Tips to Tackle Student Loans and Get Out of Debt

5 ways to get out of student loan debt faster and for less.

Laura Adams, MBA
5-minute read
Episode #281


A reader named Breanne asks:

“My husband has $83,000 in federal student loan debt. He’s on the Income Contingent Repayment Plan because his income as a part-time teacher isn’t enough to make full loan payments right now. He hopes to get a full-time position and qualify for the loan forgiveness program. But if he doesn’t, how can we ever get out of debt?”

Today’s graduates are saddled with huge amounts of student loan debt while having to endure a tough job market. Student loan debt now tops $1 trillion in the U.S., which is more than our credit card debt. Though there’s no one formula to get rid of student loan debt, I’ll give you 5 tips to manage it wisely.

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Tip #1: Never Miss Payments

Many people don’t realize that student loans are a different breed of debt because they’re like a cockroach—built to survive! You typically can’t shake a student loan, even by declaring bankruptcy.

The government and private lenders can sue you at any time to collect defaulted student loans—plus charge you collection fees, court costs, and attorney fees. The IRS can intercept your state and federal income tax refund, garnish a portion of your wages, and even withhold a limited amount of certain benefit payments until your student loans are paid in full.

Additionally, having a student loan in default can make you ineligible for certain professional licenses or for getting student aid in the future. It also makes you ineligible for certain programs that offer debt relief, which we’ll cover next. And, of course, late payments are one of the most damaging items to have on your credit file. So, for all these very serious reasons, be sure that you always make paying a student loan your top financial priority.

Related Content: 7 Steps to Check and Correct Your Credit Report

Tip #2: Know Your Repayment Options

If you’re having trouble making student loan payments, be sure you understand all your options as soon as possible. Federal loans generally offer much more repayment flexibility than private loans. But don’t assume anything; get on the phone and speak to a loan representative before you’re at risk for missing a payment.

Standard repayment for federal student loans is a fixed payment for 10 years. But different loans come with different repayment plans. Here are 6 loan relief options you may qualify for:

  1. Extended Repayment: extends the standard loan term to 25 years. You can pay a fixed amount each month or opt for graduated payments that start low and increase every 2 years.

  2. Graduated Repayment: maintains the original 10-year repayment term, but payments start low and increase every 2 years.

  3. Income Contingent Repayment: adjusts monthly payments each year based on income, family size, and total amount of debt, for up to a 25-year repayment term.

  4. Income-based Repayment: adjusts monthly payments based on a period when you experience a financial hardship. If you meet certain requirements the loan may be extended beyond 10 years or even canceled.

  5. Forbearance: gives you temporary relief if you experience an illness, financial hardship, military mobilization, or start a medical internship or residency. For instance, you might have reduced payments or no payments for several months. You must be current on your loan to be eligible for forbearance.

  6. Deferment: postpones payment of a loan if you’re current on payments but are unemployed, have a financial hardship, go back to school, are on active military duty, or become disabled.

You’re never locked into one option because you can change your student loan repayment plan by contacting your loan servicer. Since Breanne’s husband is on the Income Contingent plan, one option would be to find out whether the Income-based Repayment plan would offer more relief.

Tip #3: Consider Loan Forgiveness Programs

Many federal student loans allow you to provide services in exchange for having debt reduced or canceled altogether. To qualify, you typically have to do volunteer work, military service, teach school, or practice law or medicine in underserved communities, for a certain period of time. For instance, Peace Corps volunteers can have certain types of federal loans deferred or canceled up to 70% in total.  

As Breanne mentioned, becoming a full-time teacher can make you eligible for student loan forgiveness. For instance, if you teach in an elementary or secondary school that serves low-income or disabled students.

The U.S. Department of Education maintains a database called the Teacher Cancellation Low Income Directory which is a list of schools where teachers qualify for loan cancelation. The American Federation of Teachers at aft.org also maintains a Funding Database, which lists loan forgiveness programs for teachers.

To find programs that you may qualify for, do an online search using the keywords “student loan forgiveness.” You should never pass up a good job opportunity to commit to a loan forgiveness program, but it may be a smart option depending on your situation and field of expertise.  

Tip #4: Sign Up for Automated Payments

You can enroll in the electronic debit account (EDA) program that authorizes your bank to automatically make your student loan payments. This is a great way to ensure that your payments are sent on time—plus, you also get a 0.25% reduction in your interest rate. 

Tip #5: Get a Second Job

If you bring in additional income, you can use it to increase your monthly student loan payment, pay down your balance faster, and pay less total interest. Having advanced education should give you an edge for finding a second job or getting work that pays above-average wages.

A final Quick and Dirty Tip for borrowers with multiple federal student loans is to consider doing a loan consolidation, which combines several loans into one. Consolidation makes repayment more convenient and generally extends the repayment period, which reduces the monthly payments. Speak to your loan servicer and visit loanconsolidation.ed.gov–-they have a calculator called the Federal Direct Consolidation Loan Calculator that can help you crunch the numbers for your situation.

Always remember that when you take advantage of repayment options that extend the length of a loan or reduce payments, you get short-term relief, but generally end up paying much more in interest over the long run. So try to increase your income and cut expenses so you can avoid paying more for your student loan than you absolutely have to. 

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.