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During this time, many Americans are taking time to reflect on the things they’re grateful for. But for some people, the season of giving thanks actually represents something that they aren’t all that thankful for—student debt. November and December mark the end of many student loan grace periods, which means this is the time of year when recent grads have to start paying back student loans.

If you fall into this category, here’s something you can be thankful for: a smart student loan repayment strategy.

Because make no mistake—paying back student loans does require a strategy, particularly for the average graduate, law or medical school grad shouldering six figures of student loan debt .

You might think it’s as simple as choosing a student loan repayment plan and writing that first check. But variables like your monthly payment amount, the interest rates on your loans, and how long you take to pay everything off can all have a big impact on your bottom line. A smart strategy optimizes these factors for your specific situation, so that you don’t spend a penny more than you have to when paying back student loans.

You can’t do anything about your grace period ending, but you can take steps to help put your repayment strategy on the right track. Here are a few tips on how you might do just that:

Know What you Owe

Chances are you haven’t looked at your loans since you signed on the dotted line, so the first thing you’ll want to do is survey the damage. You can find your federal loans on the National Student Loan Data System (NSLDS). For private loans, try gathering up your statements or checking in with your school’s financial aid administrator. If you’re really at a loss, you can pull your credit report and all of your loans should be listed there.

Once you’ve tracked everything down, make a list of your loans and their important details: the type (e.g., subsidized, unsubsidized, Grad PLUS, private), the amount and the interest rate on each one. This information will be key to determining your strategy.

Read the Fine Print

Now it’s time to familiarize yourself with the features of each loan type. A general rule of thumb is that federal loans tend to offer more hardship-based benefits than private loans—things like forbearance, potential student loan forgiveness, and income-based repayment plans. It’s important to understand whether any of these benefits apply to you before determining your repayment strategy—you’ll learn why in a moment.

Private loans don’t typically offer these same types of programs, but some of them do provide forbearance and other valuable benefits—you’ll simply have to call your lender to find out.

Do the Math

Remember when we said that various factors (such as interest rate, monthly payment amount and loan term) make a difference in your loan’s bottom line? This is the part where you discover just how much. Federal loans offer different student loan repayment options, potentially allowing some flexibility around monthly payment amount and length of repayment term (e.g., 10 years vs. 20 years).

While it may be tempting to just choose the option with the lowest monthly payments, the long-term repercussions can potentially be costly. (Meaning, lower payments typically mean longer terms, which can increase the total amount you pay overall.) You can use tools like our student loan payoff calculator to discover how long it can take to pay off your loans using different interest rates and monthly payment combinations.

Consider your Options

You may also be wondering whether to consolidate or refinance student loans. Broadly, consolidating means combining two or more loans into one loan, while refinancing student loans entails applying for a new loan at a (hopefully) lower interest rate and a new term, then using that new loan to pay off your old loans.

If you consolidate student loans through the Direct Loan Consolidation program, only federal loans are
eligible, and a primary benefit is that you can reduce the number of different loans you have to pay each month and you may get a lower monthly payment.

Direct Loan Consolidation typically won’t save you money, since the resulting interest rate is a weighted average of the original loans’ rates, rounded up to the nearest one-eighth of one percent.

So you can lower monthly payments by extending the payment term at this new fixed interest rate, but be aware that this usually means you’ll spend more on total interest over time.

You may also be able to consolidate student loans through the refinance process, and some lenders will refinance both private and federal student loans. More importantly, refinancing may potentially save you money.

In order to qualify for a lower rate, you typically need a solid income and positive history of dealing with debt. Before refinancing federal loans, you’ll probably want to determine whether any of the federal benefits mentioned above apply to you—they won’t transfer to a private lender through the refinance process. But if saving money is your top priority, refinancing may be a great option for you.

Clearly, there’s no “one-size-fits-all” approach to determining a student loan repayment strategy. But if you take the time to understand all of your repayment options, you can create a strategy that works best for your situation and potentially saves you money over the long term. And that allows you to focus on being thankful for your education rather than resenting your debt.

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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Paying off student loans fast is all about momentum and resourcefulness. Staying up-to-date on your payments—or ideally getting ahead of them a bit—can give you the motivation you need to tackle and clear your student loan debt as quickly as possible.
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When it comes to student loan repayment, there are two great ways to build momentum: prepaying (or paying more than the monthly minimum) and reducing interest rates (through student loan refinancing).

Here are five tips to help you build momentum, so you can pay back student loans faster and make your debt a distant memory.

#1 Learning the Benefits of Prepaying

When considering how to pay off loans fast, you may want to think about saving money on student loan interest by prepaying. That means to make payments in addition to your regular monthly payment.

