9 Tips for Paying Off Your Student Loans

parents with daughter at college graduation
Earning your college degree is a great way to begin your adult life, but there's one drawback: paying off student loans. If you've accrued debt during your college years, read on for Ethos' best tips for paying off student loans as quickly and efficiently as possible.

1. Start paying while you're still in school

Can you pay off student loans while still in school? It may sound crazy, but one of our most creative ways to pay off student loans is to begin paying them off before you graduate, or during the grace period afterward. 

How? One option is to see if you're eligible for student work-study status. General campus employment may have openings, too — look for them in the library, bookstore, and food service. Once you have a part-time job, allocate some of that money each month to apply to your student loans — for example, take 50% for debt servicing, and use the rest for incidentals and other costs.

2. Pay ahead on the principal

If you're looking at how to pay off student loans fast, one of the most effective tactics is to pay ahead on the principal of the loan. Not only does this lower your loan amount, but it also means you'll be paying slightly less in interest throughout the length of the loan. Even if you can only add $20-30 to each month's payments, it adds up. This will eventually lead to paying off student loans more quickly. Do check with your loan agency, though, to make sure they know that anything extra should go toward the principal and not just next month's payment.

How Ethos works
Our mission is to protect the next million families and we intend to do just that with an honest and transparent process. Take a look at how it works.

3. Consolidate loans at a lower interest rate

If you have multiple loans — or even one loan — take some time to search and see if you can find a lower interest rate. Consolidate your loans so you only have one low-interest payment. This is one of the most beneficial ways to pay off private student loans since they may have a higher interest rate than federal loans. You can also use this as an opportunity to shorten the loan's term if you're willing to accept higher monthly payments.

4. Sign up for automatic payments

When considering how to pay off student loans, this idea is a no-brainer. Many student loan servicers offer a quarter or half-point off the interest rate if you agree to set up an automatic payment system with your bank. This also means you don't have to worry about mailing in a check each month — the money will automatically be deducted from your bank account and sent to the loan servicer. 

So you've got less work and potentially, a lower rate — a win-win.

5. Develop a "payment forward" attitude

Another tip for paying off student loans? Adopt a mindset that keeps the idea of getting your loan paid off in the front of your mind. So, when you get that tax refund, use it to pay ahead on your loan. Mom and dad send you a birthday check? Use that to pay ahead. Get a bonus (or better yet, a raise) at work? That money, too, can be used to whittle down your loan total faster. 

The only time this doesn't work is if you also have any high-interest consumer debt. If you're carrying a $2,000 total on your credit card with an 18% interest rate, it doesn't make sense to pay off your 5% student loan first — get the credit card down to zero before you apply any windfalls to the student loan.

6. Explore loan forgiveness opportunities

Wouldn't it feel great not to have your student loan hanging over your head? Possibly the best way to pay off student loans is to explore the possibility of having them forgiven. How? There are several options, depending on your profession. Public Student Loan Forgiveness (PSLF) may work for you if the government or a non-profit organization employs you once you've made 120 payments while working full time. 

Forgiveness programs exist for teachers, nurses, doctors, military members, and lawyers. A simple Google search will offer you more information, and it can be well worth your time to see if your profession offers strategies for paying off student loans.

7. Look into tax deductions for the interest

One way to pay off student loans or save money is to ensure you're utilizing every possible tax deduction you can. The federal government features several tax credits, such as the American Opportunity Credit, which allows you to claim up to $2,500 per year for the first four years of college. The Lifetime Learning Credit allows you to claim $2,000 for tuition, fees, books, and supplies. You may also deduct up to $2,500 a year of interest for any loan you have to pay for college.

8. Live at home

If your parents are amenable, consider living at home to pay off student loans for some time. Your parents may charge you rent, of course, but you'll probably be able to live on less money than if you rented an apartment on your own. The money you save during this period should be used to pay off student loans early.

9. Consider life insurance

Life insurance is probably the last thing on your mind, but think about getting an inexpensive term policy after you graduate. Are you wondering, wait — do I need life insurance? 

Consider this: life insurance can protect student loan co-signers, meaning your co-signers (probably your parents) wouldn't be stuck with your payments if something were to happen to you. 

If you've never considered life insurance before, find out how Ethos works and get some tips on how a life insurance policy may help you to manage your financial situation.

The information and content provided herein is for informational purposes only, and it is not to be considered legal, tax, investment, or financial advice, recommendation, or endorsement. You should consult with an attorney or other professional to determine what may be best for your individual needs.