Understanding Guidelines for Paying Back Federal Student Loans

Don't miss these recommendations for paying back federal student loans so you can make the decisions that will help you get rid of debt.

paying back federal student loans

Student loans are a heavy burden on each year’s graduating class. Understanding the best ways of paying back federal student loans is essential. The quicker you can pay off those loans, the sooner you can contribute more savings to your future.

For some, getting to that point of having loans paid off and saving seems far off. No matter how long it will take, you will be more confident of getting there if you have a plan. Loans, interest rates, and minimum payments can be confusing, but they’re not a mystery. There are definite ways to pay your loans back, and if you plan accordingly, you can know the exact day your loans finish. Enjoy watching the days pass as you progress towards that moment. 

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3 Essential tips for paying back federal student loans

There are ways to pay off your loans quicker, but the most important thing is knowing where the finish line is. It’s not a race, and it is not the end of the world if your payments will take ten years or more. Having a plan means knowing what’s on the horizon and seeing yourself make meaningful and predictable progress towards your goals.

Here’s how you do it:

1. Awareness of what paying back federal student loans will mean

It’s important to know how much you have to pay back, and how many loans you have. Student loan debt often comes in the form of multiple loans, and it’s important to know the interest rates of each loan.

The point of being aware is to make an effective plan that you can stick to. This doesn’t mean making audacious goals of huge payments.

The snowball method is on popular approach, where you pay off the smallest of your loans first with all extra payments going towards that loan until it is gone. Then you go to your next smallest loan and pay that off in the same manner until all your debts are gone.

2. Contribute extra payments the right way

Extra payments are essential to getting your loans paid off quicker. But, if you’re not earmarking your payments the right way, you could be tricking yourself into thinking you’re making progress.

Whether you make multiple payments during the month or one large sum, make sure those payments are not going towards future payments. This will only push back your next due date but doesn’t necessarily help you pay off loans sooner or reduce your accruing interest.

Communicate clearly that you want all extra payments to go towards your current loan balance.

3. Use any extra income towards one purpose

Plan your budget and monthly payments around your income. Now and then, people come into a little extra money. Whether this is gift money, bonus money, or prize money, have a plan in place for how you will contribute this to your loans.

Every dime of extra money you see doesn’t need to go directly towards your student loans, but if you want to pay them off early, you should at least contribute a share of that cash towards an early payoff.

Plan like you plan any other part of your payments. Maybe up to $100 all goes towards loans. Beyond that can be contributed towards savings or a nice night out. Just remember not to divert from the plan without good reason. If you don’t follow a plan, you don’t achieve the planned results.

Keep your eyes on the finish line and focus on making consistent progress towards that goal. When your loans are paid in full, treat yourself to a celebration with the extra money you have that month, but immediately repurpose towards savings. You always need a plan in place. When circumstances change, it is time to make a new plan.

Are there other ways you have found that make paying back federal student loans easier?

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  • Bradly B.

    Consider paying off your highest interest rate loans first with any extra money you have going specifically towards that principal using extra payments. I prefer this method over the snowball method mentioned above since that targets your smallest loan regardless of the interest rate. It is important to consider all of your debt (credit card, student loans, car, home, etc.) before allocating extra money you may have. Always continue to pay all of your regular loan payments each month. Also, consider investing the extra capital you have (instead of paying off your loans faster) once you are able to earn more (after accounting for taxes), percentage-wise, than your highest interest percentage due loan. Also, getting matching money from a workplace retirement plan would also normally be a better use of extra capital at least until you get the full matching amount. Lastly, if a low credit score is causing you undue problems, then consider targeting only high-interest debt until the score rises. Allocating any extra money you have is just a balancing act. Weigh the benefits and detriments of each option you have.


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