Student Loan Repayment Hacks to Save Thousands in Interest

Paying off student loans can feel like a never-ending burden, but with the right strategies, you can save thousands in interest and become debt-free faster. Whether you have federal or private student loans, making small adjustments to your repayment plan can have a big impact on the total amount you pay.

Below, we’ll explore the smartest student loan repayment hacks, including biweekly payments, refinancing, employer repayment benefits, and more. Plus, we’ll answer some frequently asked questions (FAQs) to help you navigate your repayment journey effectively.

1. Make Biweekly Payments Instead of Monthly Payments

A simple yet powerful hack is to switch from monthly payments to biweekly payments. Instead of making one payment per month, you pay half your usual amount every two weeks. This small change results in:

• One extra full payment per year (since there are 26 biweekly periods in a year, meaning 13 full payments instead of 12).
• Less interest accruing over time since you’re reducing the principal balance more frequently.
• A shorter loan term without increasing your regular budget significantly.

Example: If your monthly loan payment is $500, making biweekly payments of $250 will result in an extra $500 payment each year. Over the course of a 10-year loan, this can shave off months or even years of repayment time.

2. Round Up Your Payments to Pay More Without Noticing

Rounding up your monthly payment to the nearest $50 or $100 can make a significant difference in how fast you pay down your loan.

• If your required monthly payment is $435, consider rounding it up to $500.
• This extra $65 per month directly reduces your loan principal.
• Over time, this small effort can save you hundreds or thousands in interest.

It’s a subtle way to accelerate repayment without feeling a drastic financial strain.

3. Refinance Your Student Loans to Get a Lower Interest Rate

If you have good credit and a steady income, refinancing can be one of the best ways to save thousands in interest.

How Does Refinancing Help?

• Lowers your interest rate, reducing the total interest paid over time.
• Can shorten your loan term, allowing you to pay off debt faster.
• Can consolidate multiple loans into one, simplifying repayment.

Example: If you have a $50,000 student loan at 7% interest, refinancing to 4% can save you thousands in interest over the life of the loan.

Caution: If you have federal loans, refinancing them into a private loan means losing federal protections, such as income-driven repayment plans and loan forgiveness options.

4. Pay More Than the Minimum Whenever Possible

The best way to cut down your student loan debt fast is to pay more than the minimum required amount. Even small extra payments reduce the total interest you’ll pay.

Ways to Find Extra Money for Payments:

• Cut back on non-essential expenses like dining out or subscription services.
• Use bonuses, tax refunds, or gift money to make lump-sum payments.
• Allocate any salary increases directly toward your student loan.

Every extra dollar you pay now saves you more in interest later.

5. Use the Avalanche Method to Pay Off Loans Efficiently

If you have multiple student loans, using the avalanche method helps minimize total interest payments.

How It Works:

1. Make minimum payments on all loans.
2. Put extra money toward the loan with the highest interest rate first.
3. Once that loan is paid off, move to the next highest interest rate loan.

This strategy eliminates costly high-interest loans first, reducing the total interest you pay over time.

If you prefer a psychological boost, you can use the snowball method, where you pay off the smallest loan first to gain motivation.

6. Take Advantage of Employer Student Loan Repayment Assistance

Many companies now offer student loan repayment assistance as a benefit to employees.

• Some employers contribute $50-$200 per month toward student loan payments.
• Others provide one-time lump sums to help pay down debt.
• Under the CARES Act, employer contributions up to $5,250 per year are tax-free (extended through 2025).

What to Do:

• Check with your HR department to see if your employer offers this benefit.
• If job hunting, consider prioritizing companies that provide loan repayment assistance.

7. Use Windfalls Like Tax Refunds, Bonuses, and Gifts Wisely

It’s tempting to spend unexpected money, but using it toward your student loan can make a big impact.

Windfalls to Apply Toward Loans:

• Tax refunds
• Work bonuses
• Birthday or holiday money
• Side hustle income

Even a single extra payment can cut down your loan principal and save you years of payments.

8. Enroll in Auto-Pay to Get Interest Rate Discounts

Most student loan servicers offer a 0.25% interest rate reduction for setting up automatic payments.

This might seem small, but over the life of your loan, it can add up. Plus, auto-pay ensures you never miss a payment or incur late fees.

9. Consider Income-Driven Repayment Plans (If Needed)

If you’re struggling to make payments, an income-driven repayment (IDR) plan can help by adjusting your payment based on your income.

There are several IDR plans, including:

• PAYE (Pay As You Earn)
• REPAYE (Revised Pay As You Earn)
• IBR (Income-Based Repayment)
• ICR (Income-Contingent Repayment)

These plans can lower your monthly payment, making repayment more manageable. However, they may result in longer loan terms and more interest paid over time.

10. Avoid Deferment and Forbearance If Possible

While deferment and forbearance pause your loan payments, interest often continues to accrue, making your loan balance grow.

Instead of pausing payments, consider:

• Lowering your payments with an IDR plan.
• Making interest-only payments to avoid balance increases.

Use deferment and forbearance only as a last resort.

Frequently Asked Questions (FAQs)