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6 Overlooked Ways to Get a Grip on Student Loan Debt

paying off student loansFinding a way to deal with your student loan debt isn’t always easy. Many borrowers settle into regular monthly payments for years before recognizing many other repayment options can help reduce their debt, save them money, and eliminate unnecessary headaches.

But there are a lot of programs that can help you address your student loan debt without negatively impacting your credit or financial standing. Many student loan repayment programs are hard to find, and most borrowers simply overlook them.

You can avoid making the same mistake by knowing the options that are available, and save money while you move closer to financial freedom.

The following are 6 overlooked ways to begin overcoming the burden of student loan debt.

1) Seek Forgiveness

One way you can overcome your outstanding student loan debt is to qualify for debt forgiveness. These programs are run by federal and state governments as well as banks to help borrowers.

Forgiveness programs benefit borrowers who work in a field that serves the community. This includes paid and volunteer work as well as industries like health and legal assistance.

Public Service Loan Forgiveness (PSLF) programs can be applied towards Federal Direct Loans.

Other loans such as the Perkins Loan Program or the Federal Family Education Loan Program (FFEL) may be consolidated into a Direct Consolidation Loan. This allowsBorrowers who work in the public service sector to take advantage of loan forgiveness benefits.

Keep in mind that only those payments made after consolidation will apply towards the requisite 120 months for PSLF programs.

2) Pay As You Earn

Pay as You Earn (PAYE) plans are available if you’re underemployed or have difficulty finding work once you’ve graduated. These programs offer lower monthly payments based on your total annual earnings. PAYE offers the smallest monthly payment possible among income-based repayment plans.

In order to qualify, borrowers must show that the student loan payments for each month under a standard 10-year repayment plan exceeds 10% of your discretionary income.

Borrowers who want to take advantage of PAYE must be a new borrower as of October 1, 2007, without any outstanding balance on either FFEL or Direct loans. Check out our previous post for more information on the Pay as You Earn program.

3) Income-Based Repayment

Many consider income-based repayment (IBR) to be one of the biggest secrets in student loans. Established in 2009, IBR is available for borrowers of federal student loans which include:

  • Federal Direct Consolidation Loans
  • Stafford Loans
  • Grad Plus

You may also qualify for IBR if you have a direct or federal family education loan.

As many students graduate into a weak economy, they find it difficult to manage their high level of student loan debt. IBR programs can help those students by limiting their monthly payments.

4) Direct Deposit for a Lower Interest Rate

Most lenders offer discounted interest rates for borrowers who set up a direct deposit payment agreement. This benefits the lender by ensuring that your payments will be made on time.

The average discount for direct deposit is 0.25%, which can significantly reduce the amount of interest you pay over time, depending on your total debt amount. These savings can help you pay off your student loan debt much faster. For a loan that exceeds $20,000, a 0.25% reduction over 10 years can save you hundreds of dollars.

over the course of 10 (or more) years it can knock off a big chunk of the interest you’ll pay over the life of the loan. In fact, if you have a loan amount of over $20,000, that “insignificant” discount could save you hundreds of dollars. Which would help you get out of debt faster.

5) Consolidation

Consolidating all of your loans into one can be another effective way to tackle your student loan debt. By evaluating the interest rates on all of your loans and determining if a consolidation will benefit you, you might consider this option as a way to reduce your financial burden.

Student loan consolidation can provide a number of benefits including:

  • Reduced interest rate for PLUS loans – PLUS loans with an 8.5% interest rate can be consolidated into a single rate of 8.25%.
  • Create one payment – Consolidating into one single payment will make your repayment efforts simpler and easier to maintain.
  • Alternative payment plans – You’ll have access to additional repayment methods including income contingent, graduated, and extended repayment options. By creating a higher balance through consolidation, you can extend the term of repayment in many cases.

Consolidation can help you reduce your monthly payment as much as half. One warning: By extending your repayment term, you will likely increase the amount of interest you pay over time. So consider this option carefully.  In Scotland, there are similar ways of reducing your monthly payments by applying for trust deeds.

6) Crunch the Numbers

Online calculators are one of the best ways for you to truly understand your options as a borrower. These can be used for prepayment, refinancing, deferment, and savings purposes.

By taking the details of your student loans and using the available calculators, you can discover new options that could save you money. Within minutes you’ll have a new perspective to make effective decisions to pay off your student loan debt.

This guest blog post was written by Andy Josuweit, CEO of Student Loan Hero, the smartest way to repay student loans.


Image: Freedigitalphotos.net/ddpavumba


About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. There are also many private lenders who will reward you for good payments. I had a client “miss” an interest rate deduction opportunity because he missed one of his payments. If he made 36 in a row, or something like that, his lender would have reduced his interest rate by .25.

  2. Good advice. I think a lot of recent grads can benefit from looking into one of these options. I have a decent amount of student debt but it’s manageable so I just keep making those auto-payments each month.

  3. Unfortunately, besides the direct debit deduction none of these apply to me. But I’m sure there are people out there who are not taking advantage of these options when they should be.

  4. My sister can wait until part of her loan is forgiven for teaching. She talks about it all of the time. I don’t blame her.

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