Student Loan Repayment: 13 Ways Millennials Can Deal with Debt

In 2017, Americans are more burdened by student loan debt than ever. You’ve probably heard the statistics: Americans owe over $1.45 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt! In fact, the average Class of 2016 graduate had $37,172 in student loan debt, up six percent from 2015. That translates to an average student loan payment of $372 a month for 10 years. Even if you yourself aren’t dealing with student loan repayment, someone is and that someone may just be your child. Either way it’s a big weight to carry.

Student loan repayment has become a significant financial burden for millennials. Here are 13 ways to reduce that burden and pay off student loans faster.

One thing we can all agree on: paying off student loan debt isn’t any fun. One of the worst feelings is tearing open your paycheck or seeing your direct deposit hit your bank account and getting really excited, only to remember that you need to use a huge chunk of that money to make a payment on your student loans. If you are thinking things will be improving soon, I have some really bad news for you. They’re probably not.

Student Loan Rates Just Increased

Borrowers on federal student loans in 2017 -2018 are dealing with new even higher loan rates as of July 1st. The federal government sets interest rates on student loans annually, based on a formula it adopted in 2013. The rate on new undergraduate Stafford loans, one of the most popular student loans, rose to 4.45 percent, up from 3.76 percent last year.

Rates for graduate student Stafford loans increased to 6 percent, up from 5.31 percent, and rates on PLUS loans available to parents as well as graduate students, rose to 7 percent from 6.31 percent. If there is any goods news, it’s this: loan rates on already existing student loans never increase so only the new loans are affected by the rate increases.

Some Basic Student Loan Facts You Need to Know

  • Rates on federal student loans have been fixed for the last decade and remain fixed for the life of the loan (some older loans may have variable rates).
  • There are limits on how much students can borrow from the federal government each year, as well as caps on total borrowing. The limits depend on various criteria, like the student’s year in college and the type of loan.
  • Undergraduates who are dependents — most students under the age of 24 — can borrow up to $5,500 as freshmen, $6,500 as sophomores and $7,500 as juniors and seniors from the federal government.
  • Rates made by the federal government and loans made by private lenders and banks may carry different interest rates. Private loans usually have variable rates and can change over the life of the loan.
  • Private loans are not subject to the same borrowing caps as federal loans but they do lack important consumer protections, like the ability to apply for flexible repayment or deferred payments.

13 Strategies to Help Pay Off Student Loans Faster

Last year over 5 million student loans (over 11%) were at least 90 days behind in repayment. This can mean a huge black mark on your credit record and score as well as hurting employment opportunities or renting or buying a home. Unless you are simply unable to pay, there isn’t any good excuse not to pay and to do it as quickly as you can. Here are several ways to make that happen.

1. Make more than the minimum payment

This is one of the easiest ways to reduce your debt. Just take the payments you have and add extra money to the payment. Anything extra goes straight to your principal. Even an extra $20 a month can make a difference. Start small and then gradually work on increasing your extra payments.

2. Know your payoff date

I’m guessing that a lot of students don’t even know the date they will be free of student loan debt. That’s a good place to start because once you know this date you can work on moving it closer.

3. Consolidate and refinance

Refinancing your loans is one of the best moves for paying off student loans faster. The goal of refinancing is to lower your interest rate and have more go towards paying down your principal. You can consolidate all of your loans and get one consolidated loan with one monthly payment. Just include the loans where you actually decrease your interest rate. Some student loan refinancing rates are below 3% right now.

4. Use a cash windfall if you get one

Cash windfalls come in various forms. These can include lottery winnings, an inheritance, a settlement from a lawsuit or insurance claim, and more. You might be tempted to spend a windfall. Don’t do that. Instead of spending it on stuff you won’t even remember, use it for paying off student loans faster. Even part or all of a income tax refund should go towards a payoff.

5. Take a job that offers loan forgiveness

Certain jobs, like public service work or teaching, may offer forgiveness for part or all of your student loans. This is great because it’s basically free money. All you have to do is meet the requirements to get your student loans forgiven. The one downside is the requirement to complete a specified term of work to get any forgiveness.

6. Apply any raises from work

Hopefully you work at a job where yearly raises are part of the compensation. Why not put a chunk of that toward your loans too?

7. Avoid repayment programs

You might be focused on lowering your student loan payments. This makes a lot of sense if you’re struggling to repay your student loans. But if your goal is paying off student loans faster, you should avoid loan repayment programs.

These federal student loan repayment programs are geared toward decreasing payments by lengthening the term of the loan. This means it’ll take longer to pay off. For example, the Pay as You Earn (PAYE) program stretches your loan repayment term from 10 years to 25 years.

8. Trim your budget

When you need more money but can’t easily increase your income, trimming your budget is a good option. You could move to a cheaper apartment, skip happy hours or meals out or take on a part-time job earning more side income. You can do this for the short term while you’re focused on paying off student loans faster.

9. Be strategic

For all student loans, it makes the most sense to pay off the highest interest loans first. This is called the “debt avalanche”, meaning that you pay just the minimum on all but the student loan with the highest rate where you focus your extra payments. Target private student loans first. Private student loans often have higher interest rates and have less flexible repayment terms than federal student loans.

10. Take any kind of interest rate reductions

Smaller savings can add up, too. One of them is the interest rate deduction from signing up for automatic payments. Many lenders offer a 0.25% interest rate deduction on federal student loans for enrolling in automatic payments. While this isn’t a ton of money, it will save you something.

