If you want to get out of student debt fast, you’ll need to make extra payments on your student loans. You’ll also save thousands of dollars’ worth of interest by paying off your loans early.

The best way to take a big chunk out of student debt early on? Snag a signing bonus and use it to pay down your student loans. Here’s how you can get started.

4 Ways You Can Get A Signing Bonus

Getting a signing bonus to pay down student debt might be easier than you think. A 2016 WorldatWork survey of bonus pay found that 76% of employers have a sign-on bonus program.

Usually, candidates can command a sign-on bonus when they have a lot to offer. See if you meet any of the criteria below.

1. You Have An In-Demand Degree

Companies often are willing to pay out a signing bonus to attract candidates with a specific degree or training.

At the undergraduate level, you’re most likely to get a signing bonus if you majored in engineering, business, or computer science, according to the “Job Outlook 2016” survey from the National Association of Colleges and Employers (NACE).

At the graduate level, a Master of Business Administration (MBA) commonly gets graduates signing bonuses. The average is a hefty $15,887, according to U.S. News and World Report.

2. You Graduated From A Top-Ranked College

If you earned an in-demand degree from a top-ranked school, you’re even more likely to get a fat signing bonus.

2016 MBA graduates of the famed Wharton School of the University of Pennsylvania, for instance, received signing bonuses of $33,433 on average. And 81% of 2016 Wharton undergraduates were offered sign-on bonuses, averaging just under $10,500.

3. You Work In A High-Demand Occupation

Employers are more likely to offer signing bonuses for highly skilled and in-demand occupations.

For example, employers offered signing bonuses to 90.4% of physicians recruited through The Medicus Firm in 2016, according to HealthLeaders Media. Executives and managers also were more likely to receive sign-on bonuses, according to the WorldatWork survey.

4. You Negotiate A Signing Bonus

You can try to negotiate a signing bonus for almost any position. After all, if you don’t ask, you don’t get. Once your potential employer has extended a job offer, ask if a signing bonus is available.

Perhaps you have a competing job offer, or maybe the offered salary is lower than what you asked for. Use this information as leverage to increase your chances of getting a signing bonus.

How Does A Signing Bonus Work?

Each employer has its own policy for when and how it pays out sign-on bonuses.

Try to learn the following key details when you receive a job offer so you can make an informed decision about whether you should accept it. Plus, you can figure out how much you can expect to get paid and when so you can start paying down your student debt.

How A Signing Bonus Affects Your Base Salary

Although a signing bonus is separate from your salary, it does count toward your total reported income for the year. For example, if you accepted an offer with a base salary of $100,000 and a $15,000 signing bonus, your total reported income for the year would be $115,000.

Also, if you receive benefits or raises, they’re calculated using your base salary. So a 5% raise would be $5,000 based on the $100,000 salary — not $5,750 based on the $115,000 total.

If you have a choice between an offer with a higher base salary or one with a signing bonus, consider giving preference to the higher salary. While a signing bonus is a one-time boon, a higher salary will benefit you with every paycheck.

How Your Employer Withholds Taxes On Bonus Pay

Taxes will be withheld from your signing bonus, so you should expect your take-home pay to be less than the offered amount. According to IRS guidelines, employers have a couple of options to calculate withholdings on bonus pay.

It will be up to your prospective employer to decide how taxes are withheld from your signing bonus. But each method can change the amount paid out to you now. Ask the company which method it uses so you can get the clearest idea of the actual value of the signing bonus.

Note that both your salary and your bonus are treated as regular income when taxes are calculated. So whatever method the employer uses, you’ll get that money eventually — just not until you file your return next tax season.

Reasons You Might Have To Pay A Bonus Back

It’s also common to tie a signing bonus to tenure, with some companies requiring you to stay with them for up to a year before you can receive the payout.

The $15,000 bonus mentioned above, for instance, might be tied to six months of employment. Or it could be contingent on you earning a specific certification or completing a designated project.

If you leave early or don’t meet these requirements, you could be required to pay back all or a portion of the bonus.

How To Use A Signing Bonus To Pay Down Student Loans

If you receive a signing bonus, one of the best ways to use it is to pay down your student debt. With this extra money available to you early in your career, you can use it to take a big chunk out of your student loans.

Calculate Your Savings

Using a signing bonus to pay down student loans can save thousands of dollars’ worth of interest charges over the life of the loans. You can use the Student Loan Hero lump sum extra payment calculator to see how much your signing bonus could save you.

Take a physician, for instance. Let’s say they owe an average of $164,800 in medical school debt at the current Grad PLUS Loan rate of 7.00%. If they repaid this debt in 10 years, they’d face monthly payments of $1,913 and total interest charges of $64,816.

What if the same med school grad got a signing bonus worth $20,000 in take-home pay and applied it to their student debt? They’d pay off their student loans 20 months sooner than they would’ve without this extra payment and save $18,030 in interest.

Target High-Interest Student Loans First

The higher your interest rate, the more you stand to save by making an extra lump-sum payment on a student loan.

To get the most out of your signing bonus, don’t send it to any old student loan servicer. Make sure you find out which of your student loans has the highest interest rate — that’s the one costing you the most. Put your signing bonus toward this student debt to reap the most savings in interest.

Keep Asking For Signing Bonuses

Receiving a signing bonus at your first job after graduating is a huge win. Regardless of whether you pull it off, however, don’t think it’s your only opportunity to use this student loan payoff strategy. Every time you change jobs, view it as an opportunity to negotiate a signing bonus and pay off a big chunk of student debt.

It might be easier to get a signing bonus after you’ve been working for a few years. The more experience you have under your belt, the more likely it is that potential employers will be willing to offer special perks such as a sign-on bonus to get you on board.

Wherever you are in your career, look for ways to leverage work benefits to get out of student debt faster. Perks such as signing bonuses and student loan repayment assistance can help you get rid of student loan payments ahead of schedule.


This article was written by Andrew Josuweit from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

The views of the author of this article do not necessarily represent the views of Gradifi. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained here. Readers should consult their own attorneys or other tax or financial advisors to understand the tax, financial and legal consequences of any strategies mentioned in this article.