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Graduating with Debt? Here's How to Manage Your Student Loans Like a Pro Quality education doesn't come with a sticker price, they say. However, with an average college loan debt of $37,338, you wouldn't like feeling down on your graduation day. Earning your...

By John Rampton

This story originally appeared on Due

Quality education doesn't come with a sticker price, they say. However, with an average college loan debt of $37,338, you wouldn't like feeling down on your graduation day.

Earning your college degree streamlines the path to your dream career. This comes at the cost of your financial freedom, at least for the next few years, if not decades. Graduates often find the loan burdens pulling them down long after those college years.

After all, college days are meant to be fun. Why not be strategic with your debt management and clear your liabilities before they start bothering your long-term savings? Whether it's purchasing a home, raising a family, or allocating funds for your retirement, student loan debts can badly mess up your financial planning.

In this article, we have come up with some tactical ways of handling graduation debt. With calculated aggression, you can repay significant chunks of your loan before embracing your career.

Education loan statistics every college student should know

Let's take a deep dive into the grim reality, as evident from these figures.

  • As of 2023, Americans already owe private and federal student loan debts of $1.78 trillion. Compared to the last quarter of 2022, the liability has increased by 1.1%.
  • Federal loan debts account for as much as 92% of outstanding education loan liabilities. Private loans constitute the remaining 8%.
  • As much as 55% of candidates completing four-year college education from public institutions had student loans.
  • Students from states like New Hampshire, Delaware, Pennsylvania, Rhode Island, and Connecticut share the highest debt burdens.

Graduating with student loan debt isn't something you would want. Now that you know how easy it is to get into debt, you'd be keen to cultivate financial maturity.

7 Tips to manage your student loan debt

Managing your student loan without stressing yourself about debt requires financial literacy. It's all about strategizing an organized approach to prioritize your financial commitments. Here's what we recommend for college students to fast-track their debt repayment.

Choose the right type of repayment plan

If you go for a federal student loan, you can choose from four repayment options.

  • Income-contingent repayment plans
  • Pay as you earn repayment plan
  • Revised pay as you earn repayment plan
  • Income-based repayment plan

Choose the income-based repayment plan, where you need to repay anything between 10% and 20% of your discretionary income. This percentage depends on the type of your IDR and family size. Opting for this repayment strategy ensures affordability on your end.

Make aggressive repayments to the principal

The best approach to prevent student loan debt from accumulating is to repay the principal. If possible, curtail lifestyle expenses like visiting movies and concerts or eating out too frequently. Rather, channel your savings to make larger repayments to the capital. When you aggressively repay your capital, you would shorten the loan tenure. Correspondingly, you would also be paying lesser interest.

Let's take a practical situation as an instance to help you understand this repayment concept. An education loan of $25,000 would take 10 years to be repaid at a 6.8% interest rate. In this case, you would be shelling out a monthly repayment of $288. Now, consider raising your repayment amount to $400 a month. You can close the loan within 7 years.

Now, you might be wondering how to save those extra dollars every month, right? We have discussed this strategy in the latter half of this article.

Deploy the debt avalanche strategy

In case you have taken multiple education loans to manage your college expenses, use the debt avalanche strategy while repaying. This approach involves prioritizing the loans having the highest rates of interest first.

The debt avalanche strategy can help you reduce your debt burden by being strategic with your payments. Choose the loan account wisely while repaying your debt. Once you pay off these high-interest loans, shift your attention to other liabilities.

Consolidate student debts

College students with multiple federal loans may consider the debt consolidation tactic. You might be repaying different lenders at different rates of interest. Why not combine these liabilities into a single loan and make a consolidated payment toward the outstanding amount?

Students can consolidate both subsidized and unsubsidized direct loans. Besides, parent PLUS loans, graduate PLUS loans, Federal Family Education PLUS Loans, and Stafford loans are eligible for consolidation.

By consolidating student debts, you can reduce your monthly liabilities since the combined interest rate should be lower than the individual ones. This approach to loan repayment will also grant you access to the Public Service Loan Forgiveness program and income-driven repayment.

Thankfully, students need not pay any additional fees to consolidate their federal loan debts. Visit the FSA website and apply for debt consolidation.

Automate repayments to get discounts

Setting up auto-debits for loan repayments can help you qualify for a discount. Most creditors offer discounts on interest rates by 0.25% to 0.50% when you automate these payments. For instance, participating in the Federal Direct Loan Program can make you eligible for a discount of 0.25%.

Also, you may qualify for discounts on interest rates once you fulfill some eligibility criteria. Private lenders might expect certain on-time payments to transfer the benefit of the reduced rate to you.

Pay during the grace period

Graduates get a grace period after which they need to start making repayments for their student loans. This period ranges from six months to a year, depending on the lender. For instance, you get a six-month grace period with Stafford loans and nine months for Perkins loans.

Why not start making early repayments by using the grace period? It's wise to remain ahead of your liabilities and repay as much debt as possible.

