SoFi

While we’re already a ways into the year, it’s important to reflect on those resolutions that are meaningful and actually achievable. It doesn’t matter how big or small they are—as long as you stick with them and work to make them a reality.

Paying off your student loans may sometimes feel like a pipe dream, but it doesn’t have to. Of course, if you have other forms of debt, those might take precedence over your student loans. For example, if you have credit card debt with a higher interest rate, you may want to be focusing your efforts there (while paying the minimum on your student loans, of course).

But if knocking out a chunk of your student loan debt is your top priority, let’s talk about how to make a bigger dent on your loans this year. As long as you tell your loan servicer you’d like to have extra money go toward your principal instead of interest, you could start to chip away at that balance a little at a time. Here are a few ways you can make student loan payments bigger in the coming year.

1. Budgeting for It

Review your budget to see if you can move money around. Perhaps try going to one less work lunch a month or one less coffee shop each week. You can put that extra cash toward your student loan principal each month.

If you’re having trouble making ends meet and you can barely afford the minimum payment, this might not be the right option for you. But if you have the opportunity to chunk away at your loan by spending less elsewhere, it may be worth trying.

2. Putting Your Bonuses Back into It

Sometimes the minimum payment may be all that you can afford, which is still okay—but when you get a little extra cash, that could be a great opportunity to get ahead on your student loans.

If you get a raise, you can start to increase your monthly payments. A little bit can still make a difference every month and may help you pay off your loan sooner.

If you get a bonus or a tax refund, you can make a big, one-time payment. And as we said earlier, consider contacting your loan servicer to let them know the extra payment needs to go towards your principal balance—otherwise your lender may be required to apply your extra payment to your outstanding interest first.

3. Finding Your Match

Sometimes, companies will match student loan payments up to a certain percent, like a retirement match. See if your company offers this and if so, consider taking advantage of what is essentially “free” money.

If you aren’t sure what student loan-related benefits your company offers (if any), it might be a good idea to schedule a sit-down with Human Resources. Student loan repayment is becoming a more popular employer benefit as student loan debt continues to rise. As millennials further populate offices across the U.S.—they’ll make up 75% of the workforce by 2025—they’re making it clear to their employers that student loan reimbursement is a benefit they want.

4. Refinancing Your Student Loans

Refinancing your student loans can be a smart way to potentially pay off your loan sooner. While refinancing may help you secure a lower interest rate on your loans, you could also shorten your loan term such that you’re required to make higher monthly payments, thus chipping away at your debt faster.

For example, let’s say you want to pay your loan off in, say, five years instead of 10. Refinancing may allow you to select higher monthly payments and a shorter term to meet that goal. Refinancing can help lower your interest rate, which may help you pay off your loan faster if you also shorten your loan term.

A lower interest rate and shorter term could ultimately mean you pay less interest over the course of your refinanced loan. One caveat to keep in mind: If you refinance with a private lender, you’ll lose access to federal loan benefits like income-driven repayment plans, forbearance, and deferment.

5. Getting a Side-hustle

Whether you capitalize on your hobby or you like to walk the neighborhood dogs, a side-hustle can help you make some cash.

Sometimes day jobs don’t pay enough for “extras.” If that’s the case for you, getting a side-hustle can be another way to earn additional income to pay for those “extras.” And one of those extras might be increasing your loan payments.

If your student loan payment strategy is to put more money toward your principal but your full-time job doesn’t cover it, there are plenty of side-hustles available. If you’re crafty, you can sell your goods online or at a local market. If you’re a math whiz, you could consider tutoring high school or college students. And if you have an extra room, you could think about renting it out.

The options are endless! And who knows? Maybe your side-hustle will start earning you enough to become your full-time gig.

6. The Debt Snowball Method

Slogging through debt isn’t that fun. But if you’re only earning enough to make minimum payments—or not make any payments at all—there are a few debt elimination tactics that may be worth trying. One of those is the debt snowball method.

The debt snowball method is when you pay off your debt in order from smallest balance to largest balance, regardless of interest rate. You’d continue to make minimum payments on all your different debts except the smallest—that’s where you’d pay as much as you possibly can.

When the smallest debt is paid off, you would then start to pay off the next smallest debt while still making minimum payments on the rest. You’d repeat this until all your debt is paid off.

The downside to this method is that, because you’re disregarding the interest rates attached to your loans, you may end up paying off lower-interest loans before the ones with high interest rates. And that could mean paying more interest in the long run.

Making Your Contributions More Impactful?

Regardless of how you choose to make student loan payments this new year, remember there are options. As we discussed, one such option is refinancing, which could get you a lower interest rate than what you’re currently paying on your student loans.

If you’re committed to increasing your student loan contribution this year, consider learning more about student loan refinancing with SoFi. With increased contributions and a shorter loan term, you could get out of debt faster than you thought possible.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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As a college graduate, getting started in your career and planning for your financial future should be top priorities. For 44 million college graduates , part of this includes repaying student loans. The average college student graduates with approximately $37,172 in student loan debt.

Repaying student loans can cost a substantial amount of money when you factor interest into the equation, but if you’re planning on working for a non-profit organization or a government agency, public service loan forgiveness could save you years’ worth of payments. But federal loan forgiveness is not necessarily for everyone.

