Managing Student Loan Debt: Tips and Resources

A person using a calculator to help work on their student loan

In the United States, student loan debt now totals some $1.56 trillion, with 44.7 million individuals holding such debt, according to Forbes. This amount of debt is staggering but not entirely surprising, considering that the average yearly tuition cost to attend public universities rose 213 percent from 1987 to 2018, CNBC reports.

College has become increasingly more expensive, and tuition rates look as if they will only climb even higher in the future. Considering that low-income students cannot afford over 90 percent of colleges, according to a study, it is expected that students from various income levels will turn to student loans as a means of paying for their education. This in turn means they will face the challenge of paying off student loan debt once they graduate.

Student loans themselves can be helpful in enabling students to receive a quality education that can improve their lives. But the fear of debt from these loans can have a negative effect on students. It can leave them unsure of how to pay off their loans and even potentially stop them from pursuing higher education in the first place. The following guide is designed to provide graduates as well as current and prospective students insight into how they can successfully plan for, and manage, student loan debt.

Facts and Statistics Regarding Student Loan Debt

Excessive student loan debt is an issue that impacts millions of students and graduates across the world. This section examines how it impacts residents of certain countries and groups differently.

Student loan debt in the U.S. and across the world

The United States has the second largest amount of student loan debt in the world, with American graduates holding about $30,000 of this type of debt, according to SoFi, a personal finance company. The only other country with more student loan debt is the United Kingdom, where graduates hold an average of $30,800 in loans.

Even though the U.K. has more debt, it costs more to attend college in the United States overall, based on SoFi’s data. The expected cost of an undergraduate degree was $59,828 in the United States. This is more than any of the four other countries (U.K., Canada, Germany, and Australia) that also held significant student loan debt averages. Even in countries with universities that offer free tuition, students still face student loan debt challenges. “Swedish students borrow money for college just as frequently as Americans do—and about 70 percent of students in both countries have student loans,” according to SoFi. “But Swedish students graduate with about $20,000 in debt, compared to about $30,000 for American graduates.”

Within the U.S., the states with the highest amount of student loan debt were New Hampshire, Pennsylvania, Connecticut, Delaware, and Minnesota, with students holding between $31,000 to just over $36,000 of debt on average, according to Forbes. The states with the lowest amount of student loan debt were Utah, New Mexico, California, Arizona, and Nevada, with their average debt ranging from $19,975 to $24,128, Forbes reports.

Student loan debt among women and minorities

According to Student Loan Hero, blacks and Hispanics often borrowed more frequently than white students. Nearly 80 percent of black students take out loans to