More than half of college students graduate with some debt. The average federal student loan debt balance is $37,718, while the total average balance (including private loan debt) may be as high as $40,499, according to the Education Data Initiative.
While those numbers may look daunting, keep in mind that you typically don’t need to start repaying your student loans until six months after you graduate. What’s more, lenders (both federal and private) generally offer a number of repayment options that can make managing student loan debt easier.
Here’s a look at nine tips and strategies that can make repaying your student loans as stress-free as possible.
1. Understand Your Total Debt
Before you can determine the best way to manage student loan debt, you’ll want to get a full picture of what you owe. You may graduate with several loans, both federal and private, and the interest rate may be different depending on when you took out the loan.
You can find your federal student loan balances by logging into your account at StudentAid.gov. For private student loan balances, you can contact your loan servicer or check your credit report (you can request a free credit report from AnnualCreditReport.com ).
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2. Know Your Repayment Terms
In addition to your unpaid balances for each student loan, there are other repayment factors that impact your payoff strategy. This includes each loan’s:
• Term Your repayment term is the amount of time until you get out of student loan debt, if you follow your original repayment plan.
• Interest rates This is the cost of financing. While federal student loan rates are the same for every borrower, private student loan rates range based on the lender, the type of interest rate (fixed or variable), and the borrower’s credit score.
• Grace period Many student loans offer a grace period, which is the length of time that you have after graduation before you need to start paying back your loans. Often the grace period is six months after you graduate or drop below half-time attendance.
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3. Determine if You Qualify for Loan Forgiveness
If you have federal student loans, you could be eligible for certain debt forgiveness programs. These programs can wipe away all or a portion of your student debt after you’ve satisfied certain repayment and eligibility criteria. Some pathways to forgiveness include:
• Public Service Loan Forgiveness (PSLF) Under PSLF, government and nonprofit workers may be eligible to see the remaining balance of their federal student loan debt forgiven after making 120 qualifying payments. You can use the government’s PSLF help tool to see whether you work for a qualifying employer and generate your PSLF form.
• Income-driven repayment (IDR) An income-driven repayment plan sets your monthly student loan payment at an amount that is intended to be affordable based on your income. If your federal student loans aren’t fully repaid at the end of the repayment period (which may be 20 or 25 years), any remaining loan balance is forgiven.
• Teacher Loan Forgiveness Teachers who work full time for five consecutive academic years at a low-income school may be eligible for up to $17,500 in loan forgiveness. To qualify, you must meet the FSA’s requirements as a highly qualified teacher.
4. Select a Repayment Plan That Works for You
Depending on the type of student loan you have, you may be able to choose from a variety of different repayment plans. Loans in the federal system offer access to a set list of repayment options, while private loan repayment plans vary. Choosing a payment plan that works with your budget can make it much easier to deal with student loan debt.
Private Student Loan Repayment Options
When you take out a private student loan, you may be able to choose between several different repayment plans. These may include:
• Immediate repayment This means you’ll make full monthly payments while you’re still in school.
• Interest-only repayment Here, you’ll pay only the interest on your loan while you’re still in school.
• Partial interest repayment With this plan, you’ll make a fixed monthly payment while you’re in school that only covers part of the interest you owe.
• Full deferment If you go this route, you pay nothing while you’re enrolled in school. However, your loan balance will grow during that time due to accruing interest.
You may also be able to choose your loan repayment term, such as five, 10, or 15 years. Picking a shorter repayment term can help you save on interest (it may also help you qualify for a lower interest rate), but may mean a higher monthly payment.
Once you pick a repayment plan, you generally can’t change it after the fact. However, if you experience a financial hardship, the lender may agree to temporarily lower your payments, waive a payment, or shift to interest-only payments.
Federal Loan Repayment Options
All federal student loans are on the Standard Repayment Plan (which is a 10-year fixed payment repayment plan) by default. However, you can request to enroll in other plans, such as:
• IDR Plan Income-driven repayment (IDR) plans base your monthly payment amount on how much money you make and your family size. The four IDR options are: Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Depending on the plan, your payment is reduced to 10% to 20% of your discretionary income. After satisfying a certain number of months of qualifying payments on an IDR plan, you can get the remaining balance of your loan forgiven.
• Graduated Repayment Plan With this option, payments are lower at first and then increase, usually every two years. Payment amounts are designed to ensure your loans are paid off within 10 years (or within 10 to 30 years for Consolidation Loans).
• Extended Repayment Plan With this plan, your payments can be fixed or graduated and your loan term is stretched to 25 years.
5. Consider Consolidating or Refinancing Your Loans
If you have multiple federal student loans, even if they are with different loan servicers, you may be able to combine them into one loan with a single monthly payment through a Direct Consolidation Loan. This can simplify loan repayment and make it easier to manage student loan debt by giving you a single loan with one monthly bill.
