Updated February 14, 2018

How to Get Rid of Student Loans

You can get rid of student loans faster with forgiveness programs, refinancing, and smart savings. Read on for the different options.

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The day finally came - you graduated college! Now it's onto real life. Excitement settles in until you get a look at your total student debt. How will you pay these loans on top of your other bills?

What about buying a house or starting a family? Must you put these things on the back burner until this monstrous debt is gone?

The good news is you have options.

You may be eligible for loan forgiveness. There are also income-driven repayment plans and refinancing options. There are even sneaky ways you can speed up how fast you pay your debt off.

You choose what works for you and put the plan into action. Read on to learn more about your options.

Set a Budget

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What can you afford?

Six months after graduation, your student loans go into the Standard Repayment Plan. With this plan, you pay your student loans off in 10 years. Of course, that is with timely payments.

Watch Out: After 270 days of missed payments your loans enter default with the federal government. At 360 days past due the loans will enter collections with the federal government which may result in wage garnishment, tax seizure, and will cause your credit score to drop by up to 200 points.

If you know your standard payments, determine if you can afford them. Putting loan forgiveness aside, this is one of the quickest ways to get rid of student debt. Many grads can't afford the standard payment, though. You're not alone if this describes you.

As a basic example, let's look at the average student debt. Right now the average student debt is $37,000. At an average 5% rate, you would owe $392 per month for 10 years.

Tip: Setting up automatic payments from your checking or savings account may reduce your interest rates on your federal loans by .25% which can add up in the long run.

This is just an example. You may have several loans, each with a different rate. Check out your loan balances and types in the student loan database.

If you don't know your interest rate or term, contact the loan servicer. Once you know your standard payment, look at your budget. Can you afford this payment?

Note: Keep track of all documents from your federal student loan servicer. Your servicer is the company that guarantees your loan from the federal government. You will remain with this servicer until one of the following occurs; you pay off your loans, you default on your federal loans, or they may sell your servicer to another loan company (this is not common, but does occur).

If not, read on. We provide tips on lowering your payments. You may even be eligible for loan forgiveness in some cases.

Break down your spending habits from the past few months: After paying for the necessities, where does the rest of your money go?

An easy starting point when creating a budget is to look at your average past expenditures -- and then slash that number by 30% or more. It sounds harsh, but the difference may come down to simple changes like to a few extra homemade dinners instead of restaurants, not splurging on overpriced popcorn at movie theaters, and so on. You probably will hardly miss those "little luxuries."
Christie Garton, Founder and CEO of the 1,000 Dreams Fund

Consolidate Your Loans

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Student loan consolidation and refinancing are often confused. Loan consolidation applies to federal student loans only. You may be eligible to combine several federal loans into one loan. This may make it easier to keep track of your student loans. Keep in mind if a due date does not work for you, you can ask your loan servicer to switch to a better day.

The interest rate you pay on these loans is the weighted average of all loans you consolidate.

You may be able to lengthen the term of your loans. If the monthly payments are too high, you can ask for an extended term. Keep in mind, this means more interest over the life of the loan. Even if you have a lower rate, you pay the interest for a longer period.

There are several benefits of loan consolidation.

  • Easier debt management with one payment
  • Extended term to make your payments more affordable
  • Possible lower interest rate than some loans with higher rates

If you have federal student loans, you should check with your loan servicer first. There may be other benefits you can use rather than consolidating. For instance, you may be eligible for a loan forgiveness plan. Your loan servicer can tell you how to proceed.

But, if you have a Federal Stafford Loan or Perkins Loan, you may need to consolidate them first. Again, check with your loan servicer before proceeding.

Loan consolidation isn't always the answer. We discuss repayment plans below. Keep in mind this pertains to federal student loans. Private loans are not eligible for a federal repayment plan.


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Student loan refinancing occurs when you take out a new loan to pay off one or more existing loans. This pertains to both private and federal loans. However, before you refinance any federal loans, make sure you are not eligible for any forgiveness programs. Once you refinance a federal loan, you may not be eligible for any type of assistance.

Before you refinance, look at the options. How much money will you save each month? Also look at the terms. Are they offering a fixed rate or adjustable rate loan? Make sure you understand the full implication of the loan. Look at the interest rate, term, and any agreements you must make. Also note if the lender has a forbearance period if you lose your job.

Keep in mind that forbearances can be used for multiple different reasons such as financial difficulties, medical reasons, and a change in employment, but during forbearances keep in mind that interest continues to accrue. Find the Forbearance request here.

A different option may be having your federal student loans discharged.

  • This can happen for a myriad of reasons the biggest being that the school lost accreditation and closed or you did not receive the certification that you paid for.

  • Another lesser known discharge is based on bankruptcy depending on your financial situation. If paying your federal student loans will cause undue financial distress you may be eligible for this type of loan discharge. The Department of Education can help you understand these options.

In some cases, a smaller payment may sound like just what you need. But, if you extend the term by a lot, you pay more in interest. As a general rule, the longer you borrow money, the more interest you pay. Just like with loan consolidation, make sure this is your best option before proceeding.

Ask About Employer Reimbursement

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Some employers may provide student loan reimbursement. While this is a fairly new concept, it is becoming more popular. Ask your HR department if your employer offers this benefit.

For example, employees at Fidelity may receive up to $2,000 per year towards their student debt. They may be eligible to receive a total of $10,000 throughout their career. This might not eliminate your debt, but it's $10,000 less that you must pay!

