How to Get Rid of Student Loans

Here’s how to get rid of student loans: Repay them yourself. No “magic plan” will make them go away faster than you can actively repay them on your own — not even government plans. 

The average student loan debt was $29,400 among bachelor’s degree recipients for the 2021-2022 school year, and among all borrowers, the average debt balance is $38,787.

Naturally, you might be in a hurry to get rid of this debt as soon as possible. But what’s the best way to get the job done? Let’s discuss.

Why Income-Driven Repayment or Federal Programs Aren’t the Answer

Many people assume they can take on loans as part of financial aid and wait to enter into a repayment plan after graduation. They assume they’ll sit happy until everything gets forgiven at the end, as in the example of income-driven payment plans. (Your payment is based on your income, and you’ll continue to pay on them for 20 or 25 years until forgiveness swoops in to save the day.)

But ultimately, you may pay more over time if you rely on federal forgiveness programs, so those programs aren’t the answer, because the standard repayment plan is just 10 years. Why wait for 20 to 25 years? (Note that it’s completely understandable that many people have situations that cause them to need to have one job only — circumstances might prevent them from hustling or handling a second job.)

However, we need to keep the end goal in mind: getting rid of student loan debt. And note that learning how to get rid of student loan debt without paying doesn’t work. You can’t shake off student loans, and you might find yourself in a position of having your wages garnished to pay for student loans. You don’t want to be in that position, do you?

No! So pay attention to what’s going on with your loans and make a plan to pay them off. No more regrets about how you spent way too much money on room and board, how you spent so much on pizza when you lived in off-campus housing, or that you should have gotten in-state tuition. No more regrets. Now it’s time to focus on paying it off.

Learn more: What is Need-Based Financial Aid?

How to Get Rid of Student Debt

Here are the real ways to learn how to get rid of student debt. If you’re at the beginning of your journey, look into how student loans work.

Pay Extra Toward the Principal

There are a few parts that make up your student loans: the principal balance, or the amount you borrowed. It also includes interest, or what you’ll pay for borrowing the loan, and the fees the lender charges as well. You must make at least the minimum amount payment on your student loans. 

Paying extra toward the principal will help you pay off your loans faster. The more you pay, the less interest you’ll owe. A student loan payoff calculator can tell you how quickly you’ll pay off your student loans and how much overall interest you’ll save over the life of your loan.

Here’s an example of how paying off student loans early can save you money with a $30,000 student loan and a fictitious interest rate of 5% per year:

• Loan Amount: $30,000
• Interest Rate: 5% per year
• Loan Term: 10 years (120 months)
• Monthly Payment: $318.20

Regular Repayment (10 Years):

• Total Interest Paid: $8,184.24
• Total Amount Paid: $38,184.24

Early Repayment (5 Years):

• Monthly Payment: $566.14
• Total Interest Paid: $3,968.08
• Total Amount Paid: $33,968.08

Savings by Paying Off Early:

• Interest Savings: $4,216.16
• Time Saved: 5 years

By increasing your monthly payment and paying off the loan in five years instead of 10, you could save over $4,000 in interest. This example shows how even small extra payments can lead to significant savings and financial freedom sooner.

Make More than the Minimum Payment

One of the best ways to pay off your student loans is to make more than the minimum payment. Once you determine your budget (how much money you have coming in and going out) you’ll know exactly how much extra money you have in cash at the end of the month. If you can kick in just $50 extra at the end of the month, that’s okay — it’s better than nothing! If you can double your student loan payment, that’s amazing. 

Don’t worry about how little you’ve increased it as long as you do something to increase your payment each month. As you receive raises and bonuses, you can consider upping your minimum payment. Some people also elect to get a side hustle to raise your minimum payment. 

Here are some ideas: 

• Round up payments to the nearest $10 or $50
• Make bi-weekly payments instead of monthly
• Use windfalls like tax refunds or bonuses for extra payments
• Allocate a portion of any pay raise towards extra payments
• Apply extra income from side gigs or overtime
• Cut discretionary spending and redirect savings to payments
• Pay extra towards the highest-interest debt first
• Use cashback rewards or rebates to make additional payments
• Avoid adding new debt to maximize repayment efforts
• Make additional payments directly after receiving your paycheck

Get on a Budget

Get on a budget. If there isn’t another phrase greeted by a louder round of groans, I don’t know what it is. Budgeting might seem like a huge bummer to a lot of people, but it doesn’t have to be, especially if you’re meeting your goals at the end of the month. 

One of the best ways to get on a budget is to consider using a budgeting app. However, you don’t have to do that — if you’re disciplined, you can create a budget all on your own and stick to it, even if it’s in a simple spreadsheet.

