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Tips for managing student loan debt

A college education is not as affordable as it used to be.

College tuition is rising at a rate that many can’t keep up with. In the past 20 years, a private school education at the nation’s top universities has increased by 134 percent. In the 2022–2023 school year, the average cost for tuition and fees amounts to $39,723 for a private school education. For out-of-state residents and in-state residents, an education at a public school costs $22,953 and $10,423, respectively.1

The high cost of an education makes it easy for students to accrue a lot of student loan debt. Not surprisingly, more than half of students leave school with some debt.

On average, borrowers owe $28,950, amounting to a total of $1.75 trillion in federal and private loans. The majority are federal loans (more than $1.6 trillion) that borrowers (43 million) owe. Most of the borrowers who are 25 to 34 years old owe between $10,000 and $40,000. The cohort that has the most borrowers with more than $100,000 in student loans are made up of borrowers between the ages of 35 and 49.2

President Biden’s Student Loan Forgiveness program was set to wipe away up to $10,000 in federal student loan debt for those who earn less than $125,000 a year individually or $250,000 as a family. Pell Grant recipients would have gotten an additional $10,000 in debt forgiven. On June 30, 2023, the Supreme Court struck down the forgiveness plan.

The White House has not given up and is preparing to use the Higher Education Act of 1965* to provide debt relief by compromising, waiving, or releasing student loans. As of now, it’s unclear who would qualify and how much of their debt would be forgiven.3

Also, after a three-and-a-half-year hiatus, student loan payments were required again starting in October 2023. Student loan interest resumed September 1, 2023.4

In December 2023, the Biden-Harris administration approved an additional $4.8 billion in student loan debt relief for 80,300 borrowers. That amounts to nearly $132 billion in approved debt cancellation for more than 3.6 million Americans.5

Later that same month, it was announced that a critical student loan forgiveness deadline was extended from December 31, 2023, to April 30, 2024. That means 850,000 borrowers who qualify for student loan forgiveness under the IDR Account Adjustment have an extra four months to consolidate and benefit from the adjustment.6

Borrowers are reminded of their high student loans on a monthly basis. On average, a bachelor’s degree will set a person back $267 a month and a master’s degree is $567 a month.7

If you find yourself with student loans — no matter the amount — here are some tips.

Don’t ignore your student loan debt — make a plan

Most borrowers have a grace period before they need to start making payments on their loan. The grace period starts after the student graduates, leaves school, or enrolls half-time or less. It’s important to use this time wisely to get settled and prepare a plan.8

If you feel overwhelmed by the process, contact the Department of Education’s (ED) Office of Federal Student Aid (FSA). Then, select a payment plan that fits your circumstances. Your lender will give you several options to choose from. An income-driven repayment plan (IDR) takes into account your income and family size when setting your monthly student loan payment.9 Your student loan originator can answer any questions you might have about repayment. If you don’t know who that is, go here for a list of federal student aid loan servicers or visit the National Student Loan Data System.8

It's important that you don’t miss any payments so as to keep a good credit score.

How student loan delinquency and default leave a lasting impact

You want your education to leave a lasting impact on your mind and heart, not on your financial record. That’s why you need to keep on top of your payments.

Once a payment becomes just one day past due, it is considered to be delinquent. This may result in late fees on top of accrued interest. If this happens, reach out to your student loan servicer who can let you know if you qualify for a more affordable repayment plan. Your loan goes into default after a longer period of non-payment, typically 270 days for many lenders. That’s when three major credit bureaus will be informed of your defaulted loan, which might result to a lower credit score. Once that happens, it could take up to seven to 10 years to build your score back up.10

Lenders can pursue legal action once a loan is 270 days past due.10 Some 7.5 million borrowers have defaulted on their loans.11 With no protections in place, the entire loan, plus any unpaid interest, is due immediately. Your wages could be garnished and your tax refunds withheld. Other punitive measures are sure to follow.10

The good news is the U.S. Department of Education plans to mark millions of default loans as current.12 This “Fresh Start” initiative lets borrowers have a “do-over” by giving them the opportunity to improve their credit, protect themselves from wage garnishment, and apply for federal student aid.11 It’s important that borrowers don’t redefault on their loans, after their loans are back in good standing. The most common reasons for people to default on their loans the first time — and any time after — include having a higher priority debt, feeling overwhelmed, and having unaffordable payments.13

Carrying student debt will not lower your credit score. It’s when you miss a payment or go into default that you get into trouble. Just one late payment can reduce your credit score by 100 points. Defaulting on a loan can shave off 150 points. A low credit score can affect your day-to-day life in many ways from renting or buying a home to getting a good cell phone plan.14

