Strategies for Paying Off Student Loans

Student loan debt differs from other credit products in a few ways. First of all, the most common student loans (federal Direct undergraduate loans) do not require a credit check, so they’re pretty easy to get. Second, and perhaps most important, it’s very difficult to get out of repaying student loans, even if you fall on hard times. Student loans are infrequently discharged in bankruptcy — even if you qualify for loan forgiveness, you have to apply for it. Student loans accrue interest while you’re in school (though the government pays the interest on some borrowers’ loans while they’re in school), so by the time you have to pay them back, you may be surprised to see you owe much more than you initially borrowed.

There’s some good news: You may have several options for repaying your student loans, especially federal student loans, that can make your debt more affordable. It’s crucial you can afford your student loan payments, because if you fall behind, it’s not only difficult to catch up, but you’ll also likely see your credit score drop, as a result.

How Much Student Loan Debt Do Americans Have?

Student loans often help make it possible to earn a college degree, which over time can help you earn more. But sometimes things don’t go as planned. You may have to drop out of school before you finish your studies. You may not land a good-paying job after school. Or you may discover you’ve borrowed more than you can pay back. In fact, seven-in-10 (68%) of college seniors who graduated in 2015 owed money for their educations, with an average student loan debt of $30,100 per borrower, according to the Project on Student Debt. And that’s just borrowers who graduated — some of the people who struggle most with student loan debt took out loans but didn’t earn a degree.

Besides moving back in with your parents (if that’s even an option), living off PB&J sandwiches and putting every penny you can toward your debt, what are your options?

Fortunately, there are a variety of student loan repayment programs that may help you whittle down — or even wipe out — debt. They include:

1. Student Loan Forgiveness

A number of programs allow you to get some or all of your debt canceled if you qualify. Examples include serving in the Peace Corps or AmeriCorps; programs that allow a variety of healthcare professionals from doctors and nurses to dental hygienists and mental health workers to get a significant amount of their debt forgiven if they are willing to serve at least two years in an underserved community.

Teachers may similarly be able to get some student loan debt forgiven if they work in underserved communities — especially if they teach math or science. Your school or employer may even offer a program to help with student debt, so be sure to research or ask about them. And members of the National Guard and military may be eligible for programs like the National Call to Service program which pays a cash bonus of $5,000 and up to $18,000 in student loan repayment. Finally, those who are totally and permanently disabled may also apply to have their federal loans discharged.

It may take you a while to find out whether you’re eligible for such a program. And if you do qualify, you may be taxed on the forgiven debt as if it were income. But it can still be worth the time and energy (and taxes) to wipe out these debts, especially when you consider you aren’t just eliminating the debt, but also the interest that would accrue on the balance in the future.

2. Income-Based Repayment

What happens if you don’t qualify one of those programs but your monthly payments on your loans are more than you can pay? You may want to look into the Income-based Repayment (IBR) Program. (The newer versions of that program are called Pay As You Earn and Revised Pay As You Earn.) With these programs, you may be eligible for lower monthly payments on your federal loans, based on your income. If there is a balance remaining after you’ve made payments for a certain number of years (10, 20 or 25) it will be forgiven.

The length of time you’ll be required to make payments before the balance is forgiven depends on the type of work you do. Also helpful: paying back your loan under IBR, PAYE or REPAYE does not hurt your credit scores, as long as you make the reduced payments on time.

3. Student Loan Consolidation

It can be frustrating as a student loan borrower to learn that your options for refinancing these loans are limited. Unlike other types of consumer loans, which can be refinanced if interest rates drop (if you qualify), federal student loans are not as flexible. In fact, you generally get only one shot at this.

Some of the potential benefits of a federal consolidation loan include:

  • One monthly payment instead of many
  • Lower monthly payments, by extending the loan term to up to 30 years
  • Changing from a variable-rate loan to a fixed-rate loan
  • Possible eligibility for other repayment plans such as IBR

However, there can be drawbacks as well. They include:

  • More interest paid over time if the loan term gets longer
  • Possible loss of valuable benefits such as interest-rate reductions or loan cancellation benefits, depending on which types of loans you consolidate.

How do you consolidate student loans? The Department of Education offers a helpful checklist for borrowers who are thinking of consolidating. If you decide to move ahead anyway, you will fill out a free application at the Department of Education website.

Student Loans and Your Credit Scores

Typically student loans won’t hurt your credit scores if they are paid on time, and they can often help your scores. If you fall behind, however, those late payments can cause your credit scores to drop significantly. For that reason, it is especially important to try to repay your student loans.

You can see for yourself how student loan debt affects your scores by getting a free credit score on

This article has been updated. It was originally published November 14, 2013.

Credit Tools receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.