A loan is a loan is a loan. They all involve borrowing money with the expectation of repayment. So almost every source will list the best way to pay off any loan, even when it’s providing answers on the fastest way to pay off those exclusively given for education-related expenses like tuition, fees, room and board, books, and supplies.
And ChatGPT is no different. The artificial intelligence (AI) chatbot detailed the most effective ways of paying off student loans, which are similar to repaying personal bank loans, car loans and house mortgages.
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When asked how to pay off pesky student loans as quickly as possible, ChatGPT provided a 10-item “step-by-step plan to pay off student loans fast.” Here’s what was included.
Also see which college majors are set to pay off their student loans fastest (and slowest).
Understanding Your Loans
Among the actions students should immediately take to pay off their loans, the first is the most important, and not just because it’s the first. Knowing what you owe is particularly important now, as repayment options available to borrowers continue to be amended and at risk of being eliminated under the current government administration.
According to Forbes’ resident student loan expert Adam Minsky, “Many borrowers will likely need to consider switching plans or otherwise modifying their repayment approach in the coming months.”
Explore More: 6 Ways To Lower Your Student Loan Debt Interest Rate
How To Pay Off Your Student Loans as Soon as Possible
The rest of ChatGPT’s student loan repayment solutions are rather straightforward, but that doesn’t mean they’re trivial. ChatGPT’s recommendation to stare down student loan debt on multiple fronts is the best plan of attack for those who have the means.
Employing a snowball or avalanche repayment strategy, paying more than the minimum payment on the loan principal, using lump-sum windfalls (“tax refunds, bonuses, birthday money, side hustle income”) as extra payment, and chipping away interest and term by making one extra payment a year through biweekly payments will all help you achieve financial freedom sooner.
Additionally, ChatGPT suggested exploring any available means that will assist you in paying off your loans, like employer repayment benefits or a lender-supported auto pay interest rate discount. Ideally, you should be eliminating debt by cutting spending and increasing your income with a side hustle or freelance gig. Adding to your debt by deferring payments or entering into a forbearance agreement with your lender should be last resorts.
A ChatGPT Repayment Example
According to Experian data from 2024, the average student loan balance in the U.S. was $38,883. ChatGPT used a balance of $30,000 for its aggressive repayment example.
At 6% interest and a monthly payment of $333 for a 10-year term, paying back $30,000 will cost you over $9,900 in interest. However, if you can contribute and extra $200 per month, you’ll save $4,500 in interest and will pay off the loan in nearly six years instead of over 10.
Every extra dollar you throw at your monthly student loan payment saves you money on interest and gets you to debt-free faster. If you can manage to put an extra $500 toward your student loan every month, you’ll have it cleared in about 3 1/2 years and will save yourself over $6,000 in interest payments, per ChatGPT.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT How To Pay Off Student Loans ASAP — Here’s What It Said
