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Student loans are now the second largest source of debt in the U.S. after mortgages. They’re also an infinite source of stress for the borrowers trying to eliminate them. The good news is that there are solutions that can help borrowers pay off school loans in more effective ways. In fact, a study by the Government Accountability Office (GAO) found that about half of federal student loan borrowers overpay.

The solutions that we detail below can help you pay off school loans in a more effective way. There are solutions that help lower monthly payments to fit your budget and allow you to qualify for federal loan forgiveness. On the other end of the spectrum, there are also solutions accelerate repayment so you can get out of debt faster and minimize total interest charges.

Student Loan Debt Help Quickstart Menu

General information about eliminating your debt:

Explore specific student loan debt solutions:

General Information About Eliminating Student Loan Debt

What factors determine eligibility for different solutions?

The options you choose to get out of debt start with what you want to accomplish:

  1. Do you need lower monthly payments that work better for your budget?
  2. Do you want to pay off your loans quickly, which also helps reduce the total interest charges applied to your debt?

Those are basically the two options you have. Lower payments usually mean you extend the term (length) of your loans. You stay in debt longer, but your payments are more affordable month to month. By contrast, if you go for faster payoff, the monthly payments will be higher. However, since there are fewer months to apply interest charges, you reduce your total cost.

Beyond your elimination goals, there are a few other factors that determine which solutions you choose:

  1. The types of loans you hold – federal or private
  2. The status for your loans (i.e. are they in default)
  3. Personal income level and budget
  4. Credit score
  5. Your employment

It’s important to note that any federal repayment solutions only apply to federal loans; you can’t use a federal repayment plan for your private debt. You can use private lending solutions for federal loans. However, this is usually not recommended since it converts those loans into private debt.

Private loans and public federal loans can add up quickly to create problems with student loan debt for borrowers

Employment only matters when it comes to federal student loan forgiveness programs. In most cases, you must be employed in some type of public service profession to qualify.

The best student loan repayment plan if you have limited cash

If you have federal loans and a limited budget, then the best solutions are hardship-based repayment plans. These plans set the monthly payments as a percentage of your Adjusted Gross Income (AGI). They also take your family size into account. So, the lower your income and more dependents you have, the less you have to pay.

The most affordable plan is Pay as You Earn (PayE). For the average borrower, the monthly payments usually equal to about 10% of your income. However, if you live below the federal poverty line for your state, your payments can drop to zero. You even get credited for making “qualified payments” during your hardship period. The payments only increase one your situation improves. So, if you face extreme hardship, Pay as You Earn is the way to go.

There are also two other programs that work on a hardship-based system:

  1. Income-based repayment (IBR) typically sets your monthly payments at around 15% of your AGI.
  2. Income-contingent repayment (ICR) usually offers monthly payments at 20% of your AGI.

Also, keep in mind that you must enroll in one of these hardship-based programs if you want to qualify for federal loan forgiveness.

How to pay off student loans fast and minimize total costs

There are two federal repayment plans that allow you to pay off your loans faster. They are the standard repayment plan and the graduated repayment plan. Standard repayment is what you get enrolled in automatically if you don’t choose another plan. It breaks repayment into fixed payments based on your total debt. The term is 10 years.

Graduated repayment starts with slightly lower payments than standard. But they increase by 7% every two years. So, at the end of your repayment period, the payments can be higher than standard. This option starts low to match entry level salaries, then grows as you advance in your career.

In both cases, this minimizes interest charges as compared to hardship-based programs. Those options usually have terms of 20-30 years. So, by paying off your loans faster, there are less months to apply interest charges. However, these repayment plans don’t help you qualify for lower interest rates. The rate will always be a weighted average of your original loans.

The only way to lower the interest rates applied to student loans would be to use private consolidation. This would allow you to qualify for a lower rate based on your credit score. However, keep in mind that federal loans have relatively low rates compared to private lending. So, only borrowers with excellent credit would even have a chance of beating federal rates.

If you have excellent credit, then you may decide to consolidate all your federal and private loans together. In this case, aim for a shorter term that offers monthly payments you can afford. This will allow you to get out of debt faster while minimizing interest charges.

Federal student loan consolidation vs. refinancing vs. repayment

Student loans don’t exactly function like your other debts. In turn, relief options like consolidation and refinancing function a little differently, too.

For most debts, you can refinance your loans to achieve a lower interest rate. The new rate that you qualify to receive depends on your credit score. So, if you have better credit now than when you took out the loan, you get a lower rate. But in the world of student debt, that logic only applies to private loans.

For federal loans, rates are currently set based on the 10-Year Treasury Note Index. New rates are set on June 1 of every year. So, whether you have good credit or bad credit or no credit, everyone gets the same rate. If you use a federal consolidation loan or federal repayment plan, your servicer always sets the rate by taking a weighted average of your original loans.

