Are Student Loans Crushing You? How to Repay Your Loans

Family Finances, Investing Basics, Planning & Saving, Retirement & Investing
on August 31, 2013

In 2013, the average graduate walked off the stage with a diploma and an average of $26,000 in student loans. With unemployment still at record highs, graduates are finding it harder to pay off these burdensome loans while establishing a household. Impervious to bankruptcy and able to be garnished from wages, student loan payments can be stifling for new graduates. If student loan debts are overwhelming, take these steps to reduce the burden.

Switch to Automatic Payments

Loans dispersed under the Federal Direct Lending Program provide a quarter percent decrease in interest rates if paid through automatic enrollment. While this sounds like a small bump, over the lifetime of a ten year loan this simple switch will help with saving money, a total of $400 over the life of the loan. In addition, the automatic payment will become less of a monthly burden and more of a predetermined expense.


Getting multiple loans consolidated into a single loan can equalize interest rates and make repayment easier on the borrower. Having to pay multiple student loan companies leads to confusion and missed payments. While the total cost of the loan will increase, the ease of payment and decreased monthly payments make it an attractive plan for young adults establishing themselves in the work place.

Find a Repayment Plan that Works

Most graduates leave college with a standard student loan repayment plan. Graduates pay a fixed payment every month which pays the total amount of student loan debt in ten years. Direct Loans and Federal Family Education Loans (FFELs) have additional payment plans such as income-based repayment and graduated repayment that adjust the monthly payments for struggling graduates. While these plans often take longer to repay and increase the total cost of the loan, there are contingencies that allow debt to be forgiven after a set amount of time.

Work for the Public

Federal Student Aid provides a great benefit for public workers in the form of loan repayment forgiveness. For service in a low-income elementary or secondary school as a teacher, graduates may have up to $17,500 forgiven after five years. Additionally, public servants who have paid their loans on time for ten years may have the remaining balance waived under the Public Service Loan Forgiveness program. Teachers and public workers should investigate these programs further for a money saving option.

Send Windfalls to the Highest Interest Loan

Even as a struggling new graduate, the occasional windfall is bound to happen. Whether it’s a large tax refund or a generous gift from a family member, send extra funds to the highest interest rate loans first. This will accelerate repayment of the total loan without altering day-to-day lifestyle.

Related: Should I Pay Off My Car Loan or Student Loans First?

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