If you’re struggling to pay off your student loans, you’re not alone. More than six in 10 college seniors graduated with student debt in 2019, according to The Institute for College Access and Success. Medical or dental school graduates could easily have as much as $150,000 in student loan debt.
Thankfully, if you’re in this boat, you have plenty of options. Here are a few strategies for managing $150,000 in student loan debt.
Refinancing is one way to pay off student loans while saving money each month. Check out Credible to compare student loan refinance rates.
- Refinance your student loans
- Pay off the loan with the highest interest rate first
- Add a cosigner
- Use an income-driven repayment plan (if you’re eligible)
- Explore student loan forgiveness options
- Monthly payments on $150K in student loan debt
- Other ways to pay off student loans
Best for: Borrowers with high-interest loans and a good credit score
Refinancing student loans means a new lender pays off your original loans and issues you a single new loan. Ideally, you’ll get a better interest rate and more favorable repayment terms, saving you money over the life of your loan.
The rates and terms you qualify for depend on your income and credit score. You can refinance both federal and private student loans into a new, private loan. But if you refinance a federal student loan into a private one, you lose access to valuable protections, such as student loan forgiveness programs and income-based repayment plans.
Here’s an example of how a lower interest rate can save you money:
- Student loan balance: $150,000
- Interest rate: 6.8%
- Monthly payment: $1,726
- Remaining term: 10 years
- Student loan balance: $150,000
- Interest rate: 4.25%
- Monthly payment: $1,537
- Remaining term: 10 years
With the refinanced loan, you’ll save $189 a month and $22,680 over the life of your loan. You can also lower your monthly payment by refinancing to a longer repayment term, though you’ll pay more in overall interest this way.
Best for: Borrowers with multiple student loans
One popular student debt repayment strategy, known as the debt avalanche strategy, involves focusing on paying down whichever loan has the highest interest rate first while making the minimum monthly payment on all your other loans.
The faster you pay down this loan, the less you’ll spend on interest overall and the more money you’ll free up in your budget to pay off other loans. You’ll continue knocking out the loans with the highest interest rates until they’re all paid off.
Best for: Borrowers with lower credit scores or little credit history
If you’re struggling to refinance your loan because of your credit score or lack of steady income — or your current loan has a high interest rate — you can have someone (like a parent) with a better credit history and more financial stability cosign your loan. This way you can access more favorable interest rates that’ll save you money. The cosigner has to agree to make payments on the loan if you default, so make sure everyone involved is comfortable with this arrangement.
Best for: Federal student loan borrowers
Federal student loan borrowers have the option of signing up for an income-driven repayment plan. These plans set your monthly loan payments in accordance with your income and family size to help you afford your payments each month.
You can choose from four types of income-driven repayment plans:
- Revised Pay As You Earn Repayment Plan (REPAYE Plan) — Your monthly payments are generally 10% of your discretionary income, and you have 20 to 25 years to repay your loans.
- Pay As You Earn Repayment Plan (PAYE Plan) — Your monthly payments are generally 10% of your discretionary income, but never more than what you’d pay under the Standard Repayment Plan. Your repayment period is 20 years.
- Income-Based Repayment Plan (IBR Plan) — With an IBR plan, your monthly payment depends on the date you took out loans. If you're a new borrower on or after July 1, 2014, your monthly payment is typically 10% of your discretionary income, and your repayment term is 20 years. If you’re not a new borrower on or after that date, your monthly payment is generally 15% of your discretionary income, and your repayment term is 25 years.
- Income-Contingent Repayment Plan (ICR Plan) — Your monthly payment is the lesser of 20% of your discretionary income or the amount you’d pay on a repayment plan with a fixed 12-year repayment term.
Best for: Federal student loan borrowers working in qualifying fields
Student loan forgiveness programs allow borrowers to stop repaying all or part of their federal student loans after they’ve made a certain number of payments.
The Public Service Loan Forgiveness Program is a popular option for borrowers with Direct Loans. If you’re employed full-time by a nonprofit organization or the government, you may be eligible for Public Service Loan Forgiveness. This program forgives the remaining balance on a federal Direct Loan after you make 120 monthly payments under a qualifying repayment plan.
Your monthly payment depends on your loan amount, interest rate, and repayment term. Here are some examples of what you’d pay for different loan amounts with varying terms:
You can save money on your monthly student loan payments when you refinance. With Credible, you can compare student loan refinance rates from various lenders in minutes.
Let’s look at a few more tips and tricks for paying off your student loans so you can get out from under your debt faster.
Pay more than the minimum every month
The longer you take to pay off your student loans, the more you’ll pay in interest over the life of the loan. If you can put extra money toward your student loans each month, above the minimum required payment, you’ll save on interest — this can make it easier to pay off your loans faster. Be sure to instruct your student loan servicer to put your extra payment each month toward the principal of your loan, not the following month’s payment. The less principal you have remaining, the less interest you’ll pay.
Consolidate your student loans
If you have federal loans, you can consolidate them with a Direct Consolidation Loan. This is similar to refinancing private student loans — you combine all your outstanding federal student loan balances into a single loan. Your interest rate will be an average of what you’re already paying across all your loans (so you may or may not get a lower rate), and you’ll have one convenient monthly payment. With a Direct Consolidation Loan, you’ll get up to a 30-year loan term. Remember, while a longer repayment term will lower your monthly payment, you’ll also pay more in total interest.
Sign up for automatic payments
The last thing you want to do is accidentally forget to make your monthly loan payment. By enrolling in an autopay program, you’ll never miss a student loan payment (as long as you have enough funds in your account to make the payment) and can avoid late payment fees. Some private lenders offer a small interest rate discount to borrowers who sign up for automatic payments. If you’re a federal Direct Loan borrower, you’ll save 0.25% on your interest rate if you sign up for automatic debit payments.
Make biweekly student loan payments
If you make your student loan payments every two weeks instead of once a month, you’ll end up making a full extra payment every year. This may seem small, but you’ll save on interest over the years, which can really add up — especially if you have a long repayment term.
Adjust your budget
If your goal is to pay off your student loans as quickly as possible, make room in your budget for extra student loan payments. To create a basic budget, combine all your monthly expenses (including any student loan minimum payment amounts) and subtract that amount from how much money you bring home each month.
Once you know how much money you should have left each month, you can decide how much extra you want to put toward student loan payments. Take that amount and add it back into your budget as an ongoing expense so you get into the habit of making those extra payments every month.
If you’re ready to refinance your student loans, visit Credible to compare student loan refinance rates from multiple lenders without affecting your credit.