Borrow Student Loans

5 Strategies to Start Repaying Your Student Loans And Become Debt-Free

Ginger Abbot  |  August 5, 2021

The student debt repayment strategies you can rely on, and how to execute them now, no matter your loan amount.

Student loans in the United States totaled $1.73 trillion in the first quarter of 2021, and student debt repayment can be a huge burden on graduates just entering the workforce. (And even those who have been working for years!) If you haven’t landed job since graduating, the good news is that you can apply for a deferment for a year, and you won’t accrue additional interest charges during that time. When you’re new to the workforce and earning very little, you can also apply for an income-based repayment plan, which takes your income into account to determine monthly payments. But for those without those options, there’s still hope. 

But how, exactly, are you supposed to pay off your debt if you’re barely managing to keep your head above water? First, know that you’re not alone. Second, here’s a few strategies you can employ to ensure you’re making your payments on time, and one day soon, becoming debt-free. 

1. Create A Budget You Can Stick With 

A solid budget is essential if you want to keep your financial priorities straight. (If you haven’t checked out our podcast with YNAB Founder Jesse Mecham on “Budgeting Without Tears” it’s a must-listen, as is our story on how to budget if your spending habits have changed!) There are countless ways to budget, and one of our favorite methods is the 50/30/20 budget. It’s fairly effortless to follow, and very beginner-friendly. This budget suggests that you allot 50% of your earnings to things you need, such as rent and other monthly expenses, 30% to things you want that aren’t necessary to your survival, and 20% toward savings and debt repayment. Once you get started, you’ll be amazed how just keeping an eye on your spending can change your financial life. 

2. Use Your Gifts Wisely

Whenever you receive money for your birthday, a holiday, graduation or some other occasion, it might be tempting to treat yourself to an item (or several items!) on your wishlist. But give it some thought first. Do you really need that thing you’ve been eyeing? How much better would you feel if you put that money toward becoming debt-free?

Think about your gift as “bonus” money. After all, you weren’t counting on it as part of your budget, so why not put it towards your future? We bet the person who gave you that generous gift would probably be thrilled to know that you were using the money to improve your financial standing, and reach your bigger life goals. And the quicker you pay down your loans, the better off you’ll be. If you only make the minimum payment each month, it could take you up to 20 or even 30 years to repay your loan in full. You deserve to live your best life, debt-free. Why not contribute extra money to making that happen?

3. Set Up Autopay

When you set up autopay for your student loan bill, your payment is automatically deducted from your bank account, and you never miss a payment since it’s all happening automatically.  Autopay also makes it easy for you to set up bi-weekly payments. This option can be a good one for people who get paid every two weeks. The idea is to make payments every two weeks by splitting your regular monthly payment in half, and by the end of the year, you end up paying more toward your debt than you would have with a traditional monthly payment, because several months have five weeks.  And, bonus: paying toward your balance every month, on time, also keeps your credit score up. 

4. Choose Your Job Carefully

It’s no secret that some careers offer higher salaries than others. For example, an engineer is probably going to make more money right out of college than someone in the hospitality industry. If you’re looking to earn as much as you can early on in your career, and you’re passionate about several different things, then you might want to choose the career path where you stand to earn the highest salary. Also, keep in mind that certain careers earn may earn benefits (including forgiveness) from federal loans. People working jobs in the public sector, like teachers and nurses, may be eligible to apply for loan forgiveness. (Here’s the latest on student loan forgiveness proposals!) Just make sure you read the fine print! And don’t forget to pay close attention to the benefits you’re offered before you accept a new job.  Find a position with health benefits, retirement benefits, and whenever possible, assistance with student debt repayment. 

5. Look Into Refinancing  

Sometimes, the best way to pay off debt is to redistribute it to another lender with lower interest. If you refinance your loans, your debt will be given to a private lender. The good news is that your loans will all be lumped together with one lender, potentially with a lower interest rate. Just choose carefully, because you could end up with an interest rate you didn’t anticipate and add time to your balance.

If you’re interested in refinancing, you’ll potentially earn several benefits. A lower interest rate means you could pay off your debt sooner — saving years on your student debt repayment plan

As another option, you could see if you qualify for a probate advance, which is available if you stand to inherit at least $10,000 from a relative some time in the future. Borrowing against your own inheritance is better than borrowing from an outside lender, since the funds will be yours to begin with — but, of course, this is not an option for everyone.

Your Diligence Will Pay Off

The average American student carries almost $30,000 in debt. That’s an overwhelming sum that could very well be the same amount as someone’s first-year salary out of college. It’s no surprise that it can feel daunting to tackle all at once. Thankfully, with these strategies, you can make student debt repayment easier — and become debt-free sooner than you imagined.


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