated.

When you’re dealing with something as daunting as student loan debt, this can be a big help.  Use simple snowball debt worksheet designed in good old excel. 

Get free paying off debt worksheets

Another approach- avalanche debt pay off method

It’s also worth mentioning a slightly different spin on the debt snowball method: the avalanche method.

With this debt repayment strategy, you start with the loan that has the highest interest rate. Once you pay it off, you move to the loan with the next highest interest rate. 

Since federal loans are likely to have the lowest interest rates, you’ll probably end up starting with private loans.

The avalanche debt repayment method can be a great alternative to the snowball payoff method, but it might not be a good fit if you have loans with high balances. 

Because it will take you longer to pay off a loan with a high balance, you won’t get the same kind of motivation and encouragement as you would with the snowball method. 

Before you choose a debt repayment method, it’s worth doing the math to see which debt repayment strategy saves you the most money. 

Do you get penalized for paying off a loan early?

Extra loan payments can make a big difference when you’re trying to kick debt to the curb.  The reason is that shrinking your balance means paying less interest.

For example, if you owe $10,000 with a 6% interest rate on a 10-year repayment schedule, you will pay $3,322 in interest over 10 years, assuming you only make the required $111 minimum monthly payment. 

However, if you bump your payments to $211 (an extra $100), you will pay off your loan in just 4.2 years and pay only $1,441 in interest. That’s paying off your loan 66 months early and putting an extra $1881 in your pocket. 

To put it another way, making multiple credit card payments/student loans  in one month saves you 56% on your debt. You can run various scenarios yourself using a student loan calculator online. 

Once you see how much you can save, it’s easy to commit to paying off your loans early.

debt repayment

Is refinancing to pay off debt a bad idea?

Refinancing can be a good way to lower your interest rates so you can pay off your student loan debt more quickly.

To do this, you’ll need a good credit score — usually at least 660 or higher. Lenders will also want to see that you have a stable income and a solid history of paying your bills on time. 

If you have a lot of separate loans, refinancing can also be a great way to consolidate them into a single, more manageable loan. 

You need to know all your options, American Debt Enders can help you to your way to debt freedom. Before you go for it, however, make sure you’re truly saving on interest in the long run.

Is AutoPay a good idea?

Many student loan lenders, including the federal loan servicers, offer borrowers a discounted interest rate if they enroll in autopay.

With autopay, your loan payment is automatically debited from your bank account each month. If you struggle to remember due dates for your student loans, autopay could help you stress less and save a bit of money. 

What Is The Best Way To Become Debt Free In A Few Years?

Is biweekly better than monthly?

If you don’t have the budget to make extra payments, biweekly payments are a good debt repayment strategy that can help you pay more toward your loan without feeling a financial pinch.

With biweekly loan payments, you don’t pay more each month. Instead, you divide your monthly payment in half and send one half every two weeks. 

For example, if your monthly payment is $300, you would send $150 for the first two weeks and $150 for the next two weeks. 

So instead of 12 payments for the year, you make 26 half payments, which results in you making a whole extra payment every year. Many people like biweekly payments because they fall in line with when they receive their paychecks from work. 

Some federal student loan servicers will let you set up a biweekly payment schedule, but others like Navient & Greatlakes won’t. If yours doesn’t, you can still do it on your own. Just make sure you make both payments before each month’s due date.

Put “found” money toward your student loans

Found money is anything extra or unexpected outside of your normal income. It could be a bonus at work, money made during a garage sale, or even birthday cash from grandma.

The idea is to use any extra financial boost to pay off  student debt faster. And it makes a lot of sense when you think about it. 

For example, you might go out to dinner with the $50 your great aunt sent for your wedding anniversary. As nice as the meal might be, it’s just one meal and one evening.

By using that same $50 to pay extra toward your student loan — and doing this consistently every time you get “found” money — you can shave years off your student debt payments.

Side jobs to pay off student loans

To pay off student debt faster, it might be worth taking on part-time work. This doesn’t necessarily have to be an official second job where you work for an employer. Many people turn a hobby into a lucrative source of extra income

For example, are you good at finding bargains? Hit up thrift and discount stores and then sell your finds on sites like eBay and Etsy

If friends are always asking you to help them make a website, try putting your design skills to work by making websites and providing other services for people on Fiverr. If you love taking pictures of friends and family, consider starting a small photography business. 

Of course, you can also opt for traditional employment. Many retailers hire thousands of extra staff over the holidays. Commit to six weeks of seasonal work and put everything you earn towards your student loans.

Getting rid of debt? Here is how to stay motivated

Get your employer to chip in

As millennials become the biggest demographic in the workforce, employers are starting to realize that today’s workers want new types of benefits.

With so many millennials stuck with sky high student debt, some companies are starting to offer loan repayment assistance for employees who use their degree as part of their job. ​

For example, Fidelity Investments and Staples offer student loan repayment assistance as an employee benefit. Workers at Fidelity can receive up to $2,000 per year and $10,000 total in loan repayment benefits. 

Staples pays its retail associates up to $1,200 per year, capped at $3,600 in total benefits.  In the future, it’s likely that more companies will join this growing trend.

Can you deduct student loan debt on taxes?

The majority of student loan borrowers qualify for a federal student loan interest tax reduction capped at $2,500 for paid student loan interest. 

By taking this reduction, your adjusted gross income is lower, which means you pay less in taxes overall. 

There are income rules for both single filers and married couples, so it’s important to talk with an accountant or tax professional if you’re interested in the student loan interest deduction. 

What happens if you defer your student loans?

While deferrals — which let you temporarily stop making payments on your loan — can be a lifesaver under certain circumstances, it’s best to avoid them.

When you defer or forbear a student loan, the interest continues accruing. After the deferment or forbearance period ends, all that stored up interest gets capitalized, which means the lender adds it to your loan balance.

This means you end up paying interest on your interest. If you defer a payment multiple times, you could pay thousands more than the original loan balance.

Going debt-free may sound like a pipe dream, but it’s possible as long as you’re committed and willing to work hard at saving money and sticking to your goals. 

If you have a lot of student loan debt, the above debt repayment strategies can help you reach your goals much faster. 

Debt avalanche as a debt repayment strategy


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