Pay Off Student Loans: Step By Step

Student loans can leave you feeling drowned in debt before you’ve even started your career. While it can be difficult to find help when you’re looking for ways to pay off student loans, we’re here to help. There’s no best way to do pay off student loans, but there are steps you can take to improve your situation and set you on the right path.

When You’re Not Behind on Payments Yet

You don’t want to wait until you’re behind on your loan payments to begin addressing your student loan problems, there are ways to make sure you never reach that point. Contact your lending at ask what options are available to either lower your monthly rate, or attempt to temporarily postpone payments. Asking to have your interest rates lowered is another option. Income-driven repayment plans, refinancing, or deferment are all great options.

Income-driven repayment plans

So what are income-driven repayment plans? These plans cap your monthly payments so they can’t go above a certain percentage of your income. These plans may extend your loan term, in some cases for as much as 20 years, but forgive your remaining loan balance at the end of loan term term. This option is available only to borrowers who took out federal student loans.


Student loan refinancing can help you save money on loan payments. They’ll lower your interest rates, something that is obviously a huge money-saver. You’ll need good credit, though. Refinancing works best for private student loans, rather than federal. If you are currently struggling to make federal loan payments, income-driven plans might be much better for you.


Forbearance and deferment are great options for borrowers. You can temporarily postpone loan payments. The government can give great options for federal loan borrowers, and private lenders often also offer deferment or forbearance options. Terms will vary by lenders, though. Interest will still accrue during deferment and forbearance, except during deferment for borrowers with federal loans.

Private student loans don’t have a huge number of options for repayment. Private lenders don’t offer income-driven repayment loans, which is unfortunate. If you’re close to the end of your ability to make payments, though, talk to lenders about ways to temporarily lower payments. They will often be willing to work with you on them.

Whether you have private or federal student loans, you can pay extra every month when you can afford it to reduce your balance and save money. It’s very helpful in the long run—just tell your lender or servicer where to apply the additional money you make in the payment to ensure it doesn’t go towards a future payment.

If You’re Already Late On Payments

If you’re already a bit behind on payments, you’ll want to pay off student loans that are outstanding as soon as possible. You don’t want to negatively affect your credit history. If you have not already defaulted on your federal loan, you can switch to income-driven repayment plans. Do your best to catch up to these payments before they’re 90 days overdue. At that point, federal student loans are reported to credit bureaus as delinquent and will stay on your record for seven years.

If you have private loans, not federal, talk to your lender as quickly as possible once you get behind on payments. It’s best to be honest about your  financial situation. Your lender might even be able to help you out by postponing payments or lowering the rates. If you miss a payment, a lender can technically sue you, but it’s unlikely that they will do so immediately.

If You Have Defaulted on Your Loan

When federal student loans are in default, you can repay the debt you owe, consolidate the debt into a direct consolidation loan, or go through rehabilitation. Any way you do it, you’ll have to pay back the money you owe, no matter what.

Private student loan defaults are a little more constricted. There aren’t options for consolidations or rehabilitation. If you don’t pay, the lender can legally enforce their right to collect the debts.

It’s a good idea to speak with a lawyer who specializes in student loans if you’ve defaulted. If you’re going to try to negotiate with a loan holder, a lawyer is practically required. The National Consumer Law Center has a list of legal resources you can use.

Handling Student Loan Debts Under Unusual Circumstances

There are certain circumstances that are more unusual than others, and we have some tips for certain cases such as these:

Death or Disability

It might not be something you want to think about, but death and disability are real possibilities. Disabled borrowers have to submit an application for a disability discharge. It will require proof of disability. Family members of a borrower who has passed on must also provide proof of death to the lender. Certain private lenders might actually forgive the debt for borrowers’ families when a borrower dies or become disabled.


You won’t be able to discharge student loans in bankruptcy. Sometimes, though, bankruptcy may waive your student debt if you can prove that if you were forced to stay responsible for the debt, you would come under ‘undue hardship.’

What You Should NOT Do With Student Loans

First off, don’t take debt relief offers. Debt relief companies prey on the confused and uninformed. These companies collect a large fee for putting you into income-driven plans, something you can do yourself for free. Also, stay away from companies that ask for your Federal Student Aid ID or for permission to contact your loan servicer directly. Also, don’t take out a bad credit personal loan if you can avoid it.

It takes a lot of effort to pay off student loans. Getting rid of any debt can be hard, but it’s definitely possible, so don’t give up! You can pay off student loans if you take small take and keep at it!