There are five main steps to getting on a budget: 

• List your income. Tally up everything you make, including any side hustle money that you earn. 
• List your expenses. How much are you spending per month relative to the amount you earn? If you’re spending more than you earn, that’s a quick sign that you need to start watching your money. 
• Subtract your expenses from your income. What’s left over? How much money do you have left? Are you spending more than you earn?
• Track everything coming and going. Keep track of your transactions so you know exactly how much you can budget per month. You may even have different budget categories, like groceries, clothing, etc. Keep in mind the important things on your list, like setting aside money for retirement and an emergency fund.
• Make a new budget each month. Budgets can be fluid, which is a beautiful thing. You may want to challenge yourself to save more than you had last month, or put more toward your student loans than you did the month before. 

Cut Spending

Can you cut your spending? Chances are, there’s something that you don’t need. Here are some ideas you can cut out: 

• Extended warranties
• Gym memberships
• Premium cable packages
• Bottled water
• Designer clothing
• Name-brand medications
• Banking fees
• Luxury car features
• Subscription boxes
• Fancy coffee

After you get on a budget, you might consider searching for these items that you regularly spend money on. Who needs ’em? You don’t, especially when you’re trying to get rid of student loans.

Pay While in College 

Paying on your loans while in college: Is it possible? Yes, and you may want to consider that approach if you have an unsubsidized federal loan. Unsubsidized loans means the government doesn’t pay for your loan while you’re in school, unlike subsidized loans. If you can tackle some of your costs while you’re a student, you can consider this possibility. Doing so may help you reduce your overall debt, reduce stress after graduation and give you a head start on paying for college. 

If you’re still in school, look into a tuition payment plan to help you — it can break up the costs.

Increase Income

How might you increase your income? Can you get a side gig in the very popular gig economy? You might consider: 

• Freelance writing
• Rideshare driving
• Pet sitting/dog walking
• Virtual assistant
• Graphic design
• Tutoring
• Photography
• Delivery driving
• Social media management
• Handyman services
• House cleaning
• Online surveys
• Event planning
• Blogging
• Babysitting
• Transcription services
• Dropshipping
• Personal fitness training
• Freelance web development
• Selling handmade crafts

Or what about a second job? If you have the energy to work two (or even three) jobs, it would be well worth it to pay off your student loans faster. Consider the following:

• Retail associate
• Bartender
• Restaurant server
• Call center representative
• Delivery driver
• Warehouse worker
• Customer service representative
• Administrative assistant
• Security guard
• Hotel receptionist
• Uber/Lyft driver
• Bank teller
• Personal care aide
• Janitor
• Cashier
• Night auditor
• Fitness instructor
• Receptionist
• Freelance designer
• Landscaping assistant

Or you can ask for a raise at your existing job, of course. Once you make a decision about how you’ll increase your income, you can put any extra hard-earned money toward your debt. It’s a fantastic way to get out of debt much more quickly than you might have been able to do previously.

Refinance Only if it Makes Sense

Refinancing means replacing your existing loans (federal, private or both) with a private loan. Refinancing doesn’t reduce the amount you owe — it changes your loan in some way so you owe less over your loan term. These are the ways it can change your loan positively:

• Give you a shorter repayment period: Refinancing a loan can result in a shorter repayment period, which allows you to pay less interest over time. However, it’s important to note that with a shorter repayment period, it’s likely that you’ll have to make higher monthly payments on your student loan debt.
• Lower your interest rate: Getting a lower interest rate is one of the biggest benefits of refinancing, because you can save money over your loan term if you have a lower interest rate. For example, if you owe $30,000 on your student loans at 7% and a term length of 20 years, you’ll pay more than $26,000 in total interest over the course of the loan. If you refinance to a 5% interest rate and keep the same 20-year term, you’ll save around $8,000 in interest.
• Reduce your monthly payments: You can also lower your monthly payment through a refinance. However, it also increases your loan term, and a longer loan term means you’ll end up paying more in interest over time. 

The borrower requirements generally vary by lender, but you generally must have good credit with an established credit history, stable income, a degree from an accredited college or university, and a certain amount in student loans.

Shop around with a few different private loan lenders to see if a refinance makes sense for you. 

Don’t Bank on Government Plans

So much has been said about the benefits of sticking to government plans, like loan forgiveness programs or deferment or forbearance options. However, it’s a much better option to simply pay off your student loans yourself, as we’ve discussed. But why, exactly?

Here’s exactly why: Let’s take Public Service Loan Forgiveness (PSLF) as an example. You must make 120 qualifying monthly payments on your student loans and work for a qualifying employer (such as a government or nonprofit organization) to qualify for PSLF.

In other words, you must continue making payments for 10 years, plus you might give up on more beneficial routes of employment, including more lucrative job opportunities. (However, it is important to note that you can get certain forgiveness benefits if you work as a teacher, for the military or as a health care worker.) 

