Skip Navigation

Small Steps to Pay Off Student Loans Quickly

August 2016

Barbara O’Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension

Many people today- at all ages- have student loan debt, which is like a double-edged sword. While borrowing money for post-secondary education often helps improve someone’s future earning ability, it also can lead to emotional distress and/or financial strain and delay savings and independent living arrangements.

Student loans impact students in many ways besides their actual dollar cost (i.e., repayment of money borrowed, plus interest). In the last decade, as the use of loans to attend college has increased, so-called “crowding out effects” have become noticeable. In other words, money required to make student loan payments is already “spoken for” and unavailable for other purposes such as homeownership, entrepreneurship, and retirement savings.

Not surprisingly, many student loan borrowers want to “get on with their financial life.” When student loans are repaid, money is freed up for other expenses (e.g., car loan payment) and savings for future financial goals (e.g., buying a home). Thus, it is smart to pay off student loan debt as quickly as possible. Below are 10 ways to do this:

Reduce Spending - Try to ‘find” $1 to $5 a day by cutting expenses (e.g., brown bagging lunch to work and avoiding vending machine snacks) and reallocate this money toward larger student loan payments.

Earn Extra Income - Freelance skills and experience with “side jobs” that bring in extra money and use this money to make larger student loan payments.

Make Bi-Weekly Payments - Like bi-weekly payments on a mortgage, splitting monthly student loan payments into half-payments every two weeks results in an extra monthly payment made every year.

Apply a Cash Windfall - Use all or part of large sums of money (e.g., income tax refund, returned security deposit, retroactive pay, and end-of-year bonus) to repay student loan debt. Another good sum to apply toward debt is the amount taken as a student loan interest tax deduction on federal income taxes.

Request Cash Gifts - Instead of receiving a holiday or birthday gift that you may not ever use or wear, tell potential gift givers that you would prefer to receive cash with which to repay student loan debt.

Use PowerPay - If student loans are one of several outstanding debts that you have, prepare a Powerpay debt reduction calendar at When a debt is repaid, apply its former payment to a remaining debt. Eventually more money will be applied to student loans and they will be paid off faster.

Get Help from an Employer - Some employers are providing cash with which to make student loan payments as an employee benefit to recruit and retain young employees. Even if your job does not have a formal benefit policy to help with student loans, it may not hurt to ask.

Get a Loan Discount - When you reduce loan interest rates, more of each payment goes toward principal and less toward interest, thereby paying debt down faster. Some lenders reduce loan interest (e.g., by a quarter to a half percent) when student loan payments are automatically deducted from a bank account.

Consider Refinancing - There are private companies that refinance student loans. This strategy can simplify bill-paying, by incorporating separate loans into one, and may lower interest rates. Disadvantages include loan origination fees and inability to access federal loan forgiveness or income-based repayment programs after refinancing.

Consider Consolidation - Like refinancing, grouping many smaller loans into one big one makes loan payment convenient. However consolidation could extend the payback period and increase the amount of interest paid. It may also not be available for private student loans. Consolidation should be used only if it makes economic sense (e.g., lower interest), perhaps combined with the first five strategies, noted above, to repay debt quickly.

For more information about different types of student loans and how to repay them, visit the Federal Student Aid web site at