How to Manage Student Loan Debt
UpdatedApr 28, 2025
- Careful budgeting, and consolidating or refinancing loans can help you manage student loan debt.
- Federal student loans often qualify for special repayment programs.
- Private student loans can be relieved with forbearance, bankruptcy, or debt relief.
Table of Contents
You can manage student loans one step at a time. Start by budgeting in a way that works for you, setting clear goals to stay on track, teaming up with an accountability partner, and building a repayment plan that makes sense for your life.
How to Manage Student Loan Debt and its Financial Effects
Budgeting, debt consolidation, and refinancing can all be key to managing student loan debt effectively.
A budget gives you insight into where your money is flowing. You may find areas where you can cut back on spending so that you can make more headway against your debts.
Student loan consolidation means combining student loans to make them easier to pay. This may also mean you get more time to pay off loans.
Refinancing switches you to a new loan, potentially with lower rates. Federal and private options differ, and you may want to refinance these loan types separately.
What works for you depends on your financial situation and your student loan terms (federal vs. private, fixed vs. variable interest rate). More on these strategies below.
Create a Concrete Budget to Manage Student Loan Debt
A budget is key to managing student loan debt. You can make a budget plan even if you hate math by using a spreadsheet or a budgeting app.
Use a spreadsheet
Start by creating two columns: One for income and one for expenses. Group expenses by fixed, discretionary, and debt/savings to keep things organized.
Types of expenses and examples of expenses that fit into each category:
Fixed expenses: These are expenses you must pay every month. Rent/mortgage, utilities, phone, internet, insurance, transportation, groceries.
Discretionary expenses: These are choices. Dining out, shopping, entertainment.
Debt and savings: This category includes student loan payments, other debt payments, and money for emergency funds.
The upside of using a spreadsheet is that it’s free and easy to customize. The downside is that it can take time to set up, especially the first time. Once you’ve made a template, it gets easier.
Use a budgeting app
Look for a budgeting app that lets you lump together similar expenses. The visual makes it easy to understand where you spend most.
The upside of using a budgeting app is that it tracks your income and expenses automatically. The downside is that it’s not as customizable as a spreadsheet, and even free budgeting apps may attempt to upsell you on non-free options. It may be worth trying regardless, if it helps you manage debt.
Set financial goals
Specific goals keep you motivated to manage debt. Split goals into yearly, monthly, and weekly targets.
Say you want to put together a three-month emergency fund within one year. First, calculate how much you spend on essential living expenses like rent, utilities, and groceries. Second, use your budget to estimate how much you must save monthly to build your fund within one year.
Pair goal-setting with strategies that make it easy to stick to your plan. By, say, turning on automatic recurring bank transfers into your emergency savings account.
Find an Accountability Partner to Help Manage Student Loan Debt
An accountability partner supports your efforts to manage debt. Choose a trusted person, like a spouse, friend, or financial mentor.
How to use an accountability partner:
Monthly reviews: Review income, expenses, and progress toward goals.
Spending checks: Consult them before discretionary purchases, like online shopping.
A partnership can create habits that help you manage student loan debt successfully.
Develop a Plan to Manage and Pay Off Student Loan Debt
A repayment plan is key to paying off student loan debt. Beyond the standard 10-year federal plan, consider these options:
DIY your plan
Tackle student loan debt with the avalanche or snowball method.
Avalanche: Pay off the loans from highest interest to lowest, which minimizes interest costs.
Snowball: Clear the smallest balance first, then go to the next smallest, and so on, for quick wins and momentum.
Note: when working with a student loan servicer, you may need to manually adjust the order in which you pay off your loans. Use the website or contact your servicer to change payments.
Consolidate loans
Student loan consolidation takes your federal student loans and combines them into one loan with one monthly payment. You can consolidate through the U.S. Department of Education at no additional cost if you have multiple federal loans, or you can work with a private lender for a fee.
In most cases, you extend the loan term and the amount of interest you pay. This spreads out monthly payments and makes them smaller, but also costs more in the long term.
Note: If you have a combination of federal and private student loans, you can consolidate your student loans with a private lender. This is also known as student loan refinancing.
Refinance debt
Student loan refinancing offers a new loan with potentially lower rates or terms. You can refinance by shopping around for loans.
Types of student loan refinancing:
Fixed-rate: These loans offer stable interest rates.
Variable-rate: These loan rates rise and fall, depending on market conditions.
Note: Refinancing federal loans with private lenders ends federal protections such as forgiveness programs. Consider this carefully to manage student loan debt.
Debt Relief Options to Manage Student Loans
Federal and private student loans offer separate avenues to manage debt through debt relief.
Federal student debt relief options
Federal student loans offer many debt relief options to make repayment more manageable.
Income-Driven Repayment (IDR) plans: These plans base payments on income and family size, with potential forgiveness after 20-25 years. These are the current plans that are available:
| Plan | Payment | Forgiveness |
|---|---|---|
| Pay As You Earn (PAYE) | 10% of discretionary income | After 20 years |
| Revised Pay As You Earn (REPAYE) | 10% of discretionary income | After 20-25 years |
| Income-Based Repayment (IBR) | 10-15% of discretionary income | After 20-25 years |
| Income-Contingent Repayment (ICR) | 20% of discretionary income or fixed | After 25 years |
| Saving on a Valuable Education (SAVE) | 5% of discretionary income | After 10-25 years |
(As of April 2025, the SAVE plan is paused because of legal challenges.)