11. Take full advantage of tax deductions and credits

If you’re paying off student loans, you’re likely eligible for the student loan interest deduction on your federal taxes. You may deduct up to $2,500 on your taxes each year for the interest you pay on student loans. While you must meet other requirements, generally student loan holders in their 20’s are eligible. This deduction can be taken even if you don’t itemize your taxes (which many young taxpayers don’t do).

Tax credits, such as the American Opportunity credit or the Lifetime Learning credit, can be even more valuable than tax deductions. In general, a $2,500 tax credit will save you more money than a $2,500 deduction will.

12. A student loan isn’t “good debt”

You might hear chatter about “good debt” and “bad debt”. While student loans are generally a good investment based on increased income potential in your lifetime, along with some deductions, it’s not good debt to keep around. The “good debt vs. bad debt” is really about how that debt helps you increase the value in something. In this case, it’s the value of a salary.

13. Pay the loan every two weeks

A popular extra payment strategy for student loans is to make a student loan payment every two weeks. You don’t need to pay double the amount of your monthly payment. To make this work, split your monthly payment in half. Make a payment of that amount every two weeks. This makes an extra payment over the course of a year.

And finally, don’t forget to visualize the future without student loans. While it isn’t exactly a repayment strategy, it can help motivate you and eliminate stress in your life. Make escaping your debt a real priority.

So what’s your #1 strategy for paying off student loans? Are you facing this issue head on and if you are what are you doing to complete the process? Have you already finished your loan payments? Are you interested in refinancing any student loans?


  1. This is SUCH an important subject. With our kids nearing college age we are thinking and planning seriously for college costs and teaching the kids what they can do to avoid student loan debt as much as possible. The scary student loan debt stats take on a whole new meaning when it’s YOUR kid who’s facing tens of thousands of dollars in tuition costs.

    1. Other ways that I didn’t stress in the post include opening up a 529 plan as soon as you can to save for college and you can also negotiate with colleges paying in advance, which of course will mean less cost years from now. There are always the opportunities for grants and scholarships, for academic and financial need as well. Some people consider doing one or more of those as an option. In any event, the important thing is to discuss and prepare way in advance if possible, because college has become an absolute necessity these days. Thanks for your comments, Laurie.

  2. Lindsay VanSomeren | Notorious D.E.B.T.

    Great info! I wasn’t aware of how the federal loans are given out in different amounts depending on your class level, that was interesting. I wonder why that is.

  3. Great topic Gary. I’d suggest avoiding them or minimizing the amount you borrow from the start. Parents and student need to work together as early as possible to develop a plan for college. The need to look at the complete picture, the ROI of a college degree, potential income after, etc. It all needs to be discussed and evaluated.

    1. Excellent points, Brian. The sooner that one starts planning their children’s higher education, the better the decisions made will be. I agree with your comment on the ROI with potential salary and career. If one is going to spend a very large amount on education, hopefully they pick a career that will help them recoup the money and pay off their loans quickly.

  4. Our oldest is in 8th grade, but we’ve already begun to stress the importance of staying away from student loans as much as possible. Whether it’s scholarships or working your way through school, it’s vital to avoid the thinking that college and student loans always go hand in hand and “There’s nothing you can do about it!” We’re trying hard to change our family tree.

    1. Jamie, one thing that I think would help cut the cost of future expenses for college is for people to consider community college as a first step toward their 4-year degree. As someone has stated earlier, that would help cut your college education costs about halfway, or at least by a big number. The most important thing is to have a plan in place in advance and make an effort to save as much as you can, making the loans the last alternative.

  5. Hey, Gary. Very informative post. Like Lindsay, I had no idea that the amount you can borrow from federal government increases as you advance toward graduation. And I’m with Brian on this one. As important as formulating a pay-back strategy is, the most important student loan strategy today is to mitigate the amount you borrow. And on this front, I think perspective college students should avoid residential colleges at all cost. Simply by living at home and going to a local college, college students reduce the cost of a bachelor’s degree by half. Well, that’s my pathetic two cents, anyway. Great post as always, my friend.

    1. I definitely agree, Mr. Groovy, with the idea of staying local as long as you can, such as in a community college. I personally was never specifically asked as to which college I attended when job-seeking, other than the information I provided on my résumé. Many people think that they have to attend expensive, prestigious schools, but I think that that qualification is seldom the deciding factor for employment. Limiting your college costs gives you a leg up on building a solid financial future. Thanks so much for your comments.

  6. Emily @ JohnJaneDoe

    The biggest hint I’d make is “always make sure your extra payments go to pay down the principal.” You’d think that your payments would go to principal first, but some of the less scrupulous loan servicers don’t do that. They apply your extra to your next payment and stretch out the dates instead. Borrower rules were supposed to fix that, but the new rules were set aside by the current administration.

    Also, the student loan interest deduction is capped at $2500 per tax return. If you have student loan debt and your spouse also has it, you still can only deduct $2500 if you file jointly (and none if you file separately.) It also phases out at higher incomes.

    I’m hoping we can avoid loans with my daughter (she’s 7) but a lot of that will depend on which college she chooses. I know we’ll push her to choose a reasonably priced option and to be as aggressive as possible about scholarships.

    1. Thanks for sharing the information regarding principal payments and student loan deductions. I think that can help people avoid a mistake about payment of their loans. While it seems that college may be a decade plus away for your child, it’s never too early to start thinking about it, and making the decision based on cost is a good part of how you will decide with your child where to attend. I still have a hard time believing that schools are charging $40-50k or more for a year in attendance. That’s scary!

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