How to Get Rid of Private Student Loans: Your Fast Repayment Plan

Student loan repayment/forgiveness has been dominating the headlines in 2023. But while you're waiting for Biden's forgiveness plan to come through, it's important to have a plan in place for how to get rid of private student loans, while still living your life.

It’s not as difficult as you might think. Just follow these steps to set up both your federal and private student loan repayment! I've covered both federal and private repayment options below. 

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How to Get Rid of Private Student Loans?

There are really only two strategies for getting rid of private loans:

1. Getting aggressive (and staying consistent!) with a debt repayment plan, a la my $8k in 90-Day Challenge.
2. Refinancing (vs. debt management or debt consolidation) is often the best, easiest option.

When is refinancing student loans a good idea?

Say you have $40,000 in student loans at 9.9% interest and ten years left on your repayment. By refinancing to a 7% interest rate, you lower your monthly payment by $100 and save over $13,000 in interest over the next ten years.

$13,000! Yes, that is a downpayment on a house.

Other Private Student Loan Repayment Resources (by our editor, Lauren, for Student Loan Hero)

• Follow these ultra-easy, frugal tips for one year to pay off student loans faster 
• Do I have to pay my private student loans while I'm still in school?
• Where to go for personal help with your student loans

Should I get rid of student loan debt first, or save up to buy a home?

Traditionally, it's important to pay down debt first before you buy a home. Paying down debt has big home-buying benefits: it raises your credit score and frees up money in the budget for mortgage payments and upkeep.

But with student loan debt delaying homeownership up to seven years, it's become the age-old millennial conundrum: do I pay off student loans or buy a house? Do I have to wait for one to achieve the other?

You can get creative, but I do think it's worth knocking out a substantial portion of your debt before buying a home.  Why? Because you'll be able to afford more and breathing room is always a good thing.

How can I get rid of private student loan debt fast?

• First, save up a $1,000 cushion to cover yourself in case of emergencies.
• Then put every extra penny toward your student loan repayment.
• Set small, manageable financial goals.
• Create a strong debt payoff plan.
• Hack your budget (See here for four creative ways to hack your budget.)
• Try one of these money-making apps
• Set up your own side hustle

How to Get Rid of Private Student Loans: 4 Extra Tricks Servicers Won't Tell You

#1 – Cut a Quarter Point Off Your Interest

All student loan servicers are required to offer their borrowers a quarter-point discount off their loan rate for enrolling in auto-pay. That is when you have your monthly payment automatically deducted from your checking account. If they do not offer you a discount, ask for it.  You'e entitled to it!

#2 – Take Advantage of Repayment Options if You’re Eligible

Many of the complaints against servicers have to do with their failure to inform borrowers of income-driven repayment options when they are struggling with their payments.

Students who have a hard time making monthly payments on federal loans may be eligible for a number of repayment options that can lower their monthly payments.

Eligibility and the amount of the payment reduction are based on the borrower’s income and family size.

In some cases, the loan payment can be reduced to nothing, but borrowers must reapply each year which can change the amount of the payment.

When you start on an income-driven repayment plan, it doesn’t continue on its own. In order to continue with the plan, you have to reapply each year. If you don’t you can’t continue the plan.

If that happens, you could wind up accruing interest and lose any progress you made towards loan forgiveness.

Also – it is the servicer’s responsibility to notify you when it is time to reapply. Just to be safe, mark the reapply date two weeks ahead of time on your calendar.

#3 – Servicers Must Offer Forbearance if you are eligible

Did you know that forbearance is an option even if you are on an income-driven repayment plan? Forbearance allows you to suspend your monthly payments for 24 to 36 months over the life of the loan.

The problem with forbearance is that interest continues to accrue and capitalizes (usually) into the loan. This can make it more expensive when you start making payments again.

Still, it is better than defaulting on your loan. When informing your servicer of financial trouble, all of your options, including forbearance should be fully explained to you.

#4 – Refinance Your Loans Away from Your Servicer

Refinancing is one of the best ways I know of when it comes to how to reduce student loan debt.

What your loan servicer certainly won’t tell you is that you have the option to find a lender who will refinance all of your debt. Refinancing is always possible no matter what kind of loans you have and it can make sense if you can qualify with a lender that offers a lower rate than what you are paying (on average) with your current loans. Exploring alternatives (here's a great post from CreditNinja on alternatives, including cash advance loans) could potentially provide you with the financial flexibility you need to manage your debt more effectively. By taking advantage of such options, you can work towards reducing your overall interest burden and achieving greater peace of mind regarding your financial obligations.

You can't refinance federal loans into other federal loans. These can only be refinanced into private loans.

It’s important to note that, if you refinance federal loans into private, you are no longer be eligible for income-driven repayment. But if you can get a fixed rate that is low enough, you may not need those options.

How do I get rid of federal student loans?

First, debt repayment depends (largely) on the kind of student loans you have: federal vs. private.

Step #1 – Choose Your Repayment Plan

The first step in starting your federal student loan repayment is to actually choose your payment plan. Here's how to do that and start getting rid of student loan debt:

• If you haven’t spoken to your loan servicer about what plan is best for you (more on that later!) or didn’t choose a repayment plan already, you were probably opted-in to the Standard Repayment Plan.
• Take a look at Federal Student Aid’s overview of repayment plans to get an idea of what options are available to you.
• But what if your repayment needs to change? One of the great things about federal student aid is that you can actually change your repayment plan whenever you need it.

This can help ensure that you are able to make your payments while giving you control over how and when you pay.

Step #2 – Find Your Loan Servicer

The next step in repaying your student loans is to find your loan servicer. You won’t be writing a check to the government each month, you’ll actually be working with a financial institution who handles your loan. You can find your loan servicer through logging in to the FSA website – it’s that easy!

Why do you need to know your loan servicer? Since your loan servicer oversees your repayment, they are who you will contact if you need any assistance with your loans. This includes changing your repayment date or setting up automatic debits so that you never miss a payment. Plus it's best to actually know these things instead of it being some nebulous question in the back of your mind (getting answers to queries like that is #adulting folks.)

Step #3 – Know the numbers on your total debt balance

This sounds silly, but it is really important. If you don't know the answers to these questions, you're doing something wrong:

• Do you know all the different types of debt you're responsible for?
• Do you know your current debt balance?
• What about the interest rate?

Knowing simple answers like these will help you to understand what you will really pay in interest over the course of debt repayment. Use a debt repayment calculator like this one from Credit Karma to help you see the big picture of your debt. You can also use this tool to set goals for yourself, such as seeing what minimum monthly payment you should make to pay off your debt by a certain date.

Step #4 – Start tracking your payments

The next step is to actually make your monthly payments. You should take an active role in your repayment schedule – set up a reminder on your phone, mark your payment date on a calendar, or set up automatic debits so that you don’t miss a payment.

Other Federal Student Loan Repayment Resources (by our editor, Lauren Bowling, for Student Loan Hero)

• American Education Services [AES] Information and Resources for Borrowers
• 3 Reasons Student Loan Debt Forgiveness Isn't a Magic Bullet for Debt
• Are you Eligible for a Pell Grant?
• What You Need to Know About that “Master Promissory Note” You Signed

The TL:DR on How to Get Rid of Private Student Loans

When it comes to student loan debt, pay it off early and pay it off as fast as you can so you knock it out and get on with your life.

~Lauren Bowling and Torie Winkler contributed to this piece.