Pay Off Student Loans

If you have finished school with Lower Student Loan Payments, you need to pay them off. With the rising cost of education, you may owe a formidable amount of money. It is crucial to develop a plan for repaying your debt as efficiently as possible so that it does not haunt you for decades.


Understanding Your Debt

  1. Complete your school’s exit counseling procedures. If you have federal student loans, you are legally required to complete exit counseling when you graduate, leave school, or fall below half-time enrollment. Different schools may handle exit counseling differently, but whether you have to handle it in person, by mail, or online, it’s an important step in understanding your debt. During exit counseling, you should receive information about:
    • your legal rights and responsibilities as a borrower
    • various available repayment plans
    • procedures for making payments
    • conditions that must be met for deferment, forbearance, and forgiveness
    • resources available if you have questions or concerns regarding your debt
  2. Understand that you must repay your student loans regardless of whether you completed your program successfully. Some borrowers believe – erroneously – that they do not have to repay their student loans if they do not graduate. Unfortunately, that’s not the case, and you’ll need to repay your debt whether you completed your degree or not.
  3. Determine how much you owe. Depending on how long you’ve been in school, how many loans you’ve gotten, and whether your debt is federal, private, or both, you may not have a clear picture of how much student loan debt you’ve accumulated. That’s completely understandable, but you can’t address the issue effectively without figuring out what, exactly, you owe – and to whom.
    • You may be receiving notices, either by email or by snail mail, from your lenders or your school’s financial aid office. If that’s the case, keep careful records of these notices, noting what kinds of loans you have (Stafford, Perkins, PLUS, etc.) and who is servicing those loans.
    • Whether you’re receiving notices or not, it’s a good idea to do some research on your own to ensure that you’re fully aware of every loan. Start by visiting the National Student Loan Data System at This website will have information about all your federal loans, even if they were taken out at different times and are being serviced by different companies. If you’ve borrowed through the federal government only, then you don’t need to look anywhere else. If you have private loans, you’ll have to check your records and follow up with those lenders as necessary.
  4. Know which company is servicing your loans. If this information was not made clear to you during exit counseling, visit the National Student Loan Data System or inquire with your financial aid office.
    • In some circumstances, you may have multiple servicers for different loans. For example, you may find that your Stafford Loans are serviced through one company, but your Perkins loans are serviced through another.
  5. Find out when you must start making payments. For most forms of federal student aid, you will need to start making monthly payments six months after your graduation date (or after you stop attending). Private lenders may set other deadlines for payments to begin – in fact, they may even require payments while you are still in school.
    • For any subsidized federal loans, the government will continue to cover the accumulating interest during this six-month grace period, as it did when you were in school. If you have unsubsidized loans, though, interest will accrue during this time. Be aware that if you do not make payments, you will owe more six months after graduation than you did on graduation day.
  6. Be aware that failing to make payments will impact your credit. Although federal student aid is awarded regardless of your credit score, understand that if you do not pay, your credit will absolutely suffer – whether your loans are federal, private, or both.
    • If you do not make your payments and wind up with bad credit, you will have a much harder time qualifying for other kinds of loans (including mortgages and car loans) later on.
    • Bad credit may also make it more difficult to rent an apartment or sign up for certain utilities. You may even have difficulty getting a cell phone plan.