Whether you have federal, private, or both types of loans, you might consider refinancing your student loans with one private student loan, ideally with a lower interest rate and/or better repayment terms. This can simplify repayment and could also help you save money. Just keep in mind that if you opt for a longer long term, you can end up paying more in total interest. Also be aware that if you refinance federal loans to private, you may lose some benefits, such as student loan forgiveness and IDR plans.
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6. Ask Your Employer About Student Loan Assistance
Many employers are now offering student loan repayment assistance or tuition reimbursement as a way to recruit and retain top employees.
And starting in 2024, employers will be able to pair student loan repayment with contributions to a traditional 401(k) plan. With this benefit, an employer matches a worker’s student loan payments as if they were payments to a qualified retirement plan, even if they don’t contribute to the company’s retirement plan.
The upshot: It can be worth asking your employer if they have any repayment assistance — or are planning to offer it in the future.
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7. Explore Payoff Strategies
Whatever type of student loan repayment plan you have, there are steps you can take on your own to help manage your student loan debt, and even speed up repayment. Here are two effective strategies to consider:
• Making extra payments toward principal If you have any extra cash to spare after you make your minimum monthly loan payment(s), consider putting it directly toward lowering your principal balance. Doing this can help you reduce the amount of debt you owe, pay off your loans faster, and save you money on interest over time. Just be sure to tell your lender in writing that your extra payment should go toward the principal and not toward future payments.
• Avalanche repayment method This can be useful if you have multiple student loans. With this approach, you make minimum student loan payments on all your loans and then direct any extra money toward the loan with the highest interest rate. Once that loan is paid off, you funnel your extra funds to the loan with the next-highest rate until that debt is paid off, and so on until all your student debts are gone. This payoff method can speed up loan repayment and also save you money.
8. Take Advantage of Lender-Specific Benefits
Some student loan lenders offer certain benefits to their borrowers. For example, federal, as well as many private, lenders offer a discount on the interest rate if you agree to set up your payments to be automatically withdrawn from your checking account each month.
In addition, some private lenders offer specific borrower perks, such as a one-time cash reward if you get above a certain GPA or the ability to earn reward points that you can then use to lower your monthly payments. It’s a good idea to learn about — and take advantage of — any repayment benefits your lender offers. This can make it easier to handle your student loan debt after you graduate.
💡 Quick Tip: Need a private student loan to cover your school bills? Because approval for a private student loan is based on creditworthiness, a cosigner may help a student get loan approval and a lower rate.
9. Budget Your Finances Accordingly
No matter the amount or type of student debt you have, a key way to manage repayment is to set up a basic budget. While that may sound complicated, it’s actually a relatively simple process.
The first step is to figure out how much money you have coming in each month (like your income after taxes and any help you may receive from your parents). Next, make a list of all your fixed monthly expenses, such as rent, utilities, phone/cable bill, food, and minimum payments due on loans, including your student loans.
You then subtract your fixed costs from your total income. Whatever is left is your disposable income — the money you have to spend on things like eating out, movies, other entertainment, and clothing.
Going through this exercise can help ensure you have enough funds to make your loan payments each month and avoid getting hit with late fees or, worse, defaulting on your student loans.
The Takeaway
There’s no one right way to handle student loan debt. Federal student loan borrowers have access to many student loan repayment strategies that can make paying off your debt more manageable. Private lenders typically also offer several different repayment options and sometimes even forbearance or deferment for borrowers who run into financial difficulty making payments.
No matter what type of student debt you have, you can utilize smart repayment strategies (such as making extra payments towards principal or using the avalanche repayment method) to pay off your loans faster and save money on interest.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
FAQ
How to pay off 70K in student loans?
There are many ways to pay off $70,000 in student loans, depending on the type of loans you have and repayment goals.
If you have federal student loans, you might sign up for an income-driven repayment (IDR) plan. With these plans, your payments are based on your income — typically 10% to 20% of your discretionary income. In addition, you could have any remaining balance forgiven after 20 to 25 years, depending on the plan.
For any type of student loan (federal or private), you might consider refinancing. This involves taking out a new private student loan and using it to pay off your existing student loans. Depending on your credit, you might get a lower interest rate, which could save you money on interest. You might also be able to shorten your loan term, and pay off your loans faster.
What is the best student loan repayment method?
The best repayment method for you depends on the type of student loans you have, your repayment goals, and your current financial situation.
If you’re looking to repay your loans as quickly as possible, you might consider paying interest while you’re in school and then, after you graduate, making extra payments toward the principal whenever you can. Another way to potentially pay off your loans faster is to refinance. This may allow you to lower your interest rate and/or shorten your repayment term.
What age group holds the most student loan debt?
Borrowers between age 30 and 39 hold the most student debt, with an average student loan balance of $42,748, according to the Education Data Initiative.
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