Student Loans Just Changed... Here’s How to Pay Them Off Faster (This Year!)

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1:31Learn more at Accenture.com slash Spotify. On this episode of the Personal Finance Podcast, student loans just changed. Here's how to pay them off faster.

2:00What's up, everybody? And welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be talking about your student loans. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co slash newsletter. And you can respond to any of those newsletters that come out every single week. And I read every single one of them. And don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player.

2:39cannot thank you guys enough for leaving those five-star ratings and reviews. Now, first off, before we dive into this episode, I just want you to know that down below in the show notes, we created a free guide that you could follow along on this episode. In addition to all the steps that we're going to be talking about in this episode on how to pay off your student loans faster, we're going to be talking about negotiation tactics and ways that you can negotiate your rates. I give you scripts in that free guide that's going to show you exactly how to negotiate some of these different things that we are talking through in addition to emails and templates and all these different things.

3:12And so if you have student loans, if you're looking to pay off your student loans faster or just navigate the craziness of student loans right now, I want you to make sure that you check out that free guide down below. Now, as we start to dive into this episode, one big thing that a lot of people are struggling with right now is student loans. And the default rates are at their highest because a lot of things are shifting within this landscape where some people thought they were going to get forgiveness and some people thought that they were going to have a bailout. And then all of a sudden, student loans came crashing back down.

3:42And now we have these payments that we have to deal with. So the number one thing I want you to focus on is the thing that you can control, meaning that you can focus on what you have to pay currently. And we're going to focus on how we need to think about paying these loans down. And specifically, if you have a high interest rate loan, we want to get rid of those loans as fast as we possibly can. Now, I know for some people out there that income is tight, meaning you're living paycheck to paycheck. It is a difficult world to live in right now when it comes to your financial situation. And so I'm going to try to help you navigate through that in this episode so that we can go through this entire process.

4:17But first, before we dive into the tactics that we're going to talk about in this episode, I want to dive into some of the changes that are happening right now so that you are informed as to what may be happening to your student loan as well. And so we're going to dive into those changes first, then we're going to get into how to pay off your student loans faster and some tactics and things that you can use to pay off those loans faster this year. And then lastly, we will have those scripts available for you. And I'm going to go through a bunch of rapid fire questions on student loans at the end.

4:48So this is an action packed episodes. Without further ado, let's get into it. All right. So first, let's talk about some of the changes that are happening to your student loans. First is there is an elimination of save, pay, IBR, and ICR for new borrowers that is going to be eliminated July 1st of 2026. So what does this mean? These were all income-driven repayment plans where your monthly payments were going to be based on a percentage of your income with forgiveness after 20 to 25 years. So the way that these were structured is that they looked at your income and said, okay, these payments are going to be based on a percentage of that income in this given year.

5:27And then after 25 years, if you truly can't pay these back, they will be forgiven. So these were governmental loans that were in place based on that. So starting July 1st, 2026, none of these plans will be available for new borrowers. And so the government is consolidating options into just two, which is the standard plan. And the standard plan is going to have fixed monthly payments over 10 to 25 years. and then the repayment assistant plan, which is one to 10 % of discretionary income with forgiveness after 30 years. And so the previous plan was a little better. And so anyone borrowing new federal student loans on or after July 1st, 2026, this is going to impact you.

6:07And so if you already have loans, you're safe. Nothing is going to change. You can keep your current plan. They're going to honor your current plan. But if you're starting school soon, try to take out the loans before July 1st, 2026, to preserve access to IDR plans like IBR. Now, just so you know, at the top of the show, I just want to say this up front. If you can avoid student loans, I would try to avoid them at all costs. Don't take out student loans if you don't need them. And it is really important to make sure that you do that. If you go through life without having student loans, you are going to have a much easier time financially than someone who has to take out student loans.

6:39But the reality is privilege is very real. And some people are privileged to have folks who can help them through college. And some people are not so privileged and they have to take out student loans in order to make sure that they can pay for college. Now, the second big change that is happening right now is interest resumes on SAVE plans starting August 1st, 2025. So this episode is coming out after August 1st, 2025. And so this is something where SAVE was the most generous repayment plan available and it eliminated unpaid interest for low income borrowers. So any unpaid interest, it was eliminated.

7:12But as of August 1st, interest starts to accrue again, meaning even if your payments are low, your balance might grow again. So anyone currently enrolled in the save plan, you need to go and log into your servicer account and check out how much interest is building. And if your balance is growing, consider either making extra payments every single month or switching to IBR if your income has gone up. And then comparing cost projections under save and wrap. Those are three of the things that I would do first, and then you can figure out what to do next. Number three is there is going to be a forced transition to the repayment assistant plan, or a lot of people call this RAP, by July 1st, 2028.