Generally, there is no penalty for making extra student loan payments (check with your lender or loan servicer to verify this), and it can help you spend less on interest over the life of the loan.

If you haven’t started paying off your loans yet, you can use our student loan calculator to estimate your monthly payments. Then, you can determine how much you want to pay on top of that each month, to help pay off your student loans faster.

As a bonus, it’s amazing how motivating it can be to see your outstanding balance shrink more quickly than you planned by making more than your minimum payment each month.

An important note: Some lenders may apply the additional money to next month’s payment instead of deducting it from your student loan balance if you don’t specify where you want to apply your prepayments. If your goal is to save money on interest and be done with your loans sooner, ask your loan servicer if they can apply any extra payments to your loan’s principal instead.

#2 Taking Control of Your Spending

Prepaying sounds great, but where are you going to come up with that extra cash? You can start by taking stock of where your money currently goes.

Many of us have “leaks” in our spending that we barely notice—whether we’re springing for frequent takeout dinners or have auto-payments on magazine subscriptions that we keep meaning to cancel.

Try recording your daily spending in the notes app on your smartphone or using an app like Toshl , which can help give you better insights into where your money is going. Sites like Mint offer tools that can help you create a livable budget with room for the occasional splurge.

#3 Using Unexpected Windfalls to Grow your Proverbial Garden

Instead of treating a windfall like “fun money,” use it to get ahead on your debt. Whether you come into money through inheritance, you get a pay out from a stock you’d forgotten you owned, or your boss hands out a surprise bonus, try to put a portion of your surprise cash straight toward your debt.

And don’t just think small—see if you can apply at least 50% of any financial gifts, dividends, bonuses, and raises toward paying down your loans.

#4 Creating Another Income Stream

If your main job isn’t extremely demanding, you might consider adding a side hustle to help pad your debt payments. Sites such as Upwork can connect you with freelance work. If you don’t have the time or inclination to take on another job, you can consider becoming an Airbnb host .

According to recent analysis from SmartAsset , the average host can expect to cover 81% of their rent by listing one room in a two-bedroom apartment on Airbnb.

They also found that, in many cities, it may be possible to pay the entire rent on a two-bedroom apartment with around 20 days of bookings per month. That translates to sizable savings you can put toward your student loans.

#5 Lowering your Interest Rate

If you are a working graduate paying down high-interest student loans, student loan refinancing could be a powerful way to make a dent, if you qualify. For example, securing a lower interest rate can make a big difference in what you have to pay over time.

Bear in mind that if you have federal student loans such as Direct Loans and Graduate PLUS loans, refinancing them with a private lender like SoFi means you will lose certain benefits that come with them, such as access to the Public Service Loan Forgiveness program and income-based repayment plans.

However, some graduates may find they don’t need these benefits and that the cost-saving benefits—and faster payoffs—that can come with refinancing provide more value.

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.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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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There are so many upsides to investing in your education—the personal enrichment and possibility of a bright and fruitful future being the most obvious. But, there are also some potential downsides that are hard to ignore, one of the main ones—if you’re like so many others—being the debt you may accrue.

Before you start losing sleep over your looming financial obligations, read on to gain a better understanding of how student loans work, starting with “the language of loans.”

Getting a grasp on certain student loan terms and concepts can benefit you in a few ways. For one thing, you’ll be able to better understand your student loan options, which means you can more easily compare features and fine print. That allows you to make confident decisions about your loans and, perhaps most importantly, save some money along the way.

So, what are the student loan terms every borrower should know? Here are a few of the big ones:

The Basics of Student Loans

Borrowing a loan can have long-term financial consequences so it’s important to fully understand the fees and interest rates that will affect the amount of money you owe. Here are a few of the most important terms to understand before you take out a student loan:

Principal

This is the original amount of money borrowed, plus any capitalized interest and fees. Capitalized interest is accrued interest that is added to the principal balance.

Term

The loan term is the amount of time the student loan will be in repayment. Loan terms vary by lender, and if you have a federal loan, you are usually able to select your repayment plan.

Annual Percentage Rate

Commonly referred to as APR—this is the cost of borrowing, expressed as an annual percentage. APR includes any fees associated with the loan, providing a more comprehensive view of what you are being charged. Depending on the fees associated with your loan, the APR could be a bit higher than the interest rate.

Accrued Interest

The amount of interest that has accumulated on a loan since your last payment.

The Potential Student Loan Pitfalls

Once you understand loan basics and have secured your student loans, there are a few more terms to know. Making sure you understand your repayment terms and options like deferment or forbearance will allow you to find the best strategy to pay off your student loans quickly.

Forbearance

The temporary postponement of student loan repayment during which time interest typically continues to accrue. If your student loan is in forbearance you can either pay off the interest as it accrues, or you can allow the interest to accrue and it will be capitalized at the end of your forbearance.

