How to Deal With Student Loan Debt

Maybe you’re cramming for your first college finals ever or getting ready to apply for graduation. Either way, we get it. The last thing you want to worry about is paying off your private student loans. 

However, avoiding a phone call to your lender or not setting up a repayment plan can impact your financial wellness for years to come, and if you have a student loan cosigner, it can affect their credit, too.

Ascent is here to help you understand your student loan repayment options. Here are 7 tips to help you manage student loans in school and after graduation.

1. Document All Your Loans and Where to Find Them

Knowing how to deal with student loans is the first important step as you build a plan to make payments. As intimidating as the world makes student loan payments sound, understanding the basics of your loan (who your loan servicer is and what your loan terms are) is the best way to feel confident and overcome your fear of student loan debt.

To get started, you’ll need a complete view of all your loans, which means you’ll need to: 

• Find out your loan servicers and whether you have a federal or private student loan. Your loan servicer is who you will be making your monthly payments to, so you should know who they are and how to contact them.
• Log in to your online portal to locate a copy of your original loan agreements. 
• If you or your cosigner already started to make payments, gather your receipts or make sure you know where to find them online. 
• Figure out what you owe and when.
• Double-check that your contact information is up-to-date. 

You’ll get a little more familiar with your lender and loan servicer through this first step. Just make sure you know how to contact your loan servicer if you run into any questions about how to manage student loan debt.

2. Pay Interest During Your Grace Period

Your grace period is the period of time after graduation when you aren’t required to make a payment on your loan. Usually, this grace period is about six months after graduation, but some loan providers, like Ascent, offer more time. Federal student loan grace periods can also be extended for active military duty or returning to school at least half-time before the end of your original grace period.

The grace period is important because interest continues to “capitalize” during this period. This means it continues to be added to your original loan amount, so you end up paying interest on a larger amount once repayment starts. 

Paying interest during your grace period is one of the best pieces of student debt advice because it reduces the total amount you owe. With some of Ascent’s private loans for college, you can:

• Make a minimum payment of $25 while enrolled in school at least half-time and start making payments up to 9 months after graduating or leaving school; or
• Choose to make an interest-only payment while enrolled in school at least half-time and start making payments up to 9 months after graduating or leaving school.

This small step can make your monthly payments more manageable and save you money over time.

3. Select a Repayment Plan That Works for You

When you first applied for your student loan, you selected a repayment option. Common repayment plans include:

• Deferred: You don’t make payments until after graduation, which gives you time to focus on school before handling loan payments. 
• In-school: You make a minimum payment every month while in school, helping to lower your overall debt. 
• Income-driven repayment: Some lenders offer income-driven repayment plans, which means your monthly payments are based on your income and family size. 

You can log into your account with your loan servicer to see your monthly loan payments and when you can expect them to kick in. If you don’t remember making any loan payments in school, you probably selected a deferred repayment plan. It may be time for you to log into your loan portal and see that you haven’t missed any payments. 

Not sure how to manage student loans on your current repayment plan? You can reach out to your loan servicer at any time to change your plan. However, as a general rule, if you can make payments, we recommend starting as early as possible.

4. Enroll in Automatic Payments

Setting up automatic payments for your student loans is a simple way to stay on track and never miss a payment. Once you enroll, your monthly payment is taken directly from your bank account, so you don’t have to worry about scheduling it yourself. 

Automatic payments can help you avoid late fees and protect your credit score for the future. Plus, having one less bill to remember makes learning how to manage student loans a little easier. 

Pro tip: Some lenders, including Ascent, offer a discount for setting up automated monthly payments. Even a small reduction can make a big difference in your student loan stress, especially if you have a large loan balance.

5. Explore Loan Forgiveness, Cancellation, or Discharge

What if you simply can’t afford to make payments? Life happens, and it’s important to know that there may be options available to you. If you need a little more time to build a budget and prepare to start making payments, you might want to see if any of the following solutions to student loan debt are available to you.

Student Loan Forgiveness

If you’re planning to become a teacher or work at a non-profit organization, you may qualify for the Public Service Loan Forgiveness (PSLF) plan after ten years. Under this plan, your remaining school loan balance is forgiven after 120 qualifying payments are made during your employment period. Teaching for five consecutive academic years at a low-income public school also entitles you to loan forgiveness of up to $17,500 on Direct Loans. Although this may not happen right away, it may give you some peace knowing your payment may be forgiven down the line.

Student Loan Cancellation

You can cancel federal loans within 120 days (about four months) of their disbursement without incurring any interest or fees. For example, if you’re preparing for your last year in school and you unexpectedly win a scholarship, receive a big family inheritance, or realize your parents can help cover your cost of tuition, you can cancel your student loans for that year without penalty. Your school will return the funds to your loan servicer, but keep in mind you’ll also have to return any funds that were spent. 

Student Loan Discharge

Your school loan may be discharged under certain circumstances, but this is very rare. If your school closes either while you’re enrolled or shortly after you’ve graduated, you can get your Federal Direct Loan, Federal Family Education Loan (FFEL) Program, or Perkins Loan discharged. Loans can also be forgiven if you find yourself permanently and severely disabled or in the event of a borrower’s death (this is true for Ascent’s private loans, as well). 

6. Consider Employers with Student Loan Benefits

We mentioned that government employees, non-profit workers, and teachers may have their federal school loans forgiven after working for some time. But what if you work in the private sector? Some companies offer to pay a portion of an employee’s student loans as a part of their employee benefits packages. 