Consolidation also works differently. When you consolidate credit card debt, one of the goals is usually to reduce or eliminate interest charges. But that doesn’t apply here. Instead, Federal Direct Consolidation Loans do three things:

  1. A loan simplifies repayment by combining all your loans into a single monthly payment
  2. Consolidation allows you combine different types of federal loans, so more of your debts can be eligible for federal repayment plans.
  3. If you have loans in default, you can use consolidation to bring the debt current.

Using a Federal Direct Consolidation Loan is often the first step in setting up a repayment plan.

The risks of using private student loan consolidation for federal loans

Be careful if you want to combine private and federal loans with private student loan consolidation

Federal relief programs only apply to federal loans. You can’t convert private student loan debt into federal. But the same is not true in reverse. There’s nothing that stops you from paying off federal loans with personal loan. Just like you can take out a personal loan to pay off your credit cards through consolidation, you can do the same thing with student loans.

However, just because you can do something, it doesn’t mean you should. Converting your federal loans into private debt should only be done with extreme caution. It means you are no longer eligible for federal repayment plans or Direct Consolidation. More importantly, you give up your eligibility for federal student loan forgiveness programs.

That last part only matters if you work in a qualified public service profession. That makes this conversion especially risky for teachers, nurses, firefighters and other first responders. Public Service Loan Forgiveness can be extremely beneficial for cutting the total cost of repayment. So, anyone who may qualify for PSLF should probably avoid converting their federal loans.

For everyone else, it’s a matter of risk if your financial situation changes. If you convert your debt into a shorter-term, high monthly payment consolidation loan that may work for your budget now. But what if you lose your job or have a major medical issue that knocks you out of work? In this case, you wouldn’t be able to use a hardship-based plan. In fact, you would probably not even be able to use deferment or forbearance.

Do I qualify for student loan forgiveness?

The main type of forgiveness for school loans comes through the Public Service Loan Forgiveness Program. This applies to borrowers who work in a public service profession, such as nursing, teaching or as a first responder.

This is the lengthy process that public servants must follow in order to qualify:

  1. Enroll in a hardship-based federal repayment plan.
  2. Certify their employment as a qualified public service profession.
  3. Make 10 years of qualified payments (120) on their repayment plan.
    1. This requires you to re-certify your income and family size each year.
    2. It also advised (although not required) that you recertify your employment each year or anytime you change jobs.
  4. After 120 payments, you can apply for loan forgiveness. This erases your remaining balances without penalties.

You cannot switch to a private sector job during the 10-year repayment period. After your loans are forgiven, you can change jobs without worrying about this.

There are other forms of loan forgiveness that apply specifically to military Service Members and Veterans. There are also forgiveness options if you work in the Peace Corps, AmeriCorps or as a volunteer through the VISTA program. These options only provide partial loan forgiveness up to a certain dollar amount, unlike PSLF that currently has no cap.

Does bankruptcy clear student loans?

By and large, you cannot discharge student loans through filing for bankruptcy. Federal regulators put rules in place to make it extremely difficult. This applies not only to federal student loan debt, but also private. These rules make student loans one of the few debts that you can’t just wipe away by declaring bankruptcy.

There are rare cases where a borrower can prove extreme undue hardship. You essentially must show that the burden of student loans would be so great that it would push you back into financial distress, even once all your other debts are discharged. That’s not an easy task. So, for the most part, you work under the assumption that bankruptcy can’t clear student loan debt.

Do you need professional student loan debt help?

Can you navigate student loan debt relief options on your own?

You can enroll in any federal relief options, including consolidation, repayment plans and loan forgiveness, on your own. Just sign up or change plans through studentloans.gov – the same place you check on the status of your loans. In addition, you can change federal plans as often as you need to, based on your eligibility.

That being said, there can be good reason to enlist the help of professionals. Filing documents, particularly when it comes to hardship certification can be complex – much like you’d expect from government forms. There’s also ways to strategically divide your debt up to ensure repayment fits your needs and budget. Coming up with the right strategy often involves knowing all the tricks you need to customize a solution.

So, much like you may hire a tax professional to help you file your income taxes correctly, you may choose to do the same thing for you student loans.

