How to approach paying off your student loans

Student loans continue to be a major financial stressor for many. As policy changes and proposals related to student loans occur, many are unsure about the best approach to paying off their student loans. While there are general best practices to paying off your student loans, the best steps you can take will depend on your individual situation. Learn what to consider and how to approach your student loans going forward.

What you’ll learn:

• The current state of student loans
• What to do if you’re struggling to make payments
• Why paying your student loans matters

The current state of student loans

Resumed payments and collections

As part of COVID-19 relief measures, the government paused federal student loan payments, resulting in many borrowers holding off on repayment. Now, as of May 5, 2025, collections on defaulted student loans have resumed. For federal student loans, default means payments are over 360 days past due. Default can have severe consequences, including the entire loan balance becoming due at once, collection fees, legal action and more. Because of these harsh consequences, it’s best to think ahead on what to do if you’re in a tough financial situation so you avoid delinquency and default altogether.

Student loan forgiveness

The state of student loan forgiveness has shifted significantly over the past several years. An initial proposal to forgive $20,000 in federal student loans was struck down by the supreme court, causing a shift in focus to targeted relief through programs such as the Public Service Loan Forgiveness (PSLF) program.

Today, no new loan forgiveness policies are in the works. Some existing loan forgiveness programs do still exist, though they have specific criteria you must qualify for. In general, it’s best to assume that you will need to pay back your student loans in full, unless you qualify for a specific program that would forgive your loans.

Interest Rates

The interest rate of your student loans significantly impacts your monthly payments, especially for those with large amounts to pay off. Though interest rates are higher now than they were just a few years ago, the vast majority of student loan debt consists of federal loans with a fixed interest rate. Private loans tend to have a higher interest rate that may be either fixed or variable.

To reduce the impact interest has, there are several strategies you can employ. If you have multiple student loans with different interest rates, focusing on paying off the loan with the higher rate will result in paying less in total interest (remember to still make minimum payments on all your loans). If you have the means to, you can also make more than the minimum payments on your student loans, which will reduce the principal you owe faster, in turn reducing the amount of interest you accumulate.

Finally, you can consider refinancing your student loans. Whether refinancing is the right decision comes down to your financial situation. In general, refinancing makes sense if you’re currently paying higher interest rates with stable finances and a high credit score that will allow you to qualify for lower rates. A lower interest rate on a refinanced loan can reduce your minimum monthly payment and help you pay off your loan faster.

What to do if you’re struggling to make payments

Unfortunately, student loan payments have become a huge burden for millions of Americans. While generic advice to cut expenses or increase your income is accurate, that’s often much easier said than done. Thankfully, you have options if you find yourself in a situation where you’re struggling to make your minimum monthly payments on your student loans.

Federal loan repayment plans

There are numerous repayment plans for those with federal student loans, many of which will lower your monthly payments compared to the standard repayment plan. Some plans are available to everyone, while others require meeting specific criteria. One example of a repayment plan is the Income-Based Repayment Plan, which is available to those with a high debt relative to their income. This plan adjusts your monthly payments based on your discretionary income.

For more information, visit studentaid.gov. Keep in mind that many alternative repayment plans can result in you paying more over time than the standard plan.

Deferment and forbearance

Both deferment and forbearance will have your student loan payments paused. While neither is a long-term solution, they can be helpful options if needed. The specific differences between each can vary based on your student loan type. Be sure to thoroughly research the financial implications of each option and what you qualify for.

Talk to your loan servicer

Ultimately, loan servicers, whether federal or private, want to get the money they loaned you back. If your plan isn’t working out, reaching out to your loan servicer about potential solutions is a good step to take. Loan servicers are often willing to work with people who are honest and upfront about their situation. There’s no downside to trying this method, as the worst-case scenario is staying in the same position you’re currently in.

Why paying your student loans matters

When faced with difficult financial situations, it can be tempting to push the problem away. However, there can be significant consequences for not making student loan payments that will impact your finances for years to come.

When you miss any loan payments, including student loans, it will hurt your credit. This will make everything from renting an apartment and buying a car to getting a credit card more difficult. Eventually, non-payment will cause your student loans to default, exposing you to consequences such as wage garnishment and loss of tax benefits.

While paying off student loans can seem like an impossible challenge, going in with a plan can help you confidently tackle your debt. Researching and considering all the options at your disposal can reveal the best path forward for your financial situation.