9 Ways to Pay Off Your Student Loans Faster and Cheaper

9 Ways to Pay Off Your Student Loans Faster and Cheaper

Posted on May 13, 2014

College years are the best years of your life. Whether you agree or disagree with that statement you’ve heard dozens of times, if you’re like 40 million other Americans, you have the student loans to remind you of your college days.

Pay off student loans fast

The average new college graduate has $29,400 in student loan debt upon graduation.
(Photo: Mando vzl / Wikimedia Commons)

We owe somewhere between $902 billion and $1 trillion in student loan debt in the United States, according to the ASA. And with the average college grad starting out with $29,400 in debt, dealing with these loans are on everyone’s priority list.

Before you let the stress of dealing with student loans get the best of you, consider these ideas for easing the debt.

The Basics That Everyone Should Be Doing

These tips are nothing new, but the advice is solid and available to everyone with student loans. If you haven't acted on these solutions yet, you're throwing money away.

Pick the best repayment plan.
Explore the different payment plans offered including Pay as You Earn or Income-Based Repayment (IBR), which are based off of your income and can reduce your monthly payment.

Consider refinancing your loan.
Refinance your private student loans to get a better interest rate. Chances are, when you originally took out these loans, you had a limited credit history, no assets,  and a small or nonexistent income. Assuming your credit has improved since then, you may be able to get your rate lowered since you are less of a risk, as far as a lender is concerned. Keep in mind that refinancing works differently for any federal loans. If you refinance a federal loan to a private loan, you lose the benefits that go along with it such as any loan forgiveness options and more flexible repayment plans.

Deduct your student loan interest.
Once tax season rolls around, keep in mind you can deduct up to $2,500 that you paid in student loan interest on your taxes. You’ll need to receive a 1098-E from your lender.

Sign up for auto enrollment.
While it may seem like a drop in the bucket, sign up for automatic payments on your loans. Some lenders will reduce a small percentage of your loan interest for enrolling. This can add up over time, plus eliminates the possibility of late fees. Be certain to have sufficient funds to avoid overdraft fees.

Put Your Credit Cards to Work

Used properly, credit cards are a great tool. Here are two ways to put them to work paying off your student loans faster without running up more debt.

Make your credit card pay for your student loans.
Cash in sign up bonuses. For example, the Chase Ink Plus card offers a signup bonus of 70,000 points after hitting a minimum spend of $5,000 in 3 months, which can be cashed out for $700, and you can apply for it twice. That's $1,400 right there. You'll earn smaller rewards on an ongoing basis if you keep it up, which also can be applied to your debt. Meet minimum spending requirements with household expenses you'd normally pay for with cash, and pay off the card every month. If you’re going this route, it will only work if you are able to pay off your entire balance every month and aren’t going to use it as an excuse to charge. Otherwise, you’ll also end up paying interest and getting further into debt.

Peace Corp Student Loan Reduction

Joining the Peace Corp can reduce your Perkins loans by up to 70%.
(Photo: US Embassy / Flickr)

Drop your interest rate to 0%.
Transfer what you can to a 0% interest credit card, like the US Bank Platinum Visa. Once the 0% interest period is up, you transfer it to another 0% card, and keep it rolling. If you have $10,000 in debt at 6% interest, it costs a lot more over the life of the loan than if your interest rate is 0%. Additionally, having that debt on a credit card means that if something goes wrong in your life, you can discharge it in bankruptcy - which you can't do with a student loan. But you have to be on top of it to understand when that balance will start accruing interest. (Note: A one-time balance transfer fee of 3% may apply, but it's still a lot less than monthly interest at 6% or more.)

Go Big and Change Your Life

Make a difference in the world and shed some student loan debt all at the same time with a new career or volunteer opportunity. These solutions are admittedly not for everyone, but going big can reap big rewards.

If you’ve been putting off getting out there and giving back, student loan relief just may be that extra nudge you needed. In exchange for volunteering, these organizations will help reduce your student loan debt:

  • SponsorChange
    Connect with projects in need of talented volunteers for loan assistance. Right now, projects are in Chicago, Pittsburg, and Washington, but it can be expanding soon. The amount earned towards your loans vary on a project by project basis.
  • VISTA (Volunteers in Service to America)
    Provide 1700 hours of service, and receive $4,725 towards your student loans.
  • AmeriCorps
    If you serve for 12 months, you may be able to receive a $7,400 stipend plus $4,725 to be used towards your student loans.
  • Peace Corps
    According to Finaid.org, get 15% of a Perkins loan cancelled for each year of service, up to 70% total.
  • Teach for America
    In addition to a salary, you can earn up to $11,100 for completing your service while teaching. You don’t have to have a degree in education or any experience to teach.
  • National Health Service Corps.
    If you’re a qualified healthcare worker, receive up to $50,000 in exchange for working in an area in need.

Join the Army National Guard.
It’s a bit extreme if military life wasn’t on your radar, but you can earn up to $10,000 in student loan forgiveness for serving.

Detroit Student Loan Forgiveness

Moving to Detroit could mean a $20,000 reduction in your student loan debt.
(Photo: Federal Highway Administration / Wikimedia Commons)

Move to an area that will pay your loans.
Four places are looking to give their population a boost, craving young, college educated residents, and are willing to pay for it. Work for specific companies in Detroit, and you’ll get up to $20,000 of your loans forgiven when you purchase a home in the city. Or you can get $2,500 towards your rent your first year and $1,000 the second. Depending on the Kansas community, college graduates can get up to $15,000 to put towards student loans plus tax incentives. Recent college graduates living in specific neighborhoods of Niagara Falls can earn up to $6,984 for two years of residency. Receive up to $20,000 in student loan repayments for moving to Saskatchewan, Canada and getting a job there.

Choose a job that will help you pay.
If you’re looking for a job anyways, it might as well reduce your student loan debt. When an area, generally low-income or rural, has a shortage in a profession, they’re willing to give you an incentive for taking on the challenge.

You may have known that teachers and doctors can get their loans forgiven, but programs are constantly expanding to include nurses and other healthcare workers, lawyers, dentists, law enforcement, psychiatrists, social workers, vets, doctors, therapists, librarians, speech pathologists, and firefighters are all eligible for loan forgiveness. Cities and states offer varying programs so check with your location’s specifics.

You can also have a portion of your loans forgiven with federal, state, and local government agency jobs or not-for-profit organizations.

Even private companies are starting to offer student loan repayment help as part of their employment package. Bring up the idea during salary negotiation or raise the option with your HR department.