Another option is potentially refinancing your student loans at a lower interest rate—an appealing way to save money over the life of your student loan, especially if you don’t qualify for public student loan forgiveness.

After starting your new post-graduation career and creating a budget, you’ll also want to consider your student loan repayment options and have a plan for managing your student loans.

As with any loan option, there are pros and cons to the Public Service Loan Forgiveness (PSLF) program. You’ll have to decide if it’s right for you or if refinancing your loans could be a better option for your finances in the long run.

What Is Public Service Student Loan Forgiveness?

Also known as PSLF, the Public Service Student Loan Forgiveness is a federal program that may forgive or cancel the remainder of your Direct Student Loans if you work in a qualifying public service job and meet certain stringent criteria, including making 120 qualifying monthly payments. There is no cap on how much can be forgiven, so if you are able to meet the criteria, the rest of your loan goes away.

What Are Public Service Loan Forgiveness Qualifying Jobs?

The first step to qualifying for any kind of federal loan forgiveness program is filling out the employment certification form . Often people wait until after a few years of making payments before filling out the employment certification form, only to then find out those payments didn’t qualify because their job didn’t meet the requirements.

In general, PSLF qualifying jobs are more about the employer than about the specific role you’re filling at the organization. The important thing is that the employer qualifies as a public service organization.

That includes government organizations and 501(c)3 tax-exempt non-profit organizations. There are a few non-profit organizations that are not officially 501(c)3 but still qualify—but only if they provide certain types of qualifying public services. Working as an AmeriCorps or Peace Corps volunteer also counts as a qualifying job.

Employers that don’t qualify—even though working for them can include meaningful and important jobs: Labor unions, partisan political organizations, non profit organizations that are not official 501(c)3 tax-exempt organizations, and any for-profit companies.

You also must be working full-time in the qualifying job, which generally means at least 30 hours per week or whatever your employer’s definition of full-time is.

Other Requirements for the Public Service Loan Forgiveness Program

There are a number of other requirements and specifications necessary to qualify for public student loan forgiveness. For example, only Direct Loans are eligible for PSLF.

If you have other kinds of federal student loans, particularly if you borrowed before July 1, 2010, then you may be able to consolidate your federal student loans into one qualifying federal Direct Consolidation Loan.

However, none of the payments you might have made on your Direct Loan before consolidation will count toward your 120 monthly qualifying payments.

The slightly more confusing part of the requirements are the 120 monthly qualifying payments. These do not necessarily need to be consecutive—if you leave a qualifying employer, you do not lose credit for previous payments you may have made under the employer.

The payments do have to be on qualifying repayment plan, however. Generally, to qualify for federal loan forgiveness programs, you need to be on an income-driven repayment plan. There are four different kinds offered, with the most desirable being the Pay As You Earn Repayment Plan (PAYE) and the Income-Based Repayment Plan (IBR). These typically set a cap on how much your monthly student loan payment will be based on how much you’re currently earning.

For example, if you’re on the Income-Based Repayment Plan, then your monthly payments will be either 10% or 15% of your discretionary income (depending on when your loan was disbursed), but never more than your payment would have been under the standard federal 10-year repayment plan. Your discretionary income is calculated each year based on your family size, location, and salary.

If you’re making income-based payments each month, then it might take longer to pay off your loan because your repayment term will be longer (20-25 years for IBR and 20 years for PAYE), and you’ll be paying interest during that whole time—which adds to the total amount you’ll end up paying.

However, if you meet all the requirements and make the payments, then you could ultimately have your loan forgiven. But even after you’ve made all the 120 qualifying monthly payments, you do not automatically get loan forgiveness or have the rest of your loan cancelled. You still need to apply.

Is Loan Forgiveness Right for You?

While loan forgiveness seems like the ultimate dream, there are downsides, too. Income-driven repayment plans are, obviously, tied to your income.

That means if you have a large loan but a small income and are making very small payments on your student loan, then you could end up paying more over the life of the loan as the interest compounds and gets added to the remaining balance.

If for some reason you make the 120 qualifying monthly payments but then aren’t able to get the remainder of your loan forgiven, all that extra interest could end up costing you. And, unfortunately, many students find it challenging to get their loan forgiveness application officially approved.

Another downside is that your loans have to remain as federal direct loans in order to qualify for potential forgiveness. That means you cannot consolidate or refinance them as private loans, even if the lower interest rates might save you money.

For example, the federal interest rate for undergrad Direct Loans is set at 5.05% through June 30, 2019. A $37,000 federal loan, paid back over 10 years, with a monthly payment of $393, would end up costing you about $10,202 in interest payments on top of the principal. That’s a lot of money.

Student Loan Refinancing with SoFi

And, of course, there’s the fact that if you want to pursue a career that doesn’t fall under the public service definition, then you might want to consider other student loan repayment options, like refinancing. When you refinance your student loans, you take out a new loan—potentially with a new interest rate or loan term.

Depending on your earning potential and credit score, you could qualify for a lower interest rate, which might reduce the amount you pay in interest over the life of the loan.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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