Penguin Random House also offers reimbursement for full-time employees. They offer up to $1,200 per year with a maximum of $9,000 total for student debt repayment. Employees must work for the company for at least one year to be eligible.

Tip: A deferment from the federal government might be a good option for you if you find that you have lost your job. Other uses for a deferment are returning to school or undue financial hardship. Find the Deferment request here.

Look for Forgiveness

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There are many places to look for loan forgiveness of your federal loans. You may find it at a federal, state, or local level. Forgiveness comes in all shapes and sizes. Many programs require you to work in a specific industry for a certain length of time. The part of your loan that is forgiven means you don't owe it or its accrued interest any longer.

Following are examples of loan forgiveness options you may be eligible to receive.

Do You Work in Public Service?

If you work for the greater good of the community, you may be eligible for loan forgiveness. After 10 years of timely payments, the remainder of your loan may be forgiven. Many government positions, or those within a 501(c)3 company, may make you eligible.

To take advantage of loan forgiveness, you must enroll in an income-driven repayment plan. There are several options.

  • Income Based Repayment (IBR)
  • Pay As You Earn
  • Revised Pay as You Earn
  • Income Contingent Repayment

Learn more about these programs in detail, with our article "How to Get Student Loans Forgiven."

Here's why you need to enroll in one of the above programs: If you stick with the Standard Repayment Plan, your loan should be paid off in 10 years. This means you won't have anything to forgive. With the income-driven plans, it is more likely that you will have a balance at the end of 10 years. Keep in mind that federal student loans for undergraduate students are eligible for forgiveness after 20 years and for loans taken out for a graduate program after 25 years. This allows you to take advantage of the Loan Forgiveness Plans.

Are You a Teacher?

Teachers have special programs available only to them. You must work for a low-income school, though. You can find out if your school qualifies here. If you do work for one, take advantage of the loan forgiveness. Teachers may receive between $5,000 and $17,000 in loans forgiven.

Teachers with Federal Perkins loans may even have 100% of their loans forgiven. They may have another percentage of their loans forgiven for each year they teach. Each consecutive year at the school increases the amount forgiven. After the 5th year of consecutive teaching, you may have up to 100% of your Perkins loans forgiven.

Are You a Childcare Provider?

Childcare providers in low-income communities may also be eligible for loan forgiveness.

This is possible through the Child Care Provider Loan Forgiveness Program. This program starts after you work in childcare for 2 consecutive years. After 2 years, you may have 20% of your loan forgiven. After the 3rd consecutive year, another 20% may be forgiven. During the fourth and fifth year, 30% may be forgiven.

Check Your State's Forgiveness Plans

On top of the federally funded forgiveness plans, there are state plans. These plans vary by where you live. Most of the plans offered are for nurses, doctors, lawyers, teachers, and veterinarians. These programs often require you to work in an underserved area. It doesn't hurt to check what your state has to offer, though. You never know when there is free money available.

For example, New York offers loan forgiveness for social workers. They offer it through the NYS Licensed Social Worker Loan Forgiveness Program. This program offers up to $26,000 in loan forgiveness.

A few requirements for the program include:

  • You must live in NY for a year
  • You must be a licensed social worker
  • You must not be in default on your student debt

Here's another example. Texas offers the Loan Repayment Program for Speech-Language Pathologists and Audiologists. This program helps to encourage students to work in speech-language pathology. The amount offered differs, as do the requirements.

It is worth checking out what your state has to offer any way to reduce and repay your loans quicker is worth considering.

Think Outside the Box

Once you exhaust all your federal, state, and local options, it's time to think outside the box. Your regular earnings may not make a dent in your student debt, but there are other ways. Consider any windfalls you come into:

  • Tax returns
  • Commissions
  • Sign-on bonuses
  • Annual bonuses

This is money you didn't have before. Hopefully you don't need it for daily living. Rather than spending it before you have it, put it towards your loans. Even if you only receive $1,000, it adds up. As soon as you knock your student loan down by $1,000, you owe less interest. Already you are ahead of the game. Continually do this and you will get rid of those loans before you know it.

Save Money

Another way to drop your student loans is to save money. Start by setting a budget. Let's say you budget $150 for groceries, but you only spend $100. Take that $50 and put it towards your student loan. If you do this each month with any extra money you have, you may make an extra payment or two on your loans. Again, you knock the principal down, which means less interest. The more you do this, the easier it is to knock your loans down.

Even an extra $100 per month knocks $1,200 per year off your loan. Again, it's not a lot, but it's a start.

If even $100 extra seems like too much, start small. Side jobs can help you save money. There are several apps that you can take advantage to keep the change when you make a purchase and more. We offer ideas on how to make extra money in "How to Make Money in College." Anyone can do these things even after college.

Keep in mind your bank may have a similar program for keeping the change or to help you save. Checking what options your bank has can help you gain a few dollars a month if not more towards your federal student loans.

Related: 150 Ways to Save Money, Starting Today

Bottom Line

Getting rid of student debt is possible.

It takes work and a little creativity. Make sure you exhaust all your options before proceeding. Take advantage of any loan forgiveness you are eligible to receive. From there, figure out what works best for your budget.

What works for one grad may not work for another. There is a light at the end of the tunnel - you just must find it.

More from CreditDonkey:

Student Loan Forgiveness

Should I Consolidate Student Loans

Student Loan Forgiveness Scams

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CreditDonkey is a student loan comparison website. We publish data-driven analysis to help you save money & make savvy financial decisions.

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