Exploring Your Repayment Options

  1. Understand that smaller monthly payments will mean that you pay more over time. Many borrowers look, understandably, for the repayment plan with the lowest monthly payments. Know that if you take this route, you’ll be paying significantly more in the long run. For example, say you have $26,946 in federal student loan debt – the average for borrowers who attended a four-year public university:[1]
    • If you pay a standard monthly payment of $272 a month, you will ultimately pay $32,585 on your loans.
    • If you pay on a graduated plan, starting with $152 a month and increasing to $455 a month over time, you’ll ultimately pay $33,979 on your loans.
    • If you pay on a lower “pay as you earn plan,” starting with $104 a month and increasing to $272 a month, you will ultimately pay $39,509 on your loans.
  2. Start with the standard repayment plan if you can afford it. Because making smaller payments will increase your overall cost, you should make the standard, recommended payments if possible. Under this plan, you will pay off your student loans completely in ten years.
    • In general, unless you request otherwise, your student loan servicer will start you off with the standard repayment plan.
  3. Consider the graduated payment plan if you think your salary will increase steadily over time. If you are employed in a steady but somewhat low-paying job, but you can reasonably anticipate periodic promotions and raises, the graduated payment plan might work better for you. You’ll start off with a lower monthly payment, which will go up over time.
    • In general, the graduated payment plan will also enable you to pay your loans off in ten years. Check with your loan servicer to see what you individual numbers will look like.
  4. Look into the extended repayment plan if you need the smallest monthly payments available. If your budget is restricted and you don’t anticipate a significant increase in your income, the extended repayment plan may be your best option. Under this plan, you pay off your student loans over the course of twenty-five years.
    • Remember that there’s a significant overall cost associated with these lower monthly payments. You will have this debt for much longer, and you’ll pay much more overall.
  5. Research your income-based repayment options. Depending on your individual circumstances, you may be eligible for an income-based repayment plan. You must apply for this plan by submitting proof of a low income and showing that other repayment plans would constitute a financial hardship. Individual eligibility varies, so talk to your loan servicer for details. These plans include:
    • Income-Based Repayment (IBR). Under this plan, you’ll make payments for twenty-five years, and after that, any remaining debt will be forgiven. Your payments will not exceed 15% of your discretionary income.
    • Pay-As-You-Earn Repayment. This is a newer program, which is only available to people who had no student loans prior to October 1, 2007, and received student loans after October 1, 2011. If you qualify, it's a better deal than IBR. Under this plan, you’ll make payments for twenty years, and after that, any remaining debt will be forgiven. As with IBR, your payments will not exceed 15% of your discretionary income.
    • Income-Contingent Repayment (ICR). Under this plan, you’ll make payments for twenty-five years, and after that, any remaining debt will be forgiven. Your payments will not exceed 20% of your discretionary income.
  6. Know that you may qualify for forbearance if you have a temporary need to stop making your payments. Forbearance allows qualifying borrows to hit the “pause” button on their payments. Be aware that your interest will continue to accumulate during this time. Consider applying for a forbearance if:
    • you have a sudden financial hardship.
    • you develop a serious medical problem that affects your income or your budget.
    • you start a medical or dental internship or residency program and cannot make your payments.
    • you accept a position with AmeriCorps.
    • you begin active duty in the U.S. military.
  7. Weigh the pros and cons of deferring your payments. You may qualify for a deferment (a period during which you do not have to make payments) for a variety of reasons, but remember that deferments do have costs. In most cases, your loans will continue to accumulate interest, and you’ll pay more over time. Deferments are available for borrowers who:
    • attend graduate or professional school.
    • are unemployed.
    • are experiencing severe economic hardship.
    • are serving in the military.
  8. Understand that private loans will likely offer fewer options. One of the reasons that federal financial aid is so much more attractive than private student lending is that the government offers all of these possible repayment plans. If you have private debt, you will have to negotiate directly with your lenders, and they may be much less inclined to grant you lower payments or a deferment.
  9. Avoid default if at all possible. For federal loans, at least, the variety of payment, forbearance, and deferment options should allow you to avoid defaulting (failing to pay). Don’t ignore your debt. A default will have significant, long-term implications for your credit, and you won’t be able to get any additional financial aid, either. If you do wind up in default, it’s not too late to repair the damage. Talk to your loan servicer, as individual circumstances may vary. In general, though:
    • You can get out of default by consolidating your loans with the federal government and making three consecutive monthly payments. Consolidation combines all your loans and revises your payment plan to make your monthly payments as affordable as possible. Of course, this does mean paying more interest in the long run.
    • Alternatively, you can simply start making your payments again. Once you have made nine consecutive monthly payments, you will get out of default. This process is called rehabilitation.