The Consolidated Appropriations Act allows companies to make tax-exempt contributions to an employee’s school loan payments up to $5,250. Here’s how some companies are paying employee student debt:

• Nvidia: This AI tech company offers employees who graduated within the past three years reimbursement up to $350 a month, with a lifetime maximum of $30,000.
• Google: Known for its benefits, this tech giant matches student loan payments of up to $2,500 per employee per year.
• Hulu: This leader in the streaming space offers to pay $100 per month in loan debt, up to a total of $6,000 after one year of employment.
• Lockheed Martin: Their Invest In Me program aims to attract new graduates by offering a $150/month cash bonus for five years, up to $9,000, which does not necessarily have to go toward student loans. 

Employer programs can be a useful part of your plan to pay back loans, but you’ll probably also need other solutions to student loan debt. Any decision you can make that lightens the burden of your student loan repayment plans will pay off eventually.

7. Plan a Payoff Strategy

As you think about how to deal with student loan debt, don’t forget the basics: Planning and budgeting go a long way. Think about what you must pay every month, like rent, utilities, or food, then dedicate any money you have left over to your student loan payments. If you can pay more than the monthly minimum, we highly encourage it, but first, check to see if you get penalized for paying off your loan early (with Ascent loans, there is no penalty).

What if there’s nothing left over? If you’re already cutting out luxuries and can’t make payments, cut down on other expenses. The first step is to put your costs into different buckets to get a sense of your finances. From there, you can see opportunities to cut back spending on things that aren’t as important.

Once you’ve built your monthly budget, you’ll want to consider repayment strategies like:

• The snowball method involves making regular minimum payments on everything but the smallest debt, which is paid off at higher increments. This is one way to prioritize knocking out a single debt. 
• With the avalanche method, you tackle the debt with the highest interest rate first while making minimum payments on the others. Once that debt is paid off, you apply the extra money to the next highest-interest debt. 
• Debt stacking also prioritizes the debt with the highest interest rate but also considers fees or penalties. By focusing on the most expensive debts first, you can get out of debt faster and pay less overall.

8. Pay Down the Principal

If sticking to a regular payoff strategy beyond your monthly payments feels overwhelming, making just one extra payment a year toward your loan principal can still make a big impact. By paying extra toward the principal, you reduce the amount of interest that builds up over time, which can help you pay off your loan faster. 

One way to make extra payments is by using unexpected cash, like a tax refund, work bonus, or birthday money. Instead of spending it all, put a portion toward your student loan to help lower your balance. This is a great approach to dealing with student loan debt because the money isn’t part of your regular budget. You won’t feel the pinch right now, and over time, the extra payments add up.

9. Take Action to Avoid Defaulting

At all costs, do what you can do to avoid not paying your student loans. An overdue loan becomes delinquent if it remains unpaid for too long and defaults. After 90 days of delinquency, this outstanding debt will negatively impact your credit score. A poor credit rating makes it hard, or even impossible, to take out credit cards, qualify for loans, or rent an apartment. A low credit score can also impact your ability to get certain jobs, including government jobs that would qualify you for loan forgiveness in the future. 

If you think you might default, you’ll want to learn how to deal with student loan debt fast. Look into the options below—while they won’t permanently pause payments, they can offer short-term student loan relief. 

Loan Consolidation or Refinancing

Refinancing your loans with a private company allows you to pay off the same principal amount (your total loan amount) at a lower interest rate. However, this may extend the life of your loan. Keep in mind that while you may lose some student loan forgiveness programs if you refinance your federal student loans, what you’ve heard about private student loans may not be true.

Deferment

Deferred repayment plans allow you to start making payments up to nine months after graduating or leaving school, and interest won’t accrue during your non-payment period. You can also qualify for deferment if you’re attending school at least half-time, are unemployed or living at or below your state’s poverty line, are active-duty military or a Peace Corps volunteer, or are undergoing cancer treatment. 

Forbearance

Forbearance is an arrangement between you and your lender that pauses payments during a set time, usually three to six months. You can think of forbearance as an extended grace period, but you can request it at any time. Unlike your original grace period, you will continue to accrue interest on your loan. You can apply for forbearance by speaking with your loan servicer. 

Loan Rehabilitation

If you know you’re going to miss a payment and you’ve taken out federal student loans, you can apply for loan rehabilitation. This is a process in which a borrower may bring a student loan out of default if they adhere to specified repayment requirements. Different lenders have different requirements, and you’ll have to send them your tax returns to see if you qualify. On the other hand, private student loans are not eligible for rehabilitation.

Knowledge Is Power When It Comes to Student Loan Debt Solutions

Successfully repaying your student loans is one of the best ways to stay in control of your financial future. Whether you choose a structured payoff strategy, set up automatic payments, or make extra payments when you can, every step you take helps reduce your overall debt.

If you’re worried about how to deal with student loan debt, Ascent is here for you. We offer private student loans with affordable interest rates and monthly repayment plans to fit your budget. Many of our loans also have generous forbearance and deferment options. By staying proactive and exploring all available options, you can avoid default and build a strong financial foundation.

FAQ

How Do You Cope with Student Loan Debt?

Coping with student loan debt starts with understanding your repayment options and creating a realistic budget. Setting up automatic payments, exploring income-driven plans and refinancing options, and making extra payments when possible can also help. 

How Can I Get Rid of My Student Loan Debt Faster?

Making extra payments toward your loan principal, even small ones, can help reduce your balance and the amount of interest you pay over time. Choosing a repayment strategy like the avalanche or snowball method can also help you pay off debt efficiently. If you qualify, refinancing or loan forgiveness programs may reduce or eliminate your debt.

What Is the Average Student Loan Debt?

The average student loan debt for a bachelor’s degree is $29,300. However, student loan debt varies depending on the type of degree and school attended. Graduate students often carry even higher balances, sometimes exceeding six figures. Staying informed about your own loan balance and repayment options can help you manage debt more effectively.