How to Pay Off Student Loans

It’s not uncommon to graduate college with student loan debt. In fact, it’s estimated that more than 44 million people in the U.S. collectively owe more than $1.5 trillion in student loans.

It’s important to pay your student loans to avoid hurting your credit score, which can inevitably impact your chances of getting a car loan or mortgage.

Determine the Maximum You Can Afford

The cost of student loans adds up quickly for many. To pay them off in a timely manner, it’s important to calculate exactly how much money you can put toward the overall cost each month. The first tip step in determining your maximum payment is to evaluate your finances. You should make a list of your essential monthly expenses and how much you spend on each one. Compare this with your monthly take-home pay to determine what you are left with. After you’ve subtracted your fundamental monthly bills like rent, water and utilities and car payment(s), determine how much is leftover for your student loans. Apply as much as you can while still leaving enough to live off of and some for savings.

Related Article: Saving and Budgeting Tips for New College Grads

If you are unable to pay the minimum amount on your student loans, comb through your expenses to see where to cut costs. This includes eliminating streaming services or cutting back on eating out. Set a monthly budget for each category such as groceries, entertainment, transportation and others.

It’s also important to set realistic goals, as student loans take time to pay off. Leave yourself extra spending money each month, as well as enough extra cash to help pad your savings account or emergency fund. Another helpful method of calculating a monthly maximum is to use an online calculator. Loan websites offer financial calculators that help you discover how much to pay toward your student loans each month.

Create a Long-Term Plan

On average, it takes anywhere from 10 to 25 years to repay student loans. Managing monthly payments and developing a long-term plan is the most effective way to ensure your student loans get paid off in a timely manner:

  • Determine the total amount. First, figure out exactly how much student debt you have. If you have multiple loans, add them together to determine the overall cost of what you need to repay.
  • Consolidate your student loans. If you owe on several different loans, consider combining them into one or two payments. This makes it easier to manage over time, and in some cases lowers your interest rate.
  • Be mindful of the payment dates. Make note of when each student loan payment is due. This helps you avoid late fees and other penalties. If your loans are set to pay on the first of the month, when rent and other expenses are due, call your lender. Most will adjust the due date.

For example, if you have three $10,000 loans, here is an example of a monthly payment plan and how long it would take you to pay them off:

  Interest Rate Starting Balance Monthly Payment Payment Length
Loan 1 7% $10,000 $116.11 Roughly 87 months
Loan 2 9% $10,000 $126.68 Roughly 79 months
Loan 3 13% $10,000 $149.31 Roughly 67 months
Total Monthly Payment     $392.10  

Is refinancing an option?

Student loan refinancing is a borrower getting a new loan with a usually lower interest rate. Some student loans are eligible for refinancing, while others are not. It’s a tempting option for those drowning in student loan debt:


  • Federal student loans cannot be refinanced. These types of student loans, established by the federal government, cannot be refinanced. Congress determines the interest rate for a federal student loan and that rate does not change, despite personal credit or income increases or decreases.
  • Federal student loan repayment options. Federal student loans offer several payment options like an extended repayment plan (more interest but lower monthly payment), graduated plan (monthly payments start small and increase over time), income-based repayment (evaluates your income and household size to calculate payment).
  • Shop around for private loan refinancing. Check with multiple lenders before refinancing your private student loans. Compare and contrast interest rates to negotiate the lowest possible cost. This saves you a lot of money over time.
  • Consolidate your private student loans. Although often mistaken for refinancing, the two are not the same. Consolidating means taking all loans and combining them into one payment with a single lender.

Student Loan Forgiveness or Cancellation

Student loan debt can weigh heavily on graduates. Only certain loans are eligible for forgiveness or cancellation under the following programs:

  • Public Service Loan Forgiveness. If you work for a nonprofit or government organization, the federal government clears your student loan balance after 120 payments. You need to apply for consideration.
  • Forgiveness with Income-Based Repayment. This type of plan lowers high student loan payments due to low income. Student loan payments only make up 10 percent to 15 percent of your discretionary income. Your loan balance is forgiven after 20 or 25 years of steady payments.
  • Pay As You Earn. This is an income-based repayment plan. Your monthly payment is 10 percent of your discretionary income. The leftover balance is up for forgiveness after 20 years of payments.
  • Forgiveness with Revised Pay As You Earn. This plan caps your student loan payments at 10 percent of your discretionary earnings. Student debt is forgiven after 20 years for undergraduate loans and 25 years for graduate loans.
  • Forgiveness with Income-Contingent Repayment. This plan calculates what you owe for monthly payments based on your income. This works out to 20 percent of your discretionary earnings or the equivalent of what you would pay on a fixed 12-year plan.
  • Federal Perkins Loan cancellation. This loan was discontinued by the federal government as of September 2017. However, for those who acquired the debt prior to its cancellation, the cancellation and discharge program forgives a specific amount of debt for every year served as an educational professional.
  • Forgiveness for teachers. Teachers who work at a qualifying school for a minimum of five successive years can have their loans forgiven. Elementary teachers can have up to $5,000 taken off of their student loan debt, while middle and high school teachers specializing in math, science or special education could get up to $17,500 forgiven.

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