How to Pay Off Student Loans as a New Graduate

1. Start Paying as Soon as You Can

Student loans typically have a grace period of six months after you graduate, and you technically don't have to make payments during that time.

But while your payments are still paused, interest may be accruing on your account. Once your monthly payments start coming due, the loan servicer capitalizes the accrued interest, adding it to your principal balance.

If you can afford it, pay off the accrued interest—and make additional payments—on your loans before the grace period ends to save money and speed up your repayment timeline.

2. Pay More Than the Minimum Each Month

The more you can pay each month, the fewer payments you will have to make over the life of the loan. It'll also save you money on interest.

For example, let's say you have $20,000 in student loans with an average interest rate of 5.5%. On a 10-year payment plan, your monthly payment would be roughly $217 and you'd pay $6,046 in interest. But if you were to pay an extra $50 to your monthly payment, you'd pay off your debt two years and four months early and save $1,493 on interest.

Keep in mind that you'll need to let your loan servicer know you want the extra amount applied to the current month's payment—otherwise, they may apply it to the following month's payment.

3. Pay More Toward Larger, High-Interest Loans First

Take a look at your loans and see which ones are the largest and which have the highest interest rates. If you can pay extra each month, making sure the excess money goes toward the loans with the highest interest or balance can help you save money over time.

Once you finish paying off the larger, high-interest loans, you can focus your efforts on the remaining debt.

4. Get a Job That Helps Pay Off Student Loans

Many employers offer student loan repayment assistance programs. If you work in the medical field, public defense, armed forces or as a teacher, there are government agencies that offer this type of assistance. Additionally, some private employers offer repayment assistance as an employee benefit.

Depending on your career field, research your options to find out if you can qualify for repayment assistance.

The same goes for federal student loan forgiveness programs. If you work for a government agency or eligible nonprofit organization, you could qualify for the Public Service Loan Forgiveness program. Also, some teachers may qualify for the Teacher Loan Forgiveness program.

5. Get a Side Hustle

If your job doesn't provide enough income to help you achieve your goal of paying off your student loan, consider getting a side gig to make it easier.

There are plenty of ways you can earn money with a side hustle. For example, you may decide to be a rideshare or food delivery driver, work as a freelancer online, walk dogs or take on a small job that you can find through websites and apps like Craigslist or Thumbtack.

Side hustles can take time out of your day, but they can also give you the extra income you need to eliminate your student loan debt.

6. Refinance Your Loans

Refinancing student loans involves paying off and replacing your existing student loans with a new one through a private lender.

In the right situation, refinancing can help you get a lower interest rate on your loans. You may also be able to get more flexibility with your repayment term. For example, if you can afford a larger payment, you can request a shorter repayment schedule and ensure that you become debt-free sooner.

That said, refinancing typically requires a solid credit history and income if you want to get the best terms. In some cases, it might make sense to ask a parent to cosign your student loan application to improve your odds of getting approved with favorable terms.

How Paying Off Student Loans Affects Your Credit

Making your student loan payments on time has a positive impact on your credit score. Having student loans along with other forms of credit, such as credit cards, an auto loan or a mortgage loan, can also help increase your score.

Once you fully pay off your loans, you may notice your credit score lower slightly. This may be because the account has been closed and you're no longer making payments, so that positive payment history isn't helping your credit as much as it was previously.

But in general, you'll typically see your score bounce back from this temporary dip. Overall, paying student loans responsibly can help build your credit.

Monitor Your Credit to Track Your Progress

As a recent college graduate, you may not have had the chance to build your credit history much while you were in school. Now that you're making student loan payments and potentially also taking on other credit accounts, it's important to monitor your credit regularly, keep track of your progress and address potential issues as they arise.

Experian's free credit monitoring service is an excellent way to do this. You'll get free access to your Experian credit report and your FICO^® Score^☉ powered by Experian data. You'll also get real-time alerts when updates to your credit report occur. This can include new accounts, new credit inquiries and new personal information.

As you monitor your credit consistently, you'll better understand how different actions can impact your credit score and have the information you need to address issues to avoid damage to your credit score.