Smart Strategies for Easy Student Loan Repayment

Jan 20, 2024
 |  1 min read

The impact of student loan debt can endure over an extended period, casting a prolonged financial shadow, affecting your financial freedom and limiting your ability to pursue other goals. However, the journey to economic liberation doesn't have to be an uphill battle. By adopting intelligent strategies and making informed decisions, you can navigate the path to paying off your student loans more quickly. Further, let us explore how does interest works with student loans, how do payments and credit reporting work, and actionable advice to help you take control of your student loan debt.

How does Interest Work With Student Loans?

On a student loan, the interest is like the cost of borrowing money. It's figured out as a percentage of how much you still owe on the loan. It is essential to understand how interest works in the study loan to be able to pay your loans effectively.

Loan Interest

Interest doesn't just apply to the original amount you borrowed (the principal) and any unpaid interest already accrued. This is known as "compound interest." So, in the next period, you're paying interest on the original amount and any interest already added to the loan.

Two main types of interest associated with student loans are Subsidized Interest and Unsubsidized Interest.

Subsidized Interest: Subsidized loans are typically need-based, and the government covers the interest while the borrower is in school, during the grace period, and in deferment. Borrowers with subsidized loans don't accrue interest during these periods, making them a more affordable option.

Unsubsidized Interest: Unsubsidized loans accrue interest from the moment they are disbursed. The government does not cover this interest, and borrowers are responsible for paying it. Interest accrues during school, grace periods, and deferment increasing the amount owed.


During the repayment period, borrowers make payments that cover both the principal and the accrued interest. It's important to prioritise paying off accrued interest to prevent it from capitalising.

What Happens with Missed Payments on Student Loans?

Missing payments on student loans can have several consequences, and borrowers need to be aware of the potential impacts. Here's what happens with missed payments on student loans.

Late Fees: If you fail to pay, late fees may be imposed on your account. These fees can raise the total amount you owe, adding an extra layer of difficulty in catching up on payments.

Negative Impact on Credit Score: Missing timely payments is documented by the major credit bureaus. This data harms your credit score, complicating qualifying for future loans or credit.

Credit Report: Your account may be marked delinquent if you consistently miss payments, leading to more severe consequences.

Loan Delinquency: If you miss payments for an extended period, your student loan may be considered delinquent. Delinquency typically begins after a payment is 90 days overdue.

Default: If the delinquency persists, your student loan may enter default status. Defaulting on a loan occurs when you do not fulfil the repayment terms specified in the promissory note. In the case of federal loans, this happens either after 270 days or approximately nine months. Private student loans can occur when you miss three monthly payments or 90 days. Failing to meet loan obligations can have serious repercussions, such as the immediate repayment of the entire loan amount, potential legal consequences, and a further substantial decline in your credit score.

Collection Activities: The lender or loan servicer may employ collection agencies to recover the outstanding debt. This can involve phone calls, letters, and other attempts to collect the money owed.

Tips on How to Pay off Student Loans 

As more time passes, interest on student loans tends to pile up, and thus, you end up paying more than you originally borrowed. Here are some tips to help you manage and pay off your student loans:

Create a Budget

Develop a comprehensive budget that outlines your income, expenses, and debt obligations. This will give a comprehensive overview of your financial status, aiding in pinpointing areas where cost-cutting is possible or where additional funds can be directed to repay for continued education or skill development loans.

Understand Your Loans

Know the details of each loan, including interest rates, repayment terms, and the type of loan (subsidised, unsubsidised, federal, or private). This information will guide your repayment strategy.

Prioritise High-Interest Loans:

Focus on paying off high-interest loans first. This approach minimises the overall interest you'll pay over the life of the loan, saving you money in the long run.

Consider Loan Consolidation or Refinancing.

Explore the option of consolidating multiple loans into one. This can simplify your payments and sometimes result in a lower interest rate.

Automate Payments

Set up automatic payments to ensure you never miss a due date. Some loan servicers offer interest rate reductions for borrowers who enrol in autopay.

Utilize Windfalls

Apply unexpected windfalls toward your student loan debt, such as tax refunds, work bonuses, or gifts. This accelerates the repayment process without affecting your regular budget.

Explore Income-Driven Repayment Plans

Explore income-driven repayment options for federal student loans, as these plans can adapt your monthly payments according to your income. This flexibility often leads to reduced monthly payments, easing the burden of meeting your financial responsibilities.

Take Advantage of Employer Benefits

Check for loan repayment assistance programs offered by your employer. Some companies provide financial assistance or incentives to help employees pay their student debt.

Communicate With Your Loan Servicer

If you encounter financial challenges, communicate with your loan servicer promptly. They may offer temporary relief through deferment, forbearance, or other alternative repayment options.


Remember that consistency and discipline are key when repaying student loans. By adopting these tips and staying committed to your repayment plan, you can make significant progress toward debt-free.

Moreover, for those seeking a better solution for managing their financial commitments or looking for instant loans for students online, platforms like mPokket offer a distinct advantage. mPokket provides a user-friendly interface and convenient access to short-term loans online, offering a practical solution to address immediate financial needs. At the same time, individuals work towards their long-term goal of becoming debt-free. 

Gaurav Jalan

Gaurav Jalan is the Founder and CEO of mPokket, a digital lending platform serving underserved Indian youth. He leverages technology and experience to deliver cost-effective credit to marginalized populations. In his role, he provides strategic direction and oversees execution to fulfill mPokket's mission.