7:48So everyone still on save or older income-redriven payment plans will be automatically enrolled in RAP by July 1st, 2028. Now, RAP is a new plan that requires payments between 1 % to 10 % of your income and has a $10 a month minimum and forgives your balance after 30 years of payments. Now, anyone who is using save, pay, IBR, or ICR, you're going to be moved over to RAP at July 1st, 2028. But if your income is low enough, there is a$10 per month minimum. Now, don't wait to be auto-enrolled. You can lose forgiveness progress or end up with higher payments. And so if you're pursuing PSLF or IBR or another strategy, it's time to switch now.

8:28And then if RAP is your best long-term option, review how those payments are calculated and plan accordingly. Number four is wage garnishment and collections restart in August 2025. So during COVID, collections on defaulted loans were paused. And as of August 2025, those projections are gone. So if you're in default, 270 plus days behind, the government can either garnish your wages up to 15%. They can seize your tax refund, or they can report you to credit agencies. And so borrowers who are in default on these loans, they need to make sure that they enroll in something like the Fresh Start program, which gives you a one-time chance to get out of default and restart some of those payments.

9:07And then contact your loan servicer via student8.gov to apply and do this before your wages or refunds are impacted. You need to do this beforehand. Don't do it after and wait too long. Do it now. This is one of those things that you can focus on that you can control. You need to do this now. Otherwise, they're going to start taking cash out of your paycheck and you don't want that to start to happen. Number five is new borrowing caps for grad and professional students. So borrowing limits have been tightened to curb runaway student debt. And GRAG students are$20 ,500 a year or$100 ,000 total.

9:39And professional students are$50 ,000 a year or$200 ,000 total with a lifetime cap of$257 ,000. I like this. I think this is helpful for a lot of people. If you are spending way too much on student loans, it is really hard to recover. I know a lot of doctors. I know a lot of lawyers who are like, oh, I'm going to be able to make enough money to recoup all this and get by. and a lot of times what they realize is life happens once you start to make money. It is not as easy as you think to pay off debt when it is this big. And if you have a$200 ,000 debt, for example, it is very important to make sure that you are paying it down quickly because it is very, very difficult to pay it off depending on what that interest rate is.

10:17Now, this affects anyone who is starting graduate or professional programs after July 1st of 2025. And it is something that I think is honestly positive for a lot of people. Now, number six is employer paid student loan help is now permanent. So this is a great thing. So employers can now contribute up to$5 ,250 per year to your student loans and won't pay income taxes on it. And so employers also get a tax break. So this is a win-win situation. So any borrower, especially those at larger or progressive companies, should make sure that they actually have this available. And in our guide, our free PDF guide that we're talking about, I'm going to give you an email template to send over to your company to see if they will offer this.

10:59And they will kind of be able to explain the benefits of this so that they can get that tax break. In addition, you can possibly get$5 ,250 per year going towards your student loans. And so that is a great, great benefit. And so what you should do though, is ask your HR department, and we'll talk more about this in the episode. If they don't offer it, request it. See if you can request this as part of your package. This is a great thing to throw in during your salary negotiations is to see if they will offer this because this is something where if you're not going to get the salary you want, well, this could give you a$5 ,000 boost somewhere else that can give them a tax deduction.

11:31In addition, help you with your student loan payments. That is a great, great win-win situation. I love utilizing this as a negotiation tool. And it is something I think most people need to be asking for. And I would ask for it frequently. I wouldn't just ask for it one time. If they say no, don't take no for an answer. Keep on asking in different ways. All All right. Number seven is easier access to IBRs. So in the past, you could only enroll an income-based requirement if you qualified as having financial hardship. That requirement is now gone. So the financial hardship requirement is now gone, meaning anyone with eligible loans can choose IBR.

12:05Now, borrowers who were previously blocked from IBR due to high income can now actually apply for this. And so what I would do is I would use some of those student loan calculators to compare IBR versus RAP versus the standard payment. And if you're seeking long-term forgiveness, but don't qualify for PSLF, IBR may be your best option. And so these are the seven changes that we're going to be talking about now. So for most of you out there, these are going to impact your student loans. And so you need to understand how these work and making sure that you have this in place is going to be very, very important in choosing the best option for you.

12:39So next, what we're going to get into is how to pay off your student loans faster in 2025. All right, so we're going to talk about how to crush your student loans in 2025. Student loans can be crippling to a lot of people and their financial situation. I know how difficult it can be. When my wife and I first got married, that was the first debt that we attacked. She had about$20 ,000 in student loans. And so immediately, the first thing I did was I got after those student loans and made sure that we paid those off. And eventually we were able to pay those off in just over a year, making very modest salaries.

