How to shave thousands of dollars off your student loans   

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If you could steal a sneak peek at your future, what would you see?

  1. Bling
  2. More bling
  3. A huge blingfest
  4. A gaping student-loan-shaped hole where your bling should be

If you’re anything like the average college graduate, the last answer is probably truer than you’d like. Your basic grad walks the stage with nearly $40K in student loans. College knowledge doesn’t come cheap, y’all.

But here’s a bit of intel that does. In fact, this knowledge will pay you by shaving thousands off your student loan debt. Keep reading to find out how.

Auto-pay can literally lower your interest rate.

This is an easy one. Auto-pay is everyone’s BFF. You can forget all about your bills and they still get paid—as long as you’ve got the funds.

Now prepare to love it even more. Because some lenders will actually pay you to set-and-forget your loan payment.

When you sign up to have your monthly payment automatically drawn from your bank account, you can get a .25 percent interest rate reduction on your Federal Direct loan. On a $30K loan at 6.8 percent interest, that would save you $460 in interest over the life of the loan.

Auto-pay does the work, you get the cash. Yasss.

Paying on time pays off.

You’ve probably heard that making monthly payments on time is sort of important for your credit. Make enough in a row, and you might even get rewarded with lower interest rate.

Many lenders offer discounts for borrowers with a history of on-time payments. For example, after four consecutive years’ worth of timely payments on your Stafford loan, you can get 2 percent knocked off your interest rate. If just a quarter of a percent nets you nearly $500, think what a 2 percent discount could do over the course of 10 or 20 years.

Thanks again, auto-pay!

Got deferment? Pay anyway.

So here’s the thing about student loans: Even when you’re not making payments, you’re still accruing interest. That means as long as you defer payment, your debt keeps growing. Some loans even amass interest while you’re still in school.

Once payback time hits, all that built-up interest gets added to your balance. Just one year of deferment can add an extra $2,000 to your loan balance. Now you’re paying interest on your interest—plus your monthly payment has gone up $20.

Want to do your future self a favor? Pay the interest on your loan even during deferment. Heck, see if you can make a few payments while you’re still in school. When you’re dealing with compound interest, today’s chump change is tomorrow’s stack.

Milk the tax break.

This would probably be a good time to mention that whatever interest you pay on your student loan is tax deductible. You can deduct up to $2,500 a year even if you don’t itemize your taxes.

So all that interest you paid during deferment? You’ll get it back at end of the year anyway. Guess what we recommend doing with it (cough-pay-off-more-loan-cough).

A little forgiveness goes a long way.

Work as a public servant for 10 years, and whatever’s left of your student loan will disappear—poof! Work as a teacher for five years, and drop more than $17K off your balance.

Student loan forgiveness programs may not be for everyone, but they can help make your student loans a vaguely unpleasant memory. We won’t go into all of them here, but here’s a great resource for finding forgiveness programs. See if there’s one you could maybe do.

Consider a refi.

Got high interest rates? A refi might be just what you need.

The average student borrower can save nearly $14,000 by refinancing their student loans at a lower rate, says Credible. Plus, consolidating all your loans in one place makes paying them off easier.

That’s some juicy knowledge, amirite? Now you can start chipping away at that student-loan-shaped hole where your bling’s supposed to go. Your future self will thank you.