You will usually have to apply for forbearance with your loan holder and will sometimes be required to provide documentation proving you meet the criteria for forbearance. For a loan to be eligible for forbearance, there must be some unexpected temporary financial difficulty.

Deferment

Similar to forbearance, deferment is the temporary postponement of student loan repayment. During deferment, interest may or may not continue to accrue, depending on the type of student loan you have. In
the case of federal loans , the government may pay the interest on your Perkins, Direct Subsidized and/or Subsidized Stafford loans.

Capitalized Interest

This is when accrued interest is added to your loan’s principal balance. Most student loans begin accruing interest as soon as you borrow them. While you are often not responsible for repaying your student loans while you are in school or during a grace period or forbearance, interest will still accrue during these periods. At the end of said period, the interest is then capitalized, or added to the principal of the loan.

If you make your payments on time each month, you’ll keep accrued interest in check. However, after a period of missed or reduced payments (such as forbearance), accrued interest may be capitalized, which can cost you more money in the long run.

When interest is capitalized, it increases your loan’s principal. Since interest is charged as a percent of principal, the more often interest is capitalized, the more total interest you’ll pay. This is a good reason to use forbearance only in emergency situations, and end the forbearance period as quickly as possible.

Consolidation

The act of combining two or more loans into one single loan with a single interest rate and term. The resulting interest rate is a weighted average of the original loan rates.

Consolidating can make your life simpler with one monthly bill and payment, but it’s important to understand that it doesn’t actually save you any money. In fact, if you opt for lower payments when consolidating, this is typically accomplished by lengthening your loan term, which means you’ll pay more interest over the life of the loan.

The Potential Money-Savers

Building a repayment plan and sticking to it is one of the best ways to repay your student loans quickly, while spending the least amount of money on interest. Now that you understand what could cause your interest to skyrocket, here are a few terms that could help you reduce the money you spend over the life of your loans.

Automated Clearing House (ACH)

This is an automatic loan payment that transfers directly out of your bank account to your lender or loan servicer each month. The benefits of ACH are two-fold—not only can automatic payments keep you from forgetting to pay your bill, but many lenders also offer interest rate discounts for enrolling in an ACH program.

Refinancing Your Student Loans

Refinancing is the act of taking out a new loan at a lower interest rate and using it to pay off your original loan(s). Often times, refinancing your student loans allows you to lower your interest rate on your loans.

This is one of the fastest ways to slash your student loan burden. Not only does refinancing reduce the total amount of interest you’ll spend over time, but it can also decrease your monthly payments or allow you to pay off your loan sooner.

To see how refinancing your student loans could help alleviate some financial burden, take a look at SoFi’s student loan calculator. When you refinance with SoFi, there are no origination fees, application fees or prepayment penalties.

With good earning potential and credit history, you could qualify for a lower interest rate than the one you currently have. Refinancing your loans could help you manage your student loan payments.

Prepayment

Paying off a loan early or making more than the minimum payment. Both federal and private loans allow for penalty-free prepayment, which means you can pay more than the monthly minimum or make extra payments without incurring a fee.

The more you do it, the sooner you’re done with your loans—and the less interest you’ll spend over the life of your loan.

Whether you need help paying for school or help paying off the loans you already have, SoFi offers competitive interest rates and great member benefits as well.

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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Finding helpful programs to help your student debt can be overwhelming, especially if you already feel pressure from high monthly payments or loans that never seem to shrink. But there are many student loan assistance programs to give you more time to pay back your student debt, or lower your monthly payments for greater student loan relief.

Keep in mind, while extending your payback period or reducing your payments will help ease the month-to-month burden of your student debt, you might end up paying more overall due to interest on the loans.

Whether switching to a plan based on your income, extending repayment with the hope of forgiveness, or even refinancing your student loans, it’s important to run the numbers and see which plans you qualify for, and which could save you the most money in the long term.

The great thing about the different repayment options offered for federal loans is that you can apply to change plans anytime. So whether you’ve just graduated and are still looking for work, recently changed jobs, or just want to see if you qualify for a lower payment, here are some of the top student loan debt relief options.

Getting More Time to Pay Off Your Student Loans

The Standard Repayment Plan is the default student loan option; if you don’t opt into any other plan, you’ll pay off all of your debt after 10 years, or 120 monthly payments of a consistent amount. However, for many people, especially if you are just starting out in the workforce, this fixed payment can be very high, since it’s entirely dependent on your total debt and interest.

