How To Fight Back Against Student Loan Debt

Top view on a student with bunch of overdue bills.
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If older Americans could send a message to new high school graduates, it undoubtedly would be this one: Do everything you can to stay out of student loan debt.

Student loan debt in the United States reached $1.59 trillion as of March 21, 2021, the U.S. Department of Education reported. That represents 42.9 million borrowers, and 90% of the loans are backed by the federal government.

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The highest average outstanding debt among the borrowers belongs to people ages 50 to 61, according to Bloomberg. They have an average balance of $43,400, owed to loans they took for retraining after the 2008 Great Recession, loans to help their children and in some cases, borrowing for their first stints in college. And carrying such debt is saddling them with financial difficulties as their careers should be winding down, impacting their retirements.

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It is possible, however, to climb out of student loan debt and not have it crush your financial future. If you’re struggling with payments or finding that student loan debt is keeping you from achieving your financial goals, read on. And if you’re just starting your path toward college, get a tip about borrowing.

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Change Jobs

Even if you love where you work, finding a new job could help to ease your student loan debt. That’s because many employers, especially larger ones, offer assistance with loan repayment as a perk. And since the pandemic, the benefit has gotten even better. Under the CARES Act passed in 2020, employers can make up to $5,250 in student loan payments for an employee in one year. That money is tax-free for the employee and a payroll tax exclusion for the business. The program has been extended through the end of 2025.

Even smaller employers are finding ways to help employees with their loan repayment, including making a fixed contribution toward the debt or even allowing workers to convert their paid time off to money for student loan repayment.

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Change Your Payment Method

If you’re paying $500 a month toward your loan balance, keep doing that — just change how you pay it. By paying every two weeks instead of once a month, you’ll make 26 payments each year, or the equivalent of 13 months of payments instead of the standard 12. You’ll save interest and cut time off the loan without a noticeable increase in the amount out of your pocket.

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Investigate Public Service Loan Forgiveness

Borrowers who work for a federal, state, local or tribal government, or for a qualified nonprofit agency, and have a federally backed loan could be eligible for the Public Service Loan Forgiveness Program. The balance of the loan could be dismissed after you’ve made 120 monthly payments while working for a qualified employer. To date, the program and its offshoots have wiped $583 million in federal student loans off the books, the federal Department of Education reported.

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Look Into Loan Consolidation

Whether loan consolidation is right for you depends on your individual circumstances, but it does have some benefits. According to Federal Student Loan, a division of the U.S. Department of Education, the positives include the ability to shift loans from a variable interest rate to a fixed interest rate.

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“Paying back your student loans can be a daunting task for many college graduates. The burden of debt may make it seem impossible to find success in the future,” said Max Kimmel, owner of One Shot Finance. “However, there are steps you can take to successfully pay back your loans and still move forward with life.

“My favorite piece of advice is to consolidate multiple federal loans into one payment with a federal Direct Consolidation Loan. This will make the monthly payment less individualized and simpler to manage, which can reduce your total interest by up to 0.25%.”

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Consider Refinancing

By refinancing your student loans and taking a new loan from a private lender, you can save money by lowering your interest rate or choosing a repayment plan that will wipe out the debt faster. The downside is that once the loan becomes private, you lose the ability to take advantage of federal assistance, such as the Public Service Loan Forgiveness program. Most lenders require borrowers to have a credit score of at least 650 and steady employment.

Any one of these scenarios could help existing loan holders escape from their student loan debt, but it isn’t easy. And what would their advice be to those just starting down the college path? Make sure the degree you’re pursuing will pay a return on your investment and don’t borrow a nickel more than you need.

“When it comes to ROI, there are no hard and fast rules, but common sense should apply,” said Paul Oppong, a management consultant. “A good rule of thumb is to spend no more on schooling than you anticipate earning after graduation. If you spend $100,000 on a four-year degree but earn just $30,000 upon graduation, the investment makes no sense. Spending $50,000 on college and earning $60,000 after graduation, on the other hand, may make sense.”

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Last updated: Sept. 15, 2021

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About the Author

Jami Farkas holds a communications degree from California State University, Fullerton, and has worked as a reporter or editor at daily newspapers in all four corners of the United States. She brings to GOBankingRates experience as a sports editor, business editor, religion editor, digital editor — and more. With a passion for real estate, she passed the real estate licensing exam in her state and is still weighing whether to take the plunge into selling homes — or just writing about selling homes.
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