Why drag out your student loans longer if you could finish paying them off in five years instead of 10? You’ll save money by not dragging them out. Income-driven repayment plans can also affect you in the long run as well because you pay based on your earnings and family size.

Federal loans also allow you to temporarily pause your payments through deferment or forbearance if you face financial hardship, unemployment, or if you’re returning to school. You will still accrue interest while your loans are in forbearance, so you’ll owe even more money over your loan term while they’re in forbearance.

Need an example? Let’s break down an example of how an income-driven repayment plan can end up costing a student more money over time with actual numbers:

• Loan amount: $50,000
• Interest rate: 5%
• Annual income: $40,000 to start, increasing by 5% per year
• Family size: 1

With the Standard Repayment Plan:

• Repayment term: 10 years
• Monthly payment: $530 (fixed)
• Total payments over 10 years: $530 x 120 months = $63,600
• Amount added to original loan amount: $13,600

With PAYE Repayment Plan:

1. Years one through three: Monthly payments are income-driven. Let’s say the payments start at $200 per month.
   • Total for first 3 years: $200 x 12 months x 3 years = $7,200
2. Years four through six: As income increases, the payments rise to $350 per month.
   • Total for next 3 years: $350 x 12 months x 3 years = $12,600
3. Years seven through 10: Payments continue to rise as income increases further, say to $450 per month.
   • Total for final 4 years: $450 x 12 months x 4 years = $21,600

Total payments over 10 years (before forgiveness at 20 years) = $7,200 + $12,600 + $21,600 = $41,400

But here are the hidden costs. During the 10 years, interest accrues on the loan balance. In this example, the borrower’s monthly payments early on ($200, $350) may not cover the full interest on the loan, leading to the loan balance increasing over time (negative amortization).

Even though the borrower only paid $41,400 over 10 years, which seems like a savings compared to the standard repayment plan, here’s where the cost comes in: They could have paid off the loan faster under a standard repayment plan and avoided the extra accrued interest. By the time year 20 rolls around, how much would you have paid under the income-driven plan versus the standard repayment plan, or better yet, paying your loans off early?

It’s quite possible that you feel like you don’t make enough to pay off your loans, but consider getting a second job or side hustle instead of believing you have to get on one of the income-based plans.

Watch Out for Consolidation

Consolidation means taking all of your federal student loans and turning them into one loan with one interest rate. It may not be a good idea to consolidate your federal student loans because what happens if some of your federal loans have a lower interest rate? 

Consolidation can also lengthen your repayment period, so you’ll likely pay more in interest over the years. In addition to that, outstanding interest on your consolidated loans becomes part of the original principal balance on your new consolidation loan, meaning interest might accrue on a higher principal balance than if you’d kept your loans divided.

Consolidation might also mean lower interest loans might become higher when you put them all together. Ask questions about what it’ll mean for your loans before you opt to consolidate.

Consider All Angles When Getting Rid of Student Loans

The message: You and only you have the power to learn how to get rid of student loan debt. Student loans won’t magically disappear, unfortunately!

Wondering how to get rid of private student loans, including how to get rid of Navient private student loans or private loans from another provider? The same principles above can apply to private student loans as well. 

The biggest thing is to plug away at them, and even if you have a low interest rate, consider what having student loans hanging over your head will do for you. If you owe money, that entity will control your life until you pay it back.

Learn more: How to Apply for a Parent PLUS Loan and private vs. federal student loans for college

FAQs

We’ll take a look at a few frequently asked questions about getting rid of student loans below.

Can you get student loans wiped out?

Yes, in very rare situations, you can have your student loans discharged, but that doesn’t happen very often. But what does that mean, exactly? When your student loans are discharged, you won’t have to pay back some or all of your loans. You may also qualify for forgiveness after successfully participating in a government plan, such as PSLF. 

However, in many situations, these programs prolong your student loan debt and cause you to pay more over time. And if you’re waiting for a fairy godmother to come and wipe out your student loans, dream on!

What happens if I don’t pay my student loans?

After a 30-day-late payment, your loan servicer will charge you a late fee up to 6% of the amount due. After 90 days of no payments, your servicer will report your loan as delinquent to the credit bureaus. You don’t want that, because it can affect your credit score, potentially preventing you from buying a house or even affecting your ability to get a job (some employers check your credit!).

How do you pay off student loans when you’re broke?

I get it — it’s so difficult to understand how you’ll even put food on the table sometimes. However, consider getting a side hustle or part-time job to set aside money for paying off loans. Ask your buddy if he needs extra help in his junk hauling business, or use your skills you learned in college to create a side hustle that you and only you can do. The sky’s the limit, so use your imagination.