Managing Student Loan Debt

The amount of student loan debt in America today is second only to mortgages as a percentage of total household debt. If your student loan payments are taking too big of a bite out of your balance sheet, you have options on how you can manage and possibly reduce those payments.



  • More than 600,000 federal student loan borrowers who started repayments in 2010 defaulted on their loans just two years later.
  • Unlike credit card debt, student loans cannot be discharged in bankruptcy, so it will always be with you until repaid.
  • There are several ways to lower monthly payments on federal loans, however, all of them will increase the total amount owed on a loan.


Americans currently owe a record $1.1 trillion in student loan debt, according to the Consumer Financial Protection Bureau. Trying to pay off these large debts, while also covering rent, insurance and other living expenses, can be stressful.

If you’re among the 25 million people under age 39 carrying student loan debt, it’s important to structure your payments so you can avoid falling behind or worse, defaulting on your loan. Before you run into trouble, take a moment to get a handle on three things:

  • Your loan balance and terms. Keep track of how much you owe, the interest rate you’re paying, and the repayment terms.
  • Options if you start struggling. Depending on the type of loan you have, you may be able to restructure your loan to lower your monthly payments and get them to fit into your overall financial budget.
  • Repercussions if you miss or stop payments. Like any other loan, missing payments will adversely affect your credit rating. Defaulting makes that much worse. The debt will always be with you since student loans cannot be discharged in bankruptcy.

Repayment Options for Federal Loans

For federal loans, here are a few repayment options you may qualify for, depending on the type of loan you have:

  • Graduated repayment. This program lets you make smaller payments early on with the payment amount gradually increasing over 10 years.
  • Extended repayment. This is simply making the loan term longer, which spreads payments over many more months, making each payment lower.
  • Income-Based Repayment (IBR) or Income-Contingent Repayment (ICR). These options base your monthly payment on a percentage of your income.
  • Pay-As-You-Earn repayment. This option caps monthly payments at 10 percent of your monthly income for up to 20 years. It is only available to those who took out loans after October 1, 2011 and only if you can prove financial hardship.

Keep in mind that all of the options above are designed to lower your monthly payments. But they will all result in more interest being charged over longer time frames, making you loan more expensive in the long run. Since federal loans do not have any prepayment penalties, consider accelerating payments as your income goes up to reduce the overall cost.

If you have a private student loan, there is less flexibility. Contact your lender and try to negotiate a restructure of the loan or a temporary lowering of monthly payments.

Avoiding Default

You absolutely, positively don’t want to default on your student loan. Your credit rating would take a hit and you’d be liable for costs associated with trying to collect on your debt, making your total amount owed even higher.

If you’ve tried the repayment options above and still feel like you can’t meet your obligations, there are a few other things to try:

  • Deferment. Your lender allows you to stop making payments for a period of time. Interest continues to accrue so deferment adds to your debt.
  • Forgiveness. As a teacher, you might qualify for the Teacher Loan Forgiveness Program. You must have been teaching full-time for five consecutive years at an eligible low-income school and meet other loan-specific criteria. More details are available on this page.
  • Discharge. A discharge releases you from all or a portion of your loan obligation due to death, disability, and a host of other unlikely circumstances.

The Bottom Line
Student loans come with a lot of responsibility. Fortunately, there are organizations that can help you get a handle on your student loan debt. One is the nonprofit American Student Assistance. Also check out SALT, a free resource backed by American Student Assistance that offers tools and tips for managing all of your finances. SALT offers a handy guide called 60+ Ways To Get Rid of Your Student Loans (Without Paying Them), which you can download here.