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5 Tips for Repaying Grad School Loans Fast

Kat Tretina
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Going to graduate school used to be a guaranteed path to a lucrative career and financial stability. However, the cost of a master’s or doctoral degree has skyrocketed in recent years, making it much more expensive.

While many master’s programs can be completed in just two years, the cost of getting your degree from a top university can be staggering. For example, the total cost of a master’s of business administration degree from The Wharton School at the University of Pennsylvania is a gulp-inducing $222,540.

average-student-debt-by-degree

With such a high cost, it’s no surprise that the average graduate student takes on substantially more debt than undergraduate students.

According to The College Board, graduate students borrowed an average of $18,470 in federal loans per year as of 2019. By comparison, undergraduate students borrowed just $4,410 in federal loans per year — and students pursing advanced degrees are borrowing more on top of what they already needed for undergrad. Worse, graduate school loans tend to have the highest interest rates of any student loan. For example, federal Grad PLUS Loans issued before July 1, 2020, had an interest rate of 7.08%.

If you are dealing with more than $100K in student loan debt after getting an advanced degree, here’s how to pay off your grad school loans quickly so you can focus on your other goals.

Should I pay off grad school debt early?

If you have a large amount of student debt from grad school loans, it’s easy to feel overwhelmed. It can be tempting to just ignore your loans or simply make the lowest possible payment for the duration of your loan term. But if you take the full repayment term to pay back your debt, you could end up paying thousands in interest charges.

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To see how much time can affect your debt, consider an example. The average loan balance for borrowers that complete master’s degrees is $66,000. If you had that amount in Grad PLUS Loans at 7.08% interest and you repaid them over a standard 10-year repayment term, you would pay $26,285 in interest on top of the $66,000 you originally borrowed.

If you accelerated your repayment and paid off your loans just 12 months earlier, you’d save a substantial amount of money. You’d pay just $23,434 in interest charges, allowing you to save $2,851.

student-loan-refinance-savings

How to pay off grad school loans faster

If you’re wondering how to pay off large student loan balances more quickly, here are five strategies you can use to get rid of your debt faster.

1. Increase your monthly minimum payments

To save money on interest, try to pay more than the minimum required each month. When you pay more than the minimum, more of your payment will go toward the principal, bringing down your balance and reducing interest charges.

For example, your minimum monthly payment on a $66,000 loan with a 7.08% interest rate and a 10-year repayment term would be $769 per month. If you increase your monthly payment by just $60 per month — putting $829 per month toward your debt — you’d pay off your loans in just nine years instead of 10.

2. Use windfalls to make lump sum payments

Whenever you receive an unexpected windfall, meaning money you didn’t budget for, put it directly toward your student loan balance. Whether you get a tax refund or a bonus from work, using your windfalls to make lump sum payments can make a dramatic difference.

Some employers offer signing bonuses to graduates of select master’s degree programs. According to U.S. News, the average signing bonus for graduates from top ten business schools was approximately $30,000.

If you had the same loans as mentioned above and you received that bonus and applied it to your loan balance, you’d pay off your loans 65 months early.

Even better, you’d save a whopping $20,031 in interest charges.

3. Ask your employer for help

An increasing number of employers are offering student loan repayment assistance benefits to recruit top talent. In fact, the Society of Human Resource Management reported that employer-provided benefits have doubled since 2018, with 8% of employers offering this perk.

With most programs, employers will match a portion of your loan payments up to a percentage of your salary. Over time, your employer’s assistance can help you pay off your debt sooner and save money.

4. Use the debt avalanche method

If you have multiple student loans, the most efficient debt repayment strategy is the debt avalanche method. With this approach, you continue making the minimum payments on all of your loans — while putting any extra money you have toward the loan with the highest interest rate.

Once that loan is paid off, you roll that payment — and the extra money you were putting toward it each month — into the payment on the loan with the next highest interest rate.

debt-avalanche-method

This allows you to wave goodbye to the higher rate loans more quickly, saving you the most in interest charges.

5. Refinance grad school loans to get a lower interest rate

To pay off your debt as quickly as possible, you can refinance grad school loans. When you refinance, you can qualify for a lower rate so less interest accrues on the loan, allowing you to save money. Student loan refinancing is different from student loan consolidation because the rates you receive are based on credit score, income, and other factors.

The 4 Best Companies to Refinance Student Loans

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For example, if you refinanced your $66,000 in Grad PLUS loans and qualified for an eight-year loan at 4% interest, you’d pay just $11,231 in interest charges.

By refinancing your loans, you’d save over $15,000 and be out of debt two years sooner.

  Original Loans Refinanced Loan
Balance $66,000 $66,000
Loan Term 10 Years 8 Years
Interest Rate 7.08% 4%
Minimum Monthly Payment $769 $804
Total Interest Paid $26,285 $11,231
Total Repaid $92,285 $77,231

To qualify for the lowest possible rates, you’ll likely need to opt for a shorter loan term. If your credit score is less than stellar, you may benefit from adding a cosigner to your loan application. A cosigner can increase your chances of getting a loan and qualifying for a competitive interest rate.

How to qualify for the best refinance rates

If you’re struggling with a large student loan balance, figuring out how to pay off grad school loans quickly is key for your financial future. By increasing your payments, using windfalls, and refinancing your grad school loans, you can pay off your loans early and save thousands of dollars on interest.

If you decide to refinance grad school loans, use Purefy’s Compare Rates tool to get rate quotes from top refinancing lenders all at once — saving you time and the most money possible.

Don't know where to start?

At Purefy, our award-winning student loan experts can help come up with the right plan for you to start saving on your student loans.

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ELFI Rate Disclosure

4 ELFI Rate Disclosure:

Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 09-01-2022. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

SoFi Rate Disclosure

3 SoFi Rate Disclosure:

Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 2.24% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

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2 Earnest Rate Disclosure:

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.99% APR to 8.74% APR (excludes 0.25% Auto Pay discount). Variable rates range from 2.74% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

ISL Rate Disclosure

5 Iowa Student Loan Rate Disclosure:

Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 3.94% to 8.48% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

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