Every year, frightening numbers of students finish college with massive amounts of student loan debt—and then find themselves completely unable to find employment that pays enough to cover their student loan payments.
Many of these 20somethings work as nannies, restaurant servers, and cashiers, jobs that barely pay enough to cover rent and groceries.
What can be done about this? Simply not paying on student loan debt is not an option. (You can read about the scary consequences of student loan debt default here.)
If you’re a former college student and you find yourself in this position, here are 6 strategies that will help.
1. Ask your lender for an Income-Based Repayment Plan (IBR), an Income-Contingent Repayment Play (ICR), or a Pay-As-You-Earn Repayment Plan.
These programs have significant differences, but what they all have in common is that they look at your monthly income and then cap your monthly student loan debt payment at a fixed percentage of that income.
This sounds good at first, but the problem comes when the program — in order to recoup the entire debt you owe — extends your payments out to as much as 25 years.
Yes, you heard that right. Shrink your student loan debt payment with one of these programs and you could find yourself making student loan payments until you are 47 years old (or older).
(Feel like you’ve just been kicked in the stomach? Me too.)
If you do enroll in one of these programs, remember this important yearly task.
You’ll need to supply the government with documentation of what your current income is every single year.
Some borrowers who’ve been having their student loan debt payments auto-paid from their checking accounts have forgotten to send in this documentation, been suddenly and unceremoniously booted out of the program, and then had their student loan debt payments suddenly jump from $120 a month to $520 a month all at once, causing their checking account to overdraft. Don’t let this happen to you. If you’re in one of these programs, know when your yearly income documentation is due and put that in your calendar as a reoccurring appointment so you can never forget it.
These repayment programs can be helpful in some cases. If you’re truly unable to make substantial enough student loan debt payments to get out from under your debt in three to ten years, though, I strongly suggest this option:
2. Seek out a “Public Service Loan Forgiveness Program.”
If your student loans are what are called “Federal Direct Student Loans” you may be able to have some or all of your student loan debt forgiven in exchange for entering a paid profession that serves the community in some way.
Here’s how “Public Service Loan Forgiveness Programs” work:
A) You are officially admitted to a “Public Service Loan Forgiveness Program.”
B) You start out on one of the terrible “reduced monthly payment” repayment plans described above, even though the last thing on earth you want is to stretch your student loan payments out to age 47.
C) You get a job working 30 hours or more a week doing some kind of public service job such as police, fire, EMT, military, doing some kind of work on a military base, working for any federal, state, or local government agency, providing healthcare to an underserved area, teaching in a public school, volunteering for the Peace Corps, being a public librarian, or working for a tax exempt charity. (The list of qualifying public service jobs is actually quite long.)
D) You make 100% of your discounted monthly student loan payments on time (usually by having the payments taken directly out of your checking or savings account).
Do this for 10 years, and at the end of year 10 all the rest of your student loan debt is forgiven. Poof. Gone. You get your life back. You wave goodbye to 15 years of student loan payments that you are no longer obligated to make.
This is a fabulous deal, but remember, it’s only available to students whose families filled out the FAFSA form each year and then either took out only “Federal Direct Student Loans” (or consolidated their existing student loans under a “Federal Direct Student Loan” program).
Private loans and loans made under the “Federal Family Educational Loan Program” and the “Perkins Loan Program” are not eligible for public service forgiveness unless they are officially consolidated under a “Federal Direct Student Loan” program.
Do you have friends or family members who work in a public service type job?
Do you know anyone who is a police officer, a firefighter, a public school teacher, a federal, state, or local government employee, or a public librarian? Share this article with them. Ask them if they’re still paying on any student loans, and tell them about this program. The U.S. Consumer Financial Protection Bureau estimates that 25% of all workers in the United States qualify for Public Service Loan Forgiveness but don’t know about it and so are not taking advantage of it.
3. If you are temporarily unemployed, headed back to school, or otherwise unable to pay your student loan payments, don’t ever just stop paying. Instead…
Ask your lender whether you might qualify for a temporary “student loan deferment” or “student loan forbearance.”
These programs may allow you to reduce or eliminate student loan payments for a finite period of time to get you through a tough spot. You will likely end up paying more in the long run if you take these routes, though, so don’t ask for “deferment” or “forbearance” unless you absolutely have to.
If you do choose to enter “deferment” or “forbearance,” try hard to at least pay the interest charges that are being added to your loan balance each month. Some students who’ve just let the interest continue to pile up during deferment or forbearance have seen their loan balances balloon by over 20% by the time they returned to repaying them. Yikes.
4. Remember, there are never any penalties for borrowers who choose to pay student loan interest or principal before it’s technically due.
All you’ll need to do is send an extra check to the lender in a separate envelope. Write your loan ID number across the top of the check and include a note that clearly says: “Please apply this check for $_____ to my principal loan balance.” And if you can’t afford to pay even the interest on your student loans? Try to pay something; every dollar you send in will reduce your burden in the long term.
In general, getting one of the “income based repayment plans” discussed above is a better option than either deferment or forbearance. Why? Because you get out of debt faster paying a little bit each month than you do paying nothing each month.
5. And what do you do if you’re plodding along on a 25-year repayment plan, and you suddenly get a job paying $10,000 more?
Step up your repayment. Continue to live frugally and carefully, send in as many extra payments as you can as fast as you can, and get out of debt faster.
This inspiring article by my friend the Student Loan Hero tells about one young woman who did this in just three years. It’s a must-read.
6. If you’re married to someone with student loan debt, be absolutely sure to read the important article I’ve written on that subject here.
This article will explain to you how you can legally and ethically free yourself from future responsibility for your spouses’s student loan debt. (Without running away to a Caribbean island or asking for a divorce.)
Help keep your younger siblings out of student loan debt—suggest that your parents get their copy of my book:
It’s a reference book, so nobody reads the whole thing cover to cover. Pick out what you need to read in it using the fast-paced, 10-minute video instructions here.
You can see hundreds of reviews of it on Amazon at:
You can see why financial advising professionals love LAUNCH, here.
You can see the top 9 questions parents are asking me about LAUNCH, here.
If your parents read just one chapter of LAUNCH every 1–3 months while your siblings are in middle school and high school, they’’ll know every viable strategy for debt-free college at exactly the right time to implement it.
And if your siblings are already well past middle school? That’s OK; your parents can run to catch up. But the process of getting kids through college debt-free goes more smoothly the earlier parents start it—especially if they’re not able to save up any money to pay for college.
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Who is Jeannie Burlowski?
Jeannie is a full-time academic strategist, podcast host, and sought-after speaker for students ages 12–26, their parents, and the professionals who serve them. Her writing, speaking, and podcasting help parents set their kids up to graduate college debt-free, ready to jump directly into careers they excel at and love. Her work has been featured in publications such as The Huffington Post, USA Today, Parents Magazine, and US News and World Report, and on CBS News.
This article was updated on October 27th, 2022.