Strategies for Paying Off Student Loans

Learn about strategies to help manage your student loans and opportunities for paying them off


Graduating college can feel like the start of the rest of your life. Exciting new career possibilities and experiences lie ahead of you. But you might also see student loan debt on the horizon. 

You’re not alone. A report from the Federal Reserve revealed that by the end of 2020 total student loan debt had grown to $1.56 trillion. The good news is there are lots of different strategies for paying off student loans. 

The following list offers a few ideas to consider, but student loans can be complicated. Talking to a financial expert first could help you identify the best options for your situation.

1. Create a Budget

The Department of Education says learning to budget can help you make the most of your student loans and set yourself up for future success. And budgeting can help you keep your finances under control and give you a clue when you need to adjust your spending.

The agency has budgeting tips to help you get started. And the Consumer Financial Protection Bureau (CFPB) has a spending tracker that could help you track where your money goes.

2. Consider When to Start Paying Off Student Loans

You can usually start paying off your loan as soon as you receive the funds. But most federal student loans don’t ask you to start paying until after you graduate or your enrollment status changes. Private student loans don’t necessarily follow the same process.

If it works for your budget, you might consider making payments before it’s required. That’s because interest can still accrue, or build, on what you originally borrowed while you’re in school. It can also happen during grace periods—and even when loans are in deferment or forbearance.

Depending on the type of student loan you have, you could be responsible for paying that interest thanks to a process called capitalization. And that could have a big effect on the total amount you owe and how interest is calculated.

3. Pay More Than the Minimum

It doesn’t have to be a big lump sum. Anytime you can pay more than the monthly minimum, you could help yourself get out of debt sooner and pay less in interest in the long run. You can do it just once or as often as you can afford it. 

Got a tax refund? Work bonus? Birthday cash? You could put it toward your student loan.

But if you want the benefits of this strategy, you’ll need to keep paying at least the minimum amount every month. The Department of Education says to contact your loan servicer to learn more.

4. Make Biweekly Payments

Along the same lines as paying more than the minimum, paying more often could also benefit you. And lenders aren’t allowed to charge fees or penalties for prepaying. 

Most student loan payments are made monthly. But it might make sense to split your payment in half and pay twice a month instead—especially if your job pays every two weeks. Even if you’re just paying the minimum, it could help you pay off your loan faster and with less interest.

5. Put Extra Payments Toward High-Interest Loans

If you have several student loans, you could put extra money toward the loans with the highest interest rate first. But that doesn’t mean you should skip minimum payments on other loans. 

If your lender or servicer handles multiple loans for you, it’s important to tell them where to direct the extra money. Otherwise, according to the CFPB, they might decide for themselves how to allocate the funds. The CFPB has a PDF explaining more, and it includes a sample letter you can use to give your lender instructions.

6. Enroll in Autopay

Some lenders offer an interest rate reduction when you sign up for autopay, which could save you a good amount over the life of your loan. For example, you can save 0.25 percentage points by having payments on direct federal loans automatically debited from your checking or savings account.

Bonus: You’re less likely to miss a payment when they’re automatic. And that could help you avoid late fees and damage to your credit.

7. Consider Consolidating or Refinancing

Depending on the type and mix of student loans you have, you could consider ways to consolidate or refinance them. Those options might make it simpler to manage your debt by combining them into a single loan with one servicer or lender. It might also give you a chance to lower your interest rate. 

There might be drawbacks though. According to the Department of Education, you could lose some benefits. You could also end up increasing the total amount you owe or extending how long it takes to pay off everything.

8. Investigate Repayment and Forgiveness Plans

The Department of Education offers programs that could lower your payments or eliminate your student loan debt. But the application process and eligibility requirements can be confusing. And in the past, these hurdles have limited how helpful these programs can be. 

All that said, the programs might still be worth investigating. Here are a couple:

  • Applying for an income-driven repayment plan could lower your monthly payments based on how much money you make and the size of your family. But plans must be recertified every year or your payments could go back up. And while monthly payments may be reduced, you could end up paying more in interest over the life of your loan.
  • There are forgiveness programs for public service workers and teachers. But those programs have eligibility requirements. And failing to meet them could leave you on the hook to repay everything. For example, the public service program requires 120 qualifying monthly payments, 10 years’ worth, in order to be forgiven.

Talking with an expert could help you figure out whether a program is right for you and help ensure you stay eligible.

Find What’s Right for You

There’s no “best way” to pay off student loans. But there are lots of different ways. Some might come with drawbacks as well as benefits, so it’s important to consider everything. But once you find something that’s right for you, it could help you build for the future.


Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

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