Check for special programs

Check out employer-offered student loan repayment programs. Section 2206 of the CARES Act allows employers to pay up to $5,250 of their employees’ student loans each year. It’s tax-exempt for everyone — meaning that you don’t have to pay income tax and your employer doesn’t have to pay a payroll tax.15 This provision is set to be in place until December 31, 2025. Borrowers are also able to deduct taxes on interest paid for their student loans. If you paid at least $600 in interest your loan servicer will send you Form 1098-E to fill out.16

Review refinancing and consolidation options

Consolidating your federal student loans into a Direct Loan Consolidation won’t lower your interest rate but it will help you keep better track of your loans. Plus, it will extend your repayment period, so your monthly payment will be lowered (even though you will pay more interest over time).17 And you’ll be locked into a fixed-interest rate so that your new payment won’t increase over time.18

With a private consolidation loan, you might be able to lower your interest rate or monthly payment or release a co-signer from your loan. Consolidating your federal loan into a private loan might eliminate some protections and benefits. So do your due diligence.18 With refinancing, you can lower your loan’s interest rate, thus saving you money in the long run. However, if your student loan is refinanced with a private loan, you’ll lose your access to federal loan protections, repayment options, and forgiveness programs.17

Find a repayment plan that works for you

Just like you needed to find a college that fit you, you also need to find a repayment plan you can work with. An income-driven repayment plan might be your best bet if your income is low and your federal student loan payments are high.19 This sort of plan will make your loan more affordable by lowering your monthly payment.20

A more traditional plan will allow you to pay off your student loans faster while minimizing interest charges.20 There are three categories of traditional repayment plans: standard, graduated, and extended.

A standard repayment plan lets you pay off your non-consolidated loans over the course of 10 years. In this short time period, your monthly payments might be high, but you’ll save on interest rates. A graduated repayment plan also features a 10-year repayment period; however, the lower initial payments gradually increase every two years. An extended repayment plan is geared toward borrowers with more than $30,000 in federal loans and who want to have the option of repaying their loan over the course of 25 years.20

The good news: You have a lot of options for paying off your student loans so that you can move forward with the life you envisioned for yourself and your loved ones.

* The Higher Education Act passed in 1965 to ensure that any individual who wanted a higher education had access to one, despite their income or zip code. Through the governance of student-aid programs, federal aid to colleges, and oversight of teacher preparation programs, the HEA is reauthorized by Congress every few years to encourage growth and change. HEA program authorization expired in 2013, but it’s been extended as Congress prepares amendments and changes., Higher Education Act

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Student loan repayment

Understanding the details of repayment on your federal student loan can save you time and money.

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1. Kerr, Emma; Wood, Sarah. “What You Need to Know About College Tuition Costs,”, September 13, 2022.

2. Hahn, Alicia. “2022 Student Loan Debt Statistics: Average Student Loan Debt,”, September 19, 2022.

3. Binkley, Collin; Lewis, Cora. “What will Biden’s new plan mean for borrowers set to begin paying back their student loans?”, July 3, 2023.

4. Safier, Rebecca. “When will student loan payments resume?”, June 28, 2023.

5. “Biden-Harris Administration Announces Nearly $5 Billion in Additional Student Debt Relief,” U.S. Department of Education, December 6, 2023.

6. Minsky, Adam S. “Biden Extends Key Student Loan Forgiveness Deadline: Why It Matters,”, December 18, 2023.

7. Welding, Lyss. “Average Student Loan Payment,”, October 3, 2022.

8. “Manage and Repay Student Loans,”, as of July 5, 2023.

9., Federal Student Aid as of July 5, 2023

10. Sherman, Emily. “Student Loan Default: What you need to know,”, April 27, 2023.

11. Nova, Annie. “Education Department Offers a Second Chance to 7.5 Million Borrowers Who Defaulted on Student Loans — Here’s Who Is Eligible,”, August 19, 2022.

12. Nova, Annie. “Biden Administration Will Give Millions of Student Loan Borrowers in Default a Fresh Start — Here’s What You Need to Know,”, April 12, 2022.

13. Takyi-Laryea, Ama; Levine, Ilan; Oliff, Phillip. “Government Hits Reset on Student Loan Defaults, But Many Could Experience Default Again,”, June 14, 2022.

14. Cerullo, Megan. “How Much Does Missing Student Loan Payments Hurt Your Credit Score?”, August 10, 2022.

15. Aquino, Leo. “Your Employer Can Help Pay For Your Student Loans — Here's an Email Template to Ask Them,”, August 24, 2022.

16. Berry-Johnson, Janet. “Student Loan Interest Is Tax-Deductible: But Who Can Claim?”, October 11, 2022.

17. Treece, Kiah. “Your Guide to Student Loan Consolidation,”, October 18, 2022.

18. “Should I consolidate or refinance my student loans?”, February 22, 2022.

19., Federal Student Aid as of July 5, 2023

20. McGurran, Brianna. “Your Guide to Federal Student Loan Repayment Plans,”, April 11, 2022.

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