Spectrum of Student Loan Debt Solutions

SolutionWorks for:Benefit:Use with:
Federal Direct Consolidation LoanFederal student loan debt, not including PLUS loans for parents; must have 1 Direct Loan.
  • One monthly payment
  • Brings defaulted debt current
  • Makes more debt eligible for federal repayment
Federal repayment plans, such as an IBR or PayE
Standard RepaymentFederal student loan debt, not including PLUS loans for parents
  • Fastest way to repay federal loans
  • Keeps total costs low by minimizing interest charges
Federal Direct Consolidation Loan
Graduated RepaymentFederal student loan debt, not including PLUS loans for parents
  • 2nd fastest way to repay
  • Starts low for entry level salary, then increases as you advance your career
Federal Direct Consolidation Loan
Income Based RepaymentFederal student loan debt, not including PLUS loans for parents
  • Matches payments to income and family size
  • Payments typically reduced to 15% of your income
  • Makes you eligible for forgiveness
  • Federal Direct Consolidation Loan
  • Public Service Loan Forgiveness
Income Contingent RepaymentFederal student loan debt, not including PLUS loans for parents
  • Matches payments to income and family size
  • Payments typically reduced to 20% of your income
  • Makes you eligible for forgiveness
  • Federal Direct Consolidation Loan
  • Public Service Loan Forgiveness
Pay as You EarnFederal student loan debt, not including PLUS loans for parents.
Note: Original PayE only applies to “new” borrowers (loans after 2011). Revised program (REPayE) applies to all borrowers.
  • Matches payments to income and family size
  • Payments typically reduced to 10% of your income
  • Makes you eligible for forgiveness
  • Federal Direct Consolidation Loan
  • Public Service Loan Forgiveness
Public Service Loan ForgivenessPeople in public service professions who enroll in  hardship-based repaymentForgives remaining balances without penalties after 120 payments
  • Income based repayment
  • Income contingent repayment
  • Pay as You Earn
Private Consolidation LoanAll federal and private student loan debt
  • Provides one consolidated payment
  • May reduce interest charges
  • Doesn’t require annual certification
Private Student Loan SettlementPrivate loans only.
Note: Settlement is rare, since even private loans typically can’t be discharged by bankruptcy
Allows you to get out of debt for less than the full amount owed
Can you use a federal direct consolidation loan?

Federal Direct Consolidation Loan

This is a loan used to consolidate federal student loan debt as long as you have one Direct or FFEL loan in the loans you currently hold. It can be used to quickly bring defaulted debt current, which makes you eligible for other solutions, such as Federal Repayment Plans and Public Service Loan Forgiveness.

Explore the Federal Direct Consolidation Loan Solution »
Explore federal and private student lon debt repayment plans

Federal Repayment Plans

There are a range of Federal Repayment Plans that you can use to improve the repayment plan on your debt. Some programs are designed to pay off debt fast to minimize interest charges so you can move forward faster. Other plans are designed to provide low monthly payments that are matched to your income and family size. These options make student loan debt easier to manage in your budget.

Explore the Federal Repayment Plans Solution »
Explore Public Service Loan Forgiveness

Public Service Loan Forgiveness

Borrowers who enroll in any hardship-based Federal Repayment Plan and also work in a public service sector, such as teaching or nursing, are eligible for loan forgiveness after ten years of payments. Remaining loan balances are forgiven without penalties. This means you can use repayment plans that provide lower payments and still get out of debt in a reasonable amount of time.

Explore the Public Service Loan Forgiveness Solution »
Explore private student loan consolidation

Private Student Debt Consolidation Loans

You take out a consolidation loan through a private financial institution. The funds are disbursed to pay off your original loans, leaving only the consolidation loan to repay. This can be used to consolidate private and federal student loan debt. However, converting federal debt to private makes you ineligible for Federal Repayment Plans and Public Service Loan Forgiveness. That’s why this option is often better to use solely on private student loan debt.

Explore the Private Student Debt Consolidation Loans Solution »
Explore private student loan settlement options

Private Student Loan Settlement

This option generally only works for private student loan debt that’s heavily defaulted. You settle your debts for less than the full amount owed. Each debt settled in this way creates a negative item in your credit report so the damage to your credit can be significant. Settlement requires negotiation and lender acceptance is not guaranteed so result may vary.

Explore the Private Student Loan Settlement Solution »

This website is intended for informational purposes and as a reference tool to match consumers with companies that may be able to assist them. Additional Advertising Disclosures are here

DISCLAIMER: Debt.com does not provide direct debt adjustment services, but, upon request, acts as a locator service for BBB registered companies. It is ultimately up to you to determine whether the companies that we may introduce you to are appropriate for your situation. All federal student borrowers are able to--and encouraged to--learn about, and apply for, any federal re-payment and forgiveness programs through the US Department of Education and other sources for free without paying fees to any person, company, or counselor. Nothing on this site constitutes ANY official qualification or ANY guarantee of result. All telephone numbers listed may connect to private companies offering fee-based services to assist with application preparation for federal and other loan programs.

Please note: Only the US Department of Education can provide determination of eligibility and exact payment amount for any government forgiveness or repayment program listed on this website. Also, you may apply for all forgiveness and re-payment programs may be applied to for free without paying anyone for assistance through the US Department of Education. Our calculators, estimators and eligibility tools are strictly to help consumers understand potential options estimate potential payments and do not provide any guarantee of enrollment, qualification, or payment amount for ANY programs.

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