Paying Off Your Debt as Quickly as Possible

  1. Make additional principal payments if possible. Think of your designated monthly payment as the bare minimum. If you can afford it, you can pay extra without penalty. Doing so will mean that you pay your loan off faster and pay less interest over time.
    • For the best results, ask your loan servicer to apply any additional amount to your principal (rather than to future payments). This will ensure that your money makes more of a dent in your loan balance.
  2. Budget carefully. Track all of your income and spending for a few months, and then identify expenses that can be cut. You can then funnel this money into student loan payments, including extra principal payments. Depending on your individual circumstances, this might mean:
    • renting a cheaper apartment or living with a roommate
    • eating out less frequently
    • doing without a car and walking, biking, or taking public transportation instead
    • cutting entertainment expenses like movie and concert tickets
    • avoiding small extra expenditures at coffee shops and bars
  3. Try to increase your income. It may sound obvious, but excelling at your job, earning promotions, and working overtime when possible will improve your overall financial picture and allow you to pay off your student loans faster.
    • When you do find yourself earning more, resist the urge to spend that extra money. If you continue to live as if you were receiving a lower paycheck and funnel the extra cash into extra student loan payments, you could save thousands and thousands of dollars and get rid of your debt much more efficiently.
  4. Look into forgiveness options. Depending on your profession and your other circumstances, you may be able to get some of your debt forgiven. Talk to your loan servicer for specific details on the various forgiveness plans and a complete list of restrictions and eligibility criteria. In general, though, you may qualify for at least partial forgiveness if:[2]
    • you teach for five consecutive years in a high need area
    • you join AmeriCorps or the Peace Corps
    • you join the Army Reserve or the National Guard after graduation
    • you are accepted into Teach for America
    • you work full-time as a provider of early intervention services for the disabled
    • you work full-time providing services to families in low-income communities
  5. Find out if your employer will help you repay your student loans. Some employers do offer assistance with student loan repayments. Check into this option to be sure you aren’t missing out on this benefit.
  6. Avoid taking on additional debt until you pay down your student loans. If at all possible, avoid getting a car loan, a mortgage, or any other type of loan until you have made significant progress on your student loan debt. Though it might feel like a burden to postpone buying a new car or become a homeowner, this approach will absolutely pay off in the long run.


  • Look for ways to supplement your income. Consider getting a second job, and selling things you do not need.
  • Read the fine print. If you fail to take the time to consider your options carefully, you might end up owing far more than you started with.
  • Make your payments on time. You may get an interest rate reduction if you make a certain number of consecutive on time payments.
  • Paying off your student loans and other debts should be a top priority. Consider ways to save money in every aspect of your life, so you can repay your loans as fast as you can.
  • Budget your money carefully. Learn to save money so you can repay your debts.
  • You can make paying off student loans easier if you take steps to Lower Student Loan Payments while in school. The easiest way to pay off debt is to avoid it.
  • Ask others for help. Your friends, coworkers, family, and relatives might be able to help you. Do not feel embarrassed to ask for help, trusted friends and family are often happy to listen, discuss, and offer guidance to you.


  • Avoid scams. If something sounds too good to be true, it probably is false. No one will pay off loans for you, unless they can benefit by so doing.
  • Whenever possible, avoid consolidating federal loans into a private consolidation loan, as you would lose your rights under the federal loan programs, including deferment, forbearance, cancellation, and affordable repayment options, once you consolidate with a private lender.
  • Avoid the temptation of payday advance loans at all costs. It is a quick fix that will cause you to get into a snowballing problem of debt. Before you even think about taking out a payday loan, consider other resources: family and friends, home equity, and Debtors Anonymous.
  • Avoid credit cards, unless you can be sure to pay off the full amount on time every month. Credit cards can get you into much heavier debt.
  • Federally insured student loans cannot be included in bankruptcy. You will still owe for these loans, even if you file.

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