There are multiple strategies that you can use to pay off $30,000 or more of student loan debt, such as creating a repayment plan or refinancing.
Repaying your student loans can feel overwhelming at times, but it’s critical not to miss your monthly payments or allow your loans to default.
By repaying your loans, you’ll positively impact your credit score, and pay as little interest as possible. With less debt and an improved credit score, you can accomplish your other financial goals.
The first step to overcoming about $30,000 in student loans (or more) is to create a repayment strategy. The right repayment strategy will be the one that best aligns with your financial goals and income level.
Follow these general steps to conceive your repayment strategy:
- Track your loans. List your loan amounts and interest rates from highest to lowest.
- Review your loan terms. Determine current pay-off dates and if there are any prepayment penalties.
- Create a budget. Create a budget that you can comfortably stick to. Consistency is key in maintaining substantial progress in paying down your student loan debt.
- Prioritize payments. For instance, it may save you in interest expenses to pay down the higher-interest-rate loans first (debt avalanche method) or you may feel like you’re making more progress by paying off the lowest-amount loans first (debt snowball method).
If all or some of your loans are federal student loans, you have access to various federal repayment plans. Loan holders with PLUS, Stafford, Federal Family Education Loan (FFEL), and Direct subsidized or unsubsidized federal loans qualify for the following repayment plans. However, private loans do not qualify.
| Good to Know: It’s important to note that borrowers who choose the Standard Repayment Plan typically pay less over time than when choosing other plans. Also, the standard plan is the fastest route to a zero balance. |
Changing repayment plans can be useful for many federal loan borrowers, but, if you have private loans, you might need to find a different strategy. Banks, credit unions, and online lenders typically don’t offer government-like repayment plan adjustments.
Fortunately, there are multiple options to help you pay off $30,000 in all types of education debt.
- Making extra payments
Making payments in addition to your minimum monthly payment can have a dramatic impact on your loans. Your interest accrued is calculated at the start of each month based on your outstanding balance. By making additional payments in the same month, the following month’s interest will be calculated from a lower balance.
Pros
Cons
- Student loan forgiveness and repayment assistance
If you took out a federal student loan, you may be eligible for forgiveness from the government, depending on your eligibility. Additionally, you can take advantage of forbearance and deferment in cases of financial hardship. Other federal student loan forgiveness programs include:
It should be mentioned that there are no federal forgiveness programs available for private student loans. If you’re experiencing hardship, reach out to your lender for options.
There are also repayment assistance programs from state governments, law schools, and private employers. Some examples include:
Pros
Cons
- Student loan refinancing
You can refinance student loan debt, regardless if your loans are federal or private. However, it’s best not to refinance your federal student loans, as you’ll lose access to government protections such as forgiveness, forbearance, and deferment. It’s best to consolidate your federal loans into a Direct Consolidation Loan, which consolidates your loans into one new loan, with a lower monthly payment.
Refinancing essentially pays off your existing loan and replaces it with a new loan. Your new lender may extend certain benefits to you when you refinance, such as better terms or lower interest rates.
Pros
Cons
- Federal loan consolidation
As mentioned above, federal student loan consolidation involves combining multiple loans with different interest rates and terms into a new loan with one interest rate and term.
Consolidating can be a great option to lower your monthly payment while also retaining access to government protections and assistance programs such as Income-driven repayment plans. However, consolidation can lead to a longer repayment term of up to 30 years and paying more in interest over the extended life of the loan.
Pros
Cons
To see if refinancing or loan consolidation is right for you, reach out to your loan servicer or lender. They can provide you with your options and help you understand their benefits and drawbacks.
You can then apply for these options through either your current servicer (in the case of federal loans) or you can shop around and compare rates from student loan refinancing lenders.
Related: Learn more about refinancing your student loans on Credible.com
You can use a student loan calculator to see how much an extra $100 per month can help you pay down $30,000 in student loans faster.
| For example: If you have $30,000 in loans with a 10.00% interest rate and a 10-year term, you’ll pay $396 per month, accrue $17,574 in interest, and pay $47,574 in total. However, if you pay $496 each month, you’ll only pay $11,895 in interest and $41,895 in overall payments. That’s a savings of $5,678. |
Consider applying any extra income toward payments, such as:
Related: Learn more about refinancing your student loans on Credible.com
It’s important to stick to your repayment plan to avoid delinquency and defaulting on your student loans. Both situations include severe penalties like the loss of federal repayment benefits and safeguards, damage to your credit report, and garnished wages.
To change your federal student loan repayment plan, contact your loan servicer. If you need to adjust your strategy for private student loan repayment, weigh your options and make the decision that will enable you to at least continue making your minimum monthly payments on time.
If you need help staying motivated, ask your friends and family to help. For more serious questions, you might consult a student loan counselor via a National Foundation for Credit Counseling-approved agency. You may also create a visual representation of your loan progress so you can see how each monthly payment gets you closer to your goal.
Related: Learn more about refinancing your student loans on Credible.com