How to Save More Money While Paying Off Student Loans

When you have five or six figures worth of student loan debt, it's hard to imagine having extra money to save at the end of the month. But at the same time, it's important to put money aside for things like emergencies, retirement, buying a home, and other long-term goals.


You don't want to miss out on a decade or more of prime saving years — for example, retirement money that you put away in your 20s and 30s has decades to compound and grow — just because you have debt to pay off. Here are a few strategies to help you save as you pay down your loans.

Match payments to your income

If it's difficult to afford your federal student loan payments on your salary, you may have options. Income-driven repayment plans cap Federal Direct Loan payments at a percentage of your income. While these plans may extend your repayment period beyond the typical 10 years, your remaining debt may be forgiven after 20 to 25 years. Most private student loans do not offer income-based repayment options, but if you find yourself in a financial hardship it’s always good to ask your lender if there are alternative repayment plans available.


If you work for a nonprofit organization or the government, you may be eligible for Public Service Loan Forgiveness, a program that forgives your loans after 10 years of public service.


A federal student loan repayment calculator can help you evaluate the different repayment options that may be available to you.

Look into loan consolidation

Loan consolidation with the Federal Direct Loan program combines multiple loan payments into one monthly payment, but it's important to weigh the pros and cons before you take this route.


On the plus side, you can lower your monthly payments because consolidation typically increases your repayment period. But increasing the repayment period means it'll take you longer to repay your debts, which also means you're likely to spend more money on interest in the long run.


Keep in mind that when you consolidate through the Federal Direct Loan program, your interest rate will be based on the weighted average interest rate of your existing loans. To potentially lower your interest rate, you can look into refinancing your student loans.

Refinancing your student loans

Refinancing your loans may allow you to exchange your existing federal and/or private student loan(s) for a new loan with a potentially lower interest rate.


Like consolidation, it's important to understand the impacts of refinancing before you apply. A new private loan's terms are not automatically better than the terms of your existing student loans. By refinancing federal student loans with a private lender, you'll also give up the available repayment features — namely, the ability to take advantage of Income-Based, Pay as You Earn, or Income-Contingent repayment plans, and certain loan forgiveness programs. Visit the Student Aid site for more information about available federal loan repayment options.


If you have student loans with different interest rates, one strategy is to keep the lowest-interest loans and refinance only those with the highest interest rates. Because private lenders offer interest rates based on credit scores, carefully review the terms they offer and compare them to your current loans before signing any loan documents. Check out our helpful guide “Should I Refinance?” for more information about comparing the features and benefits of your current and potential loans.

Reverse your savings strategy by paying yourself first

Many people save backwards — they spend their monthly income on necessary expenses (housing, transportation, loan payments) and optional expenses (clothing, restaurant meals, entertainment), and save whatever's left. The trouble with that approach is: there's usually not much left.


Instead, determine your savings before your allowance for optional expenses. Treat your savings goals as fixed costs that you're obligated to pay, just like your student loan bill. The leftover money can go toward the fun stuff while your savings continue to grow.


Interested in learning more about consolidating and refinancing student loan debt? Read on about the benefits of refinancing your student loans or start the application process by calling 1-888-411-0266 to speak with a Student Lending Specialist today.

Helpful Tools & Information
Refinance Loan Glossary An easy-to-use guide for the terms you’ll encounter in the student loan process.
FAQs Answers to frequently asked questions about the Education Refinance Loan.
Loan Refinance Estimator Use our Refinance Estimator to see how much you could potentially save.