13:14I was making about 30 something thousand dollars per year at the time. And she was making probably just a little bit more than me at that time, right around 45,$50 ,000 per year. And so because we had these entry level jobs, we attacked these student loans. We didn't have those payments anymore, got rid of those student loans. And then from there decided we want to start to build wealth. And that's where our big journey started. It was getting rid of those student loans. So I want you to know that no matter what your income is, you can do this. And I'm going to teach you how to figure out a plan to pay off your student loans faster.

13:45And that is our entire goal is to just increase the speed at which we pay off our student loans. Now, if you have a really low income and you look at some of these repayment plans and you think it's going to be forgiven over the course of 30 years and you just want to make those minimum payments short term, then you can do that. But as your income rises, those repayment plans are going to shift and you may end up paying off the balance Anyways, and so talking through this, we're going to start to look through how to get rid of our student loans. Now, anybody who is thinking about going to college or going back to college again, the number one thing that you can do is avoid student loans altogether.

14:18Avoiding them is the number one thing because debt is crippling to our financial situation, especially high interest debt. And the rates right now are not very good. And so making sure that we avoid some of this crippling debt is step one because it is very difficult to get out of these situations. I know people in their 50s and 60s who are still paying off their student loans. And so there's going to be a lot more of those folks in the future because student loans really started to accelerate with the millennial generation, my generation. That's when they really started to accelerate. And so let's talk through how to get these paid off faster, get it off your plate so that we can start to work towards some of the big impact things like growing our wealth so we can achieve financial freedom.

14:58This is part of those steps to achieving financial freedom, because once you get these extra dollars back, you could take those extra dollars, put them towards your freedom fund, invest them so they can grow over time so you don't have to work that job you hate anymore. And so that is what we want to do is make sure that we are working towards this. So step one is I want you to really have a good understanding of your student loan. The biggest thing to note is that when you go to war with someone, you want to understand your enemy inside and out. It's very important to understand that. And your student loan right now in this situation, that is your enemy.

15:32And so I want you to know what you owe, and I want you to know who you owe it to. You have no idea how many people I talk to who have no idea who they owe their money to with their student loans. Before anything else, I want you to get clear. So log into studentaid.gov, and I want you to go see your loan types. I want you to know your interest rates, and I want you to know your balances. You need to know those three numbers. That is very important. And so again, go to studentaid.gov, see your loan type, your interest rate, and your balances. And then I want you to make note of who your loan servicer is.

16:03Maybe it's Navient or Mohella or Nelnet. There's a bunch of them out there. Just understand who that is. And then I want you to do one thing. If you have multiple student loans, maybe you have some federal student loans, but you also have private student loans. I want you to separate the two out and figure out what we're going to do, because the repayment strategies are going to differ between those two types of student loans. So say, for example, you got a student loan with SoFi. In addition, you also have some of the federal student loans. Well, those are going to be something where we are going to think through this.

16:31Now, if your loans are in default, I want you to make sure you pay attention to step 11 as we go through this, because that is going to be a place that is going to help you the most. Now, step two is I want you to choose the right repayment plan. This is the time where you can change the structure of your repayment plan, and I don't want you to default into the wrong one. And so this is going to be very important for us to think through. So your repayment plan determines how fast that you can pay off this debt or how long it's going to linger for some of you in these situations. And so if your goal is speed, you can choose the standard 10-year repayment plan because this is the fast track and this has fixed payments.

17:08The payments are going to be the same every single month. You know what to expect. And this is going to fast track you to get those paid off in 10 years or even less if you make extra payments, which we'll talk about in a second. If you need flexibility, but you still want progress, which flexibility is everything when it comes to paying off debt, I really like flexibility and having the ability to be flexible, then you could consider things like IBR or the Repayment Assistant Program or RAP based on your income. So you could do this based on your income. If you're worried about your income and your situation, if you're in an entry-level job or you don't make a lot of money currently and you're just struggling to pay your bills as it is, then that might be the way to go for you.

17:45And if you're still on save, review your plan now. It's less generous with interest starting again. And so making sure you review your plan if you're on save is going to be really important. Now, there's something at studentaid.gov called the loan simulator. And it compares monthly payments and total costs across plan. I think that's a really great tool for you all to use when you're comparing these plans so that you can look at this based on your financial situation. And so looking at that loan simulator at studentaid.gov is really, really helpful. Now, step three is I want you to automate your payments.

