How to Speed Up Student Loan Repayment in Three Easy Steps

There’s no doubt about it—law school grads today are feeling the student loan squeeze.

A recent New America study showed that the average law student leaves school with more than $140,000 in loans, the second highest debt burden behind medical degrees.  That’s up 63% from just 10 years ago, and translates to a typical monthly payment of $1,611 (at a 10-year term and 6.8% interest rate).  Not an easy load to bear for a decade or sometimes more. 

Want to be done with your loans sooner?  It’s not only possible, but easier than you think.  There are two main drivers that accelerate student loan payoff: prepaying, or paying more than the minimum amount required, and reducing interest rate.  Here are three simple ways to do both of those things—minimal effort required:

1.  Sign up for automatic billing

If you haven’t already switched from manual to automatic (ACH) payments, this is the first easy way to give yourself a break.  Not only does it save you time and hassle, but most lenders offer a small interest rate discount (usually 0.25%) for doing so.  That may not sound like much, but every little bit counts when it comes to saving money and speeding up loan repayment. 

For a borrower with $140,000 in loans at a 6.8% interest rate and 10-year term, a 0.25% reduction in interest rate would lower monthly payments by $17.89 and save $2,146 in interest over the life of the loan.  And if you get the interest rate break but keep your payments the same (in other words, prepay an extra $17.89 each month), you’ll be done with your loans a full month sooner.

How could ACH accelerate your loan repayment?  You can do the math on your own loans here.

2.  Pay bi-weekly

This is a commonly used mortgage strategy, but it works just as well for student loans.  Matching up payments with your paycheck makes it easier to increase the amount slightly without noticing the money is gone, plus bi-weekly payments add up to an extra month of payments each year.  

In the case of our $140K/6.8%/10-year borrower, switching from one monthly payment of $1,611 to bi-weekly payments of $805 would not only save more than $6,600 in interest, but it would also eliminate the debt in less than nine years.  Just think what an extra $25 per payment could do.

Most of the bi-weekly loan calculators out there are mortgage-specific, but they work great for student loans, too. Here’s one to try.

3.  Consider refinancing

One of the best ways to be done with student loans sooner (and save a bunch of money in the process) is to lower your interest rate by refinancing.  Many law school grads become eligible for this option within a few years of graduating, when they’re steadily employed and their financial situation has improved.  Not only does refinancing slash interest, it can also reduce your monthly payments or shorten the amount of time it takes to pay off the loan—you decide what’s more important to you. 

If our $140K/6.8%/10-year borrower is able to reduce interest rate by just one percentage point—to 5.8%—he could keep the same term, lower monthly payments by $71 and save $8,500 in interest over the life of the loan.  Or he could reduce the term to five years, pay an extra $1,000 per month and save a whopping $31,000 in interest—plus, be done with loans 5 years ahead of schedule.  

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No one likes to think about student loans, which is why a lot of borrowers tend to “set and forget” their loan payments and never look back.  But if you take a little time and effort to make some small changes, it can translate to big savings andbeing done with your loans sooner—at which point you’ll never have to think about them again.

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Dan Macklin, Head of Business Development and Co-founder at SoFi. As part of his Business Development role, Dan works actively with more than 30 leading law firms to offer SoFi's refinancing loans as a voluntary employee benefit.

As a leading peer-to-peer lender focused on transforming financial services, SoFi’s affinity-based marketplace connects high-quality alumni borrowers and investors directly – benefiting them both by bypassing the banks.  Since its launch in 2011, SoFi has funded over $650 million in loans including more than $125 million to lawyers around the country. Click the link to learn more about SoFi’s student loan refinancing services.