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5 Ways to Reduce Student Loan Debt

Are you struggling to meet monthly debt payments? If the answer is yes, do not worry. There are currently 44 million student loan borrowers in the U.S. trying to deal with debt payments. Some of them are lucky- they have federal student loans.

Hence, they can access various debt reduction and cancellation tools provided by the federal government.

Others -private loan borrowers- do not have that much access to useful debt tools. However, they can still find a few options to assist them in financially challenging times.

In this guide, we will present the 5 best ways to reduce or even eliminate a student loan debt. If you cannot determine which option is the most suitable, you can contact a third-party debt specialist for more information and guidance.

1.   Forgiveness Programs

As mentioned before, federal loan borrowers have many opportunities to reduce their debt struggles. Forgiveness programs are one of the best options such borrowers can access. The reason is that the debtors can get up to 100% debt reduction with the help of forgiveness plans. Besides, there exist a variety of programs that cover more debtors’ financial needs. In general, forgiveness plans grant partial or full debt elimination in return for service.

For example, the Public Service Loan Forgiveness allows student loan debtors working in public service to get full debt reduction once they make 120 qualifying payments. In other words, one can get rid of the debt at least in 10 years. During this payment progress, the borrowers should work in a qualifying workplace.

Another program- Teacher Loan Forgiveness- can be beneficial for teachers, as its name suggests. This opportunity brings up to $17,500 in debt forgiveness for five years of service.

While we said that forgiveness programs require service, the Borrower’s Defense to Repayment option does not belong to this category. This opportunity is available for federal loan borrowers if they face fraud, misleading actions, or lies about the true education cost. In this case, as students do not get what they were promised, they can simply become free of the debt obligations. All you need to do is prove that you were misled by the school.

2.   Discharge Programs

Discharge programs are similar to forgiveness programs. However, discharge opportunity is only applicable if there exist specific situations. For example, if the school closes while the debtor is enrolled, he/she can get Closed School Discharge for the whole outstanding debt.

Other discharge programs are available for total and permanently disabled borrowers, bankruptcy or death cases, and falsely certified loans. Unfortunately, these programs, similar to forgiveness, only cover federal loans.

3.   Repayment Plans

Not all federal borrowers will be eligible for forgiveness or discharge programs. Though these options provide high benefits, they also require an extensive list of conditions. If you are one of these borrowers, you can consider moving to a more favorable repayment plan.

The Education Department provides multiple repayment options, such as Graduated, Extended, Standard, or Income-driven plans. Each of them has specific terms- the length of the payback period and the monthly interest rate.

For example, with an extended repayment plan, you can pay off the debt in 25 years, while with the Standard program, it takes a minimum of 10 years. If you think that your income is not enough to cover debt payments, you can also benefit from Income-driven plans. As its name suggests, this category of repayment plans determines the interest rate based on the revenue the borrower receives. Hence, the monthly payment can even be as low as $0.

You can check repayment plans in detail and decide which one is more suitable for your personal finance.

4.   Debt Consolidation/Refinancing

These programs might not decrease the outstanding debt, but they can lower the monthly payment amounts.

Consolidation involves combining all loans into a single loan. In this way, the borrower does not need to worry about multiple due dates. Besides making the debt repayment process more manageable, this technique allows for lower monthly payments.

The reason behind this benefit is that consolidation usually prolongs the payback period. Hence, as you pay off the debt in a longer period, you pay less per month. However, it should also be mentioned that sometimes the interest is just the weighted average of the existing loans.

Borrowers can also take advantage of refinancing services. This option is available to both federal and private debtors. Refinancing services, similar to consolidation, creates a single loan for the whole debt. A debtor gets a new loan with more favorable terms and covers all existing loans.

Sure, the important factor is that the new loan should have more suitable terms, such as lower interest rates. Otherwise, refinancing might not make sense. As the borrowers get lower rates, they enjoy more manageable loans. Besides, paying off existing loans can increase credit performance.

5.   Negotiations with the Lender/ Debt Settlements

Alternatively, private borrowers can contact their lenders in times of financial challenges. Sure, the lenders have no obligation to provide better terms if the debtor faces difficulties. However, they also do not want the borrowers to default. Hence, in some cases, the lenders might agree to provide some favors such as a non-collection period, temporarily lower interest rates, etc. Yet, borrowers should be patient and use extensive communication skills to convince the lender.

Another similar strategy is debt settlement. However, it is usually done by specific companies. Such companies create a plan for the borrower to save some funds every month, like in a deposit account. In this way, after a while, the borrower owns an accumulated high amount of money. Once the amount is collected, the debt settlement company contacts the lender and attempts to convince the lender to a lump-sum amount of payment.

Sure, the lump-sum amount is usually lower than the actual outstanding balance. However, debt settlers are skillful in convincing the lenders.


Though this option also exists, we do not recommend utilizing it. Bankruptcy should be the last resort of the borrower. If there is no other way of repaying the debt and surviving at the same time, the borrower can attempt to declare bankruptcy. However, even in this case, there will be many negative consequences.

First, the effect of bankruptcy stays on credit history for as long as 10 years. During this time, the debtors will face difficulties when they get employed, rent an apartment, or receive auto insurance. Besides, if they want to get new loans, such as one for a car, they will face higher interest rates.

Additionally, there is no guarantee that the court will approve the bankruptcy. It is extremely hard to prove that if the debtor continues making debt payments, he/she will not survive. Plus, there exist different types of bankruptcy. While in some cases, the borrower can liquidate the assets to get rid of the debt; in other cases, the court will order restructuring the debt so that the borrower can continue making debt payments.

Which Method is Suitable to Your Finances?

We understand that getting an education loan can be a mandatory process for most student loan borrowers. However, you need to take action to get rid of them as fast as possible. We have presented you with the 5 best debt reduction techniques to choose from. Yet, you need to do a thorough analysis before deciding on one program. Alternatively, you can contact student debt specialists to get advice.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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