Eight ways to pay off your student loans faster

Make extra payments, even if just a little: Both government and private student loans can be prepaid without penalty, which means you are allowed to pay more than the required minimum each month and have the extra amount applied to the loan's principal. (To do this, include a letter with your payment telling the lender what the extra money is for so it doesn't get applied to next month's payment by mistake.) Any extra amount that you can put toward prepayment gets you that much closer to saying goodbye to your loans. For example, let's say the monthly minimum payment on your loans is $345 (which is the amount someone who borrows $30,000 at 6.8% interest would owe each month if he or she is repaying over 10 years). Rounding up and paying $400 per month, with the extra $55 applied to the principal, shaves nearly two years off the length of the loan. Target your highest-interest loans for prepayment first and then work your way down as loans are paid off. That way, you'll save more in interest payments overall than you would by prepaying smaller amounts on all your loans simultaneously.

Look into loan forgiveness programs: Borrowers who go into certain careers may be eligible to have part of their loan forgiven or wiped away. The Canada Student Loan Forgiveness for Family Doctors and Nurses is open to those who practice in rural and remote communities in Canada that lack primary health care. Doctors can receive up to $40,000 in loan forgiveness and nurses can receive up to $20,000 in loan forgiveness. Other programs such as the Repayment Assistance Plan are aimed at students that cannot meet payment requirements due to a meager salary or extenuating circumstances. The government covers the interest owing that you can't afford. This can last up to 60 months during the 10-year period after you leave school.

Don't wait to start paying: Borrowers typically have six months after graduation or after leaving school before their first student loan payments are due. We typically refer to this as the grace period. The problem is that interest on federal loans continues to accrue over that time and eventually is added to the loan principal, thus increasing the overall borrowing costs. If you can at least pay interest on the loans during that grace period, you'll be saving yourself additional money down the road. Consider using cash gifts you received for graduation for this purpose. The exception to this rule is that provincial loans do not generally accrue interest over the grace period. However, it's best to check with your home province to confirm that this applies to you.

Put your tax break to good use: Interest on student loans is deductible on your federal income tax return. You can claim the interest paid for the current tax year or the preceding five years. If you receive a tax refund, avoid the temptation to blow it on a weekend getaway and use the money to make extra payments to pay off your loan faster.

Leverage a cash gift or bonus: Still getting a yearly birthday check from Aunt Gertie? Using those funds and any other cash gifts or work bonuses you receive to help prepay your loans boosts the value of the windfall by saving you interest costs down the road. And trust me: It'll make your aunt proud.

Make a personal budget: Few things will help you pay off your loan faster--as well as help you manage your financial life--more than setting a personal budget. You may be accustomed to glancing at your checking account balance each month and doing little else; but by taking a closer look at your spending habits, you can better assess your financial priorities and identify places to cut spending. The good news is it's easier than ever. Many credit card companies provide cardholders with a breakdown of their spending by category, and services such as Mint.com (which is free and online) and Quicken (which charges a fee for its downloadable software) can help you easily track your monthly spending. Once you have a handle on your budget, you can prioritize making extra student-loan payments. That may mean some financial belt-tightening--cooking at home more, canceling an underused gym membership, and looking for a cheaper cell phone plan, for instance--but you'll have a better handle on where your money goes each month.

Take a roommate--even if it's your parents: Many college grads would rather not move back home with Mom and Dad for the long term, yet it has become commonplace. The New York Times recently reported that one in five Americans in their 20s and early 30s lives with his or her parents. While it may cramp your style, living with your parents is a great way to pay down your loans more quickly, even if you are chipping in to help pay for groceries and other household expenses. Alternatively, living with roommates in a place of your own (well, sort of your own) can also be a big money-saver as compared with living alone. Sharing your living space may feel a bit like college to you--for better or worse--but if it helps you get out of debt sooner and into a place of your own, it's probably worth the hassle.

Work a side job: Finding a good-paying, full-time job is a real challenge for today's recent college grads. Nearly half are working jobs that don't require a college degree. But even if you aren't exactly in your dream job just yet, the fact remains that the more you work the more you make, and the more you make the faster you can pay off your student loans. If you are working a job that offers overtime, make the most of the opportunity. Also, consider making extra money on the side through part-time gigs such as providing child care, working for a retailer that needs extra help around the holidays, or doing odd jobs. It may not be what you pictured when you were pulling all-night study sessions as an undergrad. But working extra and earmarking the money to pay off your loans early will provide you with greater financial flexibility down the road.

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