Public Service Loan Forgiveness (PSLF): Forgives remaining balances after 120 qualifying payments while you’re working full-time for qualifying employers like government or nonprofits. Recent changes under the new administration may change the details, so check at Federal Student Aid.
Other programs: Teacher loan forgiveness (up to $17,500 for low-income school teachers), health professions forgiveness, and discharge options for death, disability, school closure, or borrower defense. You can explore these plans in detail at StudentAid.gov.
Forbearance: Pauses or shrinks payments temporarily. To get forbearance on a loan, find your loan servicer on StudentAid.gov or by checking your loan statement. Explain your situation (low income, lost job, medical issues). Submit your request online or over the phone.
Unsubsidized loans usually charge you interest during paused payments. However, subsidized loans may cover interest during a pause. Check with your loan servicer for details.
Private student debt relief options
Forbearance, bankruptcy, and debt settlement are possible options for private student debt relief.
Forbearance: Pauses or shrinks payments temporarily. Private lenders aren’t required to do this, but some will when you ask and explain your situation. This could give you time to pad your checking account or find lasting debt relief.
Private lenders almost always charge interest while your payments are paused. Call and talk to your creditor about forbearance to discuss details.
Bankruptcy: Clears some student loan debt. It’s more difficult to clear some student loan debt during bankruptcy than other debt types, and you must prove it causes severe financial hardship. However, some student debts can be cleared just like others. You can find out more via the Consumer Financial Protection Bureau.
Debt settlement: Settles with your lender for less than you owe. You can DIY debt settlement negotiation, or hire a professional debt settlement company to settle on your behalf. These companies are incentivized to get you the best deal. Settlement may be ideal when bankruptcy isn’t an option.
Learn More
What You Should Know About Access to Student Loans (Freedom Debt Relief)
Student Loan Debt Forgiveness for Medical Workers (Freedom Debt Relief)
How to Ask Creditors for Loan and Credit Card Forbearance (Freedom Debt Relief)
A look into the world of debt relief seekers
We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during November 2024. This data highlights the wide range of individuals turning to debt relief.
Credit card tradelines and debt relief
Ever wondered how many credit card accounts people have before seeking debt relief?
In November 2024, people seeking debt relief had some interesting trends in their credit card tradelines:
The average number of open tradelines was 14.
The average number of total tradelines was 24.
The average number of credit card tradelines was 7.
The average balance of credit card tradelines was $15,142.
Having many credit card accounts can complicate financial management. Especially when balances are high. If you’re feeling overwhelmed by the number of credit cards and the debt on them, know that you’re not alone. Seeking help can simplify your finances and put you on the path to recovery.
Student loan debt – average debt by selected states.
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average student debt for those with a balance was $46,980. The percentage of families with student debt was 22%. (Note: It used 2022 data).
Student loan debt among those seeking debt relief is prevalent. In November 2024, 27% of the debt relief seekers had student debt. The average student debt balance (for those with student debt) was $48,703.
Here is a quick look at the top five states by average student debt balance.
| State | Percent with student loans | Average Balance for those with student loans | Average monthly payment |
|---|---|---|---|
| District of Columbia | 34 | $71,987 | $203 |
| Georgia | 29 | $59,907 | $183 |
| Mississippi | 28 | $55,347 | $145 |
| Alaska | 22 | $54,555 | $104 |
| Maryland | 31 | $54,495 | $142 |
The statistics are based on all debt relief seekers with a student loan balance over $0.
Student debt is an important part of many households' financial picture. When you examine your finances, consider your total debt and your monthly payments.
Tackle Financial Challenges
Don’t let debt overwhelm you. Learn more about debt relief options. They can help you tackle your financial challenges. This is true whether you have high credit card balances or many tradelines. Start your path to recovery with the first step.
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What are ways to get rid of student loan debt?
Declaring Chapter 7 bankruptcy is one of the fastest ways to clear student loan debt. The catch is you must qualify for Chapter 7, then qualify separately for student loan forgiveness. If you can’t prove student debt is an unreasonable financial burden, the debt might carry over through bankruptcy.
You may qualify for Federal Programs that help you get rid of your debt. Though this takes a long time—up to 25 years—you could end up only paying a fraction of what you owe.
If you don’t qualify for repayment plans and bankruptcy isn’t an option, debt settlement can potentially rid you of some debt. It can be a drawn-out process and sometimes fails, but when it works, you save.
What’s one way to manage student loan debt effectively?
Create a budget and a repayment plan. A budget gives you insight into how much you can afford to put toward debt, and where you can adjust spending and income to meet goals quicker. You can combine debt repayment strategies like the snowball or avalanche methods to pay down debt effectively.
When should you pay student loan debt?
The order in which you pay debt is key to managing student loan debt.
The snowball method means you pay debts in order of smallest to largest balance.
The avalanche method means you pay debts in order of highest to lowest interest rate.
In some situations, you might ask whether it’s smart to pay student loan debt beyond making minimum payments, especially when you have competing obligations. Finance expert Dave Ramsey suggests you save for a $1,000 emergency fund before paying down student debt. That way you can easily cover deductibles or small emergencies.