Take advantage of deductions

Do you know that you can legally save taxes on the interest paid on student loans?

As per the interest deduction norms on student loans, you can save a maximum amount of $2,500 on the taxes paid annually. Why not claim this deduction and put that amount aside to make an extra repayment? This benefit is applicable to both private and federal student loans. This way, you can further reduce the principal substantially each year.

How to stabilize your cash inflow during college?

The best approach to repay your student loan debt is to start repaying while in college. Here's how students can put aside funds and stride toward a debt-free future.

Get a part-time job

More than 40% of college students in the US work full-time, while the percentage of part-time workers is even more. Create a flexible schedule to commit a few hours to your job so that you can start repaying your debt early.

Working part-time or full-time or engaging yourself in a profitable side hustle keeps your liabilities in check. By the time you graduate, you should be repaying sizable chunks of your debt each month. Don't worry about your eligibility for need-based grants or scholarships. College students can earn up to $7,040 annually without affecting this eligibility.

Try out both on and off-campus jobs. Side hustles like freelancing, graphic designing, affiliate marketing, or even pet walking can fetch you a few hundred dollars each month.

Make smart sacrifices

Making sacrifices doesn't mean compromising your happiness during your college days. Rather, it's about being choosy about where to spend your money.

Learn to cook and prepare your meals at home. This would help you ditch those expensive restaurants. Say no to unplanned pizza parties or frequent concerts with your buddies.

Also, have a look at your lifestyle and cut down expenses wherever possible. Maybe, you can consider sharing your entertainment subscriptions.

If you have a guest room, why not rent it out? The same applies to your garage and basement.

Talking of garages, have you vacated your store room and got rid of the junk? Selling off stuff that you won't need can fetch you a sizable amount.

Also, use your credit card reward points wisely, and don't overlook those student discounts on groceries.

Share your room and car

Financial liberation stems from being strategic while blocking your expenses! Find a roommate or two to slash your housing cost. Saving a few hundred dollars each month wouldn't be that tough!

The same applies to your car. Try not to drive alone since you would be bearing expenses like insurance, gas, repair, and even an auto loan. Go for public transport or carpooling. That's not a bad idea with your buddies around. Alternatively, get a cycle to move around the city.

Is it wise to clear off your student loan debt early?

The sooner you become debt-free, the faster you can plan your long-term financial goals. So, if you can pay more than the minimum repayment amount, clearing your debt early is a logical decision.

However, you may also have some other high-interest loans like a personal loan or a credit card loan. In such circumstances, try to clear off these loans first, given that student loans come at relatively lower rates.

Clearing off your student loan debt early would prove advantageous due to the following reasons.

  • With zero liabilities on your education loan, you can focus on crucial decisions like saving for your kid's education, homeownership, and retirement.
  • Paying off your student loan would help you boast a better debt-to-income ratio. This way, you can qualify for a home loan or any other loan later on.
  • Clearing off your student loan fast would involve lesser interest payments over the loan tenure. This way, you save hundreds of dollars.


Unless you cultivate financial resilience right from your high school days, the burden of your student loan debt may continue to haunt you right into your forties! Be vigilant on how you handle your loan burden and eliminate debt.

As we explained, you don't need a six-digit salary to clear off your loan. Being diplomatic about how you live your college life and where you channel your payment gets the task accomplished.


How long does it take to clear a student loan debt?

Banks typically design student loans to be paid off in 10 years. However, borrowers often fail to make timely payments, dragging the tenure longer. Paying off your student loan debt may take up to 25 or even 30 years. Naturally, the financial drainage would throw your long-term planning out of track. With the right approach, you should be able to clear off your student loan debt in seven to ten years.

When can I apply for student loan forgiveness?

You can apply for student loan forgiveness only after making at least 120 qualifying monthly payments. So, you need to repay your debt for at least 10 years before qualifying for forgiveness.

What happens if I fail to pay my student loan debt?

Banks would consider you a defaulter if you fail to clear off your student loan debt. This would tarnish your credit report since your lender would inform the major credit bureaus. Your credit report would also reflect your financial irresponsibility, making it challenging to secure any other type of loan in the future. Defaulters find it difficult to obtain home loans, car loans, or even new credit cards.

Will default student loans be forgiven?

No, defaulted education loans for students do not qualify for forgiveness. However, students can get some benefits from Fresh Start and remove this default status. Once this status is gone, you can apply for Public Service Loan Forgiveness or other loan forgiveness programs.

How to avoid taking a large student loan?

One of the best tactics to avoid taking large student loans is to qualify for as many scholarships and grants as possible. With this approach, you can deduct an equivalent amount from your student loan and get the remaining amount disbursed. The good news for college students is that they can qualify for multiple scholarships and grants. So, you can make the most of this free money and finance the remaining expenses through loans.

Image Credit: Pexels; Photo by Karolina Grabowska: Thank You!

The post Graduating with Debt? Here's How to Manage Your Student Loans Like a Pro appeared first on Due.

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