More than 43 million Americans have an average student loan debt balance of more than $37,000, according to the Education Data Initiative. Depending on your circumstances when you went to college, and whether you went to graduate school and took out more loans, you could owe far more than that. If you’ve taken out federal student loans, you haven’t had to think much about them for a while, as payments, interest and collection efforts have been suspended since March 2020 as a result of COVID-19 relief legislation. While the original moratorium was scheduled to end in 2020, it has been extended multiple times to help borrowers. Nevertheless, you'll want to have a plan in place for when you do need to start repaying your student loans.

Repaying your student loans

Most federal loans don't require repayment until at least six months after you graduate or drop below 50% enrollment in classes, but you'll want to have a repayment plan strategy in place. If you took a federal student loan, you might be enrolled in the standard repayment plan, which sets you up to repay the loan (principal balance and any interest accrued) in 10 years. There are other types of plans available, with repayment terms up to 25 years. If you took a private student loan, those offer their own plans, with repayment generally ranging from five to 15 years (or more).

Of course, there is no one-size-fits-all approach for paying off your student loan debt, but here are some strategies to consider.

Make extra payments

By making extra payments, you’ll speed your progress toward getting student loans “off your books.” Even if you can’t make these extra payments regularly, you may occasionally receive some “found money,” such as a tax refund or a bonus at work, that could be used, in part, to pay down your balance. You won’t face penalties for paying off your student loans early or paying more than the minimum amount due. However, make sure that your student loan servicer is not applying the extra amount to the next month’s payment, which will advance your due date, but not really help pay off your loan faster.  Instead, ask your servicer to apply overpayments to your principal balance and keep the due dates as planned.

Set up automatic repayments

You may find it easier to stay on track if you set up automatic payments through a checking or savings account. You might also be rewarded for your consistency: Federal student loan servicers may reduce your interest rate by 0.25% when you sign up for autopay. 

Consolidate your loans

If you have federal student loans with different loan servicers, consolidating these loans can simplify your repayment schedule. Plus, consolidation can reduce your monthly payment by giving you a longer time period in which to repay your loan. On the other hand, when you consolidate your loans, any unpaid interest will be added to your principal and you’ll have to pay interest on this new, higher balance. So, depending on the amount of unpaid interest and the length of time required to repay your consolidated loan, your new loan may cost you more over the loan’s lifetime than you would have paid if you hadn’t consolidated your separate loans. Also, if you are working toward a loan forgiveness program for some of your loans, consider carefully whether you want to consolidate because you may lose the progress you made toward getting your loans forgiven.

Refinance existing loans

You may be able to refinance your student loans to a lower interest rate or a shorter repayment period – or possibly even both. To refinance, it helps to have a good credit score, a steady income and a reasonable debt-to-income ratio. It's important to carefully consider which loans you are refinancing and whether you will be giving up any benefits of the loan when doing so. For example, you may have to give up certain protections and benefits of a federal loan if you refinanced it with a non-federal loan. Like with loan consolidation, if you are working toward a loan forgiveness program for some of your loans, consider carefully whether you want to refinance them because you'll lose the progress you made toward getting your loans forgiven.

Check with your employer about repayment assistance

Many employees offer student loan repayment assistance or tuition reimbursement. In fact, as part of COVID-19 legislation, employers can contribute up to $5,250 annually per employee toward student loan assistance without increasing the employee’s gross taxable income. (This benefit continues through 2025.)

A note about loan forgiveness:

Under certain circumstances, you may be eligible to have your student loans forgiven – that is, you no longer have to make payments. Loan forgiveness programs can be complex, so it's important to know and comply with all the requirements of the program if you are seeking loan forgiveness.

Here are the main loan forgiveness programs:

  • Public Service Loan Forgiveness – If you work for the government or a nonprofit organization, you might qualify to have your loans forgiven, in whole or in part. Generally, to gain this forgiveness, you need to have worked for 10 years in the public sector and made 120 qualifying payments on your loans.  
  • Teacher Loan Forgiveness – If you have taught full time for five consecutive academic years at a low-income elementary or secondary school, and meet certain other criteria, you could have some of your student loans forgiven.
  • Federal Perkins Loan Cancellation – If you took out a Federal Perkins loan, you may be able to have your loans forgiven if you’re teaching at a low-income school or you work in special education or teach math, science, foreign languages or any other area of expertise in which qualified teachers are in short supply, as determined by your state’s education agency.

If you have been in the military, or you work in certain other jobs – such as a firefighter, corrections officer or librarian – you might also qualify to have part of your student loans forgiven.

To learn more about loan forgiveness, visit the U.S. Department of Education’s Federal Student Aid  website.    

Watch for scams

Unfortunately, the student loan world can attract dishonest people or organizations that promise to help you with your debt. So, you’ll want to be on guard against these scammers. They’re easy to identify because they may ask for upfront fees (which is illegal) or promise fast loan forgiveness or a balance reduction, which, in reality, takes time and can only be granted if you meet certain conditions, some of which have been described above. These companies may also use official-sounding names, implying they are affiliated with the Department of Education, and they may ask for your FSA ID, the username and password combination you use to log in to the Department of Education’s online systems. Another giveaway: They may pressure you to make a quick decision, suggesting that certain opportunities will end soon.

Clearly, you need to stay away from these scam operators. In fact, you don’t really need any outside help because, when it comes to paying off your student loans or gaining forgiveness for them, there’s nothing a company can do for you that you can’t do for yourself – and for free. The Department of Education’s Federal Student Aid website, mentioned above, is full of useful information on paying off your loans. And you can also contact your loan servicer for assistance.

Work debt payments into your financial strategy

Here’s one final thought to keep in mind: While you do want to get rid of your student debt, you also don’t want to ignore other financial goals, such as saving for a down payment on a house or investing for retirement through your 401(k) and IRA. So, while you should always make at least the minimum payment required on all your loans, don’t unnecessarily overextend yourself to the point where you’re hindering these other objectives. Your Financial Advisor can help you find a way to integrate your student loan payments into your overall financial strategy.

After all, in the final analysis, your student loan repayments, while necessary, are still paying for the past – while your other goals are all in the future.