18:17And I want you to automate these payments biweekly if you can. So instead of paying once a month, I want you to split your payment into two and pay every two weeks. What's going to happen here? Now, here's why this works. There are 52 weeks in a given year. And so because there's 52 weeks, paying every two weeks means that you are making 26 half payments. Well, if you're making 26 half payments, that means you're making 13 full payments every single year. So you have one extra payment that you're making just by changing this to bi-weekly payments. Now that extra payment is actually going to go to reducing your principal.

18:54So it is a principal only payment and it's going to reduce the interest over that timeframe and it's going to shorten your loan term. So let me give you an example of this. Let's say for example, you have a$30 ,000 loan and your interest rate is six and a half percent. And so your standard monthly payment is$341. And in that situation, over the course of 10 years, you'd pay about$11 ,000 in interest over 10 years. I know it probably makes your stomach turn. It is one of the worst things in the world. This is why debt is so crippling. That's at a 6.5 % interest rate. But if you make biweekly payments, you're still going to pay$340 per month overall, but you're going to make those 13 full payments each year instead of 12.

19:34And you'll pay the loan off 10 to 11 months faster. So it'll be about nine years and you'll save about$1 ,200 on interest. So that's if you just do this one simple thing, you'll save yourself over 10 % in interest alone. And the cool thing is it's automatic, it's low effort and accelerates payoff by almost a year. And so that is what we're trying to do is accelerate that payoff. Now you can pay even more than the minimum. And this is the next thing I'm going to talk about. Every dollar that goes towards principal, not interest is really, really powerful. So if you add$25 to$200 per month extra to your current payments, you're going to be able to pay that off even faster.

20:11See, these things are going to start to compound. So let's say you make the extra payments, but in addition to the extra payments, you got a little bit of extra cash that you can put towards making sure you get this paid down even faster. If that's the case, you can add a little more. $25,$50, I don't care,$200,$400. If you're a high earner, you should be adding a lot more to this if it is high interest. And so because of that, you can tell your servicer to apply the extra payments to your high interest loan, not just the next due date. And this is going to help you when you're looking at paying this off faster.

20:41Now, step five is you have two options here. You have something called the debt snowball and the debt avalanche. The debt avalanche is going to make sure that you can pay off your loan slightly faster. But the debt snowball, if you have a lot of student loan debt, and if you have a couple different carriers, then the debt snowball may be the better option for most people psychologically because you get those wins. Now, the difference between the two is very simple. The debt snowball, you pay off the lowest balance first, then you move on to the second lowest balance, then you move on to the third lowest balance until you reach to that largest balance and all those payments from the previous balances are then going towards the largest balance.

21:17Now, when you're paying off the lowest balance first, you're making minimum payments on all the rest of your debt. And so because you're making minimum payments on all the rest of your debt, you're at least making sure that those are up to date. And then you're attacking that lowest balance. Now, once that lowest balance is paid off, then all the money that you were sitting towards that lowest balance goes towards the second lowest balance. And then you're making minimum payments on the rest of your debt. And this helps you get those wins and keeps people motivated. Now, studies have shown that the debt snowball, even though mathematically, it may not be the best option, is psychologically the best option for most people, and they stick with it way longer.

21:54And so this is something where if you are someone who needs the motivation to stick with it longer, the debt snowball is probably for you. Now, if you're someone out there who loves the hard numbers, you love the math, and you just want to get there as fast as you possibly can, the debt avalanche, or what we used to call the debt wrecking ball, because like Miley Cyrus, you come in on that debt like a wrecking ball, that is probably the optimal one for you. And so So between these two, just thinking through which one kind of fits your personality is going to be really, really important. You can start with the debt avalanche if you want.

22:23And if you're like, ah, this is tough. I just want to get some of these small loans out of the way so I can take this extra money and move it towards the bigger loans. Then that may be the better option for you on the debt snowball side. So avalanche snowball, both of them are really good. And honestly, the end result is not going to be much different depending on how much debt you have. I really like the debt snowball for the psychology effect. but the debt avalanche is mathematically the faster way to pay this off. Step six is if you get raises or you get financial windfalls, I want you to utilize those windfalls to help you take money and put it directly towards your loan.

22:57So this is tax refunds. Don't just go blow that tax refund on a vacation in Ibiza. Take half of it, put it towards your student loans to get those paid down. Second is bonuses. If you get a bonus, take half, put it towards your student loan debt, get that pay down faster. Third is pay increases. When you get an increase, increase the amount that you were paying down on that student loan to get it paid off faster. Most people take the increase, commingles in their checking. They don't make differences when it comes to building wealth. Instead, if your number one goal is to pay off that loan, then taking those increase and paying that down.