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Phoenix Forward magazine

7 tips for paying off student loans

Paying off student loans

You’ve finished college with two things: a new degree and at least one student loan to pay off. But don’t worry, says Casey Gorman, project manager for the University of Phoenix repayment management team, there are simple ways to pay off those loans responsibly — and in some cases, quickly.

Here, Gorman outlines seven tips to help get you started:

Set up direct payments.

Many lenders have some kind of interest rate discount — usually about 0.25 percent — for students who set up direct payments from their bank accounts, Gorman says.

“Lenders like direct deposits because they increase the likelihood that you’ll make your payments on time,” she points out. And while one-quarter of 1 percent doesn’t seem like a lot, Gorman notes that it will add up over time. “A small discount is better than no discount,” she asserts.

Increase the number of payments.

When you can swing it, make an extra payment, Gorman suggests. “Those funds can be applied directly to the principal balance [if specifically requested],” she points out, “which means you pay less in interest over time and pay off your balance earlier.”

Doing this requires consistency: If overpaying one month means missing a payment the next, it can have a negative effect on your credit score if the institution you owe reports late payments to credit bureaus, she says. Lower credit scores can result in higher interest rates on future loans, costing you more down the road.

Manage your budget.

With a set spending plan, Gorman says, you not only know where your money’s going, but also when you have any leftover funds each month to put toward student loans. “Giving up extras is no fun,” she acknowledges, “but when you watch your spending, you may notice that you are spending too much on things you just don’t need.”

Gorman suggests writing down and regularly reviewing your weekly and monthly expenses, noting, “It will keep you on task.”

Pay off high-interest loans first.

Loans with high or adjustable interest rates cost more the longer you have them, so tackling those first will save you money in the long run, Gorman says. A loan with an adjustable variable interest rate, for example, can adjust from 6 percent to 8 percent.

“Target payments toward unsubsidized and adjustable variable rate loans first, since those will typically have higher interest payments,” Gorman stresses.

Consolidate debts.

Both the federal government and some private lenders offer consolidation loans. Be mindful, Gorman emphasizes, of new interest rates on consolidations. “Evaluate your consolidation terms carefully,” she says. “Private consolidations typically will not provide the same repayment terms and benefits as a direct loan consolidation would.”

Explore repayment options.

Research all of the repayment plans for which you might be eligible, Gorman suggests. For instance, rather than extending the term of your loan and potentially paying more interest, you might qualify for the federal Income-Based Repayment Plan. This program typically caps your payments at 15 percent of your annual income and allows you to repay student loans based on your monthly income.


Be creative.

Find out if your bank offers a debit card rewards program that will allow you to pay down your balance with debit points. While you’re at it, check whether your lender offers any other interest rate deductions. Some private lenders, for example, reduce interest if your credit score is consistently high and your payments have been on time.

The Upromise Loan Link® program also can help you earn cash back on eligible purchases to help pay down your Sallie Mae® loans. Another possibility: Negotiate with potential employers for partial loan payoffs as part of a compensation package or as a hiring incentive. Gorman adds, “It never hurts to work every angle.”

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Sallie Mae is a registered trademark of Sallie Mae Inc.