The 411 on Student Loan Repayment

by Spero Financial

Money is a big hurdle for many students pursuing higher education. Student loans provide an opportunity for students to receive that education, setting them up for success later on. But student loans aren’t free college; they must be paid back. So, while they enable students to earn their degrees, these loans can also put them in debt that takes years to pay off.

Paying off student loans can be a long and tiring journey. It often gets discouraging and can feel never-ending, but we are here to let you know that paying off your student loans is possible! With the right tools and a thorough understanding of how student loans work, you can get the benefits of student loans without the burdensome drawbacks.

How Student Loan Payments Work

The first thing you should understand before taking out a student loan is how the repayment process works. Student loan repayment requires strategic planning.

Interest on student loans accrues daily. Any unpaid interest is added to the principal balance, forcing you to pay interest on interest. Negative amortization occurs when the total amount you owe increases even after you make payments. This increase results when you make payments that aren’t high enough to cover the interest.

The goal is to pay your student loan installments on time and in full. Every loan you take out appears on your credit report as a new account, and payments are reported based on the type of student loan.

It’s important to remember that student loans become delinquent the first day after you miss a payment. If you continue to miss payments, the loan will enter default, damaging your credit score. If the default continues without any communication between you and the lender, the lender can file a lawsuit against you and collect the debt. If this were to happen, you would lose eligibility for federal student aid in the future. While this is a worst-case scenario, it underscores the importance of staying current on your loan payments.

Student loan debt can be difficult to get out of, but that doesn’t mean it’s not an excellent resource for students who are looking to further their education and are willing to pay for it later. So, how can you get rid of student loans quickly and start accomplishing your other financial goals? Let’s find out.

How To Get Rid of Student Loans (and Fast!)

Student loans can feel intimidating, but with proper planning and a good financial strategy, you’ll be able to pay off your loans and move on with your life. Here are a few ways you can get on top of your student loans before they drag you down:

1. Make extra payments toward your principal.

You can make extra payments towards your student loans, but it’s important to specify that any extra money should go towards your principal balance. Otherwise, lenders may put the extra money toward your next payment or move up your payment date.

2. Refinance your loan.

You can refinance your student loan if you have good credit and a stable job. Refinancing replaces multiple student loans with a single private loan. You should look for a private loan with a lower interest rate to make it easier to pay off.

You could also opt for a private loan with a shorter term. This option would have larger monthly payments, but you’ll be able to pay back your debt faster and save money on interest. To be a good candidate for refinancing, you should have a credit score in the high 600s, reliable income, and a debt-to-income ratio below 50%.

3. Enroll in autopay.

Autopay ensures that loan payments are made automatically on the designated due date. Many lenders will lower the interest rate on your student loan if you enroll in autopay because they know you won’t miss any payments. This is a great option if you budget properly and can manage automatic monthly withdrawals from your bank account.

4. Make biweekly payments.

To make biweekly payments, you must be able to pay half your monthly bill every two weeks. Biweekly payments require careful planning and budgeting, but with this method, you’ll make an extra payment each year, which will help you pay off your student loan faster.

Pros and Cons of Paying Off Loans Early

Your student loan repayment goals depend on your long-term financial plan. Let’s take a look at some pros and cons of paying off your student loans early.


  1. You’ll reach other financial goals sooner.

Paying off student loans frees you up to focus on other financial goals, such as making investments, buying a house, and saving for retirement.

2. You’ll improve your debt-to-income ratio (DTI).

When you get rid of a loan, you lower the amount of debt you have compared to your income. A better DTI ratio can help you qualify for other types of funding and financing.

3. You’ll pay less interest.

The less time you’re indebted to student loans, the less time your balance will have to accrue interest. So, paying off student loans sooner rather than later shortens the time that interest can build.


  1. You could miss out on loan forgiveness.

Simply put, the more money you put towards paying off your loan, the less you’ll have to be forgiven. So, if you’re interested in pursuing loan forgiveness, you may want to wait before dumping large sums of money into repaying your loan.

2. You could slow progress toward other financial goals.

Spending money on paying off your student loans early takes money away from investing in retirement plans or other financial goals. With the right strategy, it is sometimes possible to make more money through investing than you would save in interest.

3. You could lose focus on other debts.

If you have other high-interest debts, it may be wise to put only some of your focus toward paying off your student loans. It’s smarter to pay off higher-interest debts first.

A college degree is often a powerful step toward your desired career — and always an impressive accomplishment. So don’t let the financial burden of student loans weigh you down. Take time to set your goals and determine how paying off your student loans fits into them. If you plan ahead and pay your loans off quickly, you’ll come out financially healthy with a college degree you can be proud of!

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