You know about the repayment plans. You've seen the options to consolidate or refinance. Your friends have done everything they can to reduce their monthly student loan payments -- and they only pay the minimum amount.
But what if you want to pay off your student loans as fast as you can and as cheaply as you can?
Not everyone can manage this, and that's okay. It's tough to come up with the money you need to pay all your expenses and double down on your student loan payment.
If you have the means, however, paying off student loans quickly saves you money because you pay less in interest. It also frees up money in your cash flow to devote to other financial goals, like saving or investing.
Sound like something you want to accomplish? Then let's walk you through this 4-step process so you can pay off your student loans ASAP:
Step 1: Get organized
Make a list of all your student loans. Put the loan with the highest interest rate at the top of the list. Work your way down, listing out loans in order of highest rate to lowest.
This is the order in which you'll pay off your debts. The loans with the highest interest rates cost you the most, so you want to knock them out first if you want to save the most money on your debt repayment.
Step 2: Set your monthly payment amount
This is about paying off loans ASAP, which means paying more than the minimum. You have a few options here:
- Make a bigger payment each month than required
- Make 2 payments each month instead of 1
Either way will have you pay off your debt ahead of schedule -- all while saving you money. The best option for you will depend on your cash flow. It may make more sense to break up payments throughout the month, or you can pay a larger sum all at once if you're comfortable with that.
Choose the amount you'll pay to that first loan each month (the one with the highest interest rate), then set up automatic payments so you don't forget.
While you're proactively paying down the student loan with the highest rate, make sure to pay the minimums on the other loans. The idea is you knock out each loan one at a time, so all your available cash should go toward the primary debt you want to repay.
Step 3: On to the next one
Once you pay off that first loan, return to the list you made when you got organized in step 1. Move to the loan with the next-highest interest rate.
Remember the amount of money you paid each month toward Loan #1? Now that it's paid off, you want to take that same amount and add it to the minimum you paid on Loan #2 while paying down Loan #1.
Continue paying off that student loan until its balance reaches $0, too.
Step 4: Repeat
Simply repeat this process until you repay all your student loan debt.
The neat thing is that each time you pay off a loan, the process speeds up because you increase your monthly payment on each loan every time you start repaying a new one.
Paying loans off from highest interest rate to lowest, and paying extra each month, will allow you to repay your debt ASAP.