The first alternative repayment plan to consider for student loan relief is the Graduated Repayment Plan, which still keeps your payment timeline to 10 years, but starts out with lower payments at first and then, yes, gradually, increases the amount over time. You will end up paying more than under the Standard Plan, but if you are in a career where you expect a raise every two years or so, this might be a good option for you.

The average undergraduate student debt at graduation was $30,301 in the 2015 to 2016 school year. If you have more than $30,000 in outstanding student debt, you could also consider an Extended Repayment Plan, which increases your loan payoff period to 25 years instead of 10.

Payments can be fixed and stay the same, or graduated and increase over time, and your monthly payments will be lower than under the Standard Plan—possibly by up to half—since you are giving yourself more than double the amount of time to pay your loans off. If you need to make lower monthly payments and are OK with paying out more over a longer period of time, an Extended Repayment Plan might be the place to start.

Reducing Your Student Loan Payments Every Month

There are a number of income-driven plans, and each has its own quirks and qualifications, so it’s important to understand which one you want to apply for when you contact your loan servicer. These plans will make your monthly payment more affordable based on your income and family size. Most federal student loans are eligible for at least one income-driven plan .

Income-Based

Through an Income Based Repayment Plan, payments will be 10% or 15% of your discretionary income, depending on when you first took out your student loans. Any outstanding balance is forgiven after 20 or 25 years, but you may have to pay income tax on that amount. You must have a high debt relative to your income to qualify.

Income-Contingent

Payments will be either 20% of your discretionary income, or the amount you would pay on a fixed 12-year repayment plan adjusted to your income, whichever is less. Most borrowers can qualify for this plan, including parents, and outstanding balances are forgiven after 25 years.

Revised Pay As You Earn (REPAYE)

Payments are 10% of discretionary income, and outstanding balances will be forgiven after 20 years for undergraduate loans.

Pay As You Earn (PAYE)

Also makes payments 10% of your discretionary income, and caps at 20 years for forgiveness, but your payments will never more be than what you’d pay on the Standard 10-year plan. You must be a new borrower on or after Oct. 1, 2007 to qualify.

Income-Sensitive

Monthly payments will be based on your income, but your loan will be totally paid off in 15 years.

The important thing to remember about all of these plans is that you must reapply every year, even if your circumstances don’t change. If you are employed by the government or a not-for-profit and are seeking Public Service Loan Forgiveness (PSLF), you should repay your student loans under one of these income-driven repayment plans.

To apply for any of these plans, you have to talk to your loan servicer, which is everyone’s favorite task. You can find all of your federal student loans, and your individual loan servicer, by logging into My Federal Student Aid .

Once logged in, you can also check which repayment plans you personally qualify for by using the Federal Student Aid Repayment Calculator . Remember, it’s always free to apply for these student loan assistance programs.

One thing to note, Perkins Loan repayment plans are not the same as those for Direct Loan or FFEL Program loans, which are some of the most common student loans. You should check with your school for more information about repayment plans for a Perkins Loan.

Perkins Loans can also qualify for cancellation , based on certain employment as a teacher, nurse, military personnel, or employee of a volunteer service like the Peace Corps.

Still Having Trouble Making Student Loan Payments?

If you are already on an income-driven plan or have extended your repayment period and are still looking for greater student debt relief, there are other options to consider. There’s always picking up a side hustle, but it can sometimes feel like those extra bucks from babysitting or dog walking don’t make a big enough dent—and it’s easy to pocket that money, rather than put it toward savings or your loans.

Unless you get cast on a TV game show that will pay off your student debt, consider instead looking into certain employers that help pay off student loans, or even cities that offer financial incentives for you to live there.

Also, most loan servicers will reduce your interest by .25% if you sign up for automatic payments. On the average student loan debt of $30,000, say with 6% APR, reducing to 5.75% equals about $450 in savings on a Standard 10-year plan. Plus, making auto payments on your loans will help you incorporate it into your budget as a fixed expense which must be accounted for every month.

Reducing Your Debt Burden through Refinancing

Refinancing is another student loan relief option that works best if you have high-interest, typically unsubsidized loans and/or private loans not from the federal government. But keep in mind that if you refinance, some benefits of federal loans such as forbearance or qualifying for PSLF will no longer be available to you.

Refinancing and consolidation are often used interchangeably, but it’s important to know the difference. Student loan consolidation is the act of combining multiple loans into one new, often federal, student loan.

Student loan refinancing will get you a new loan entirely, at a new interest rate and/or new term, so you use that new loan to pay off your student loans. Then you pay back the new loan, which is no longer a federal student loan. Refinancing can potentially get you a lower interest rate, thereby making it easier to pay off your student loan debt.

About SoFi

SoFi offers student loan refinancing which can help you lower your monthly payments or shorten your loan term. Discover the different student loan options to see if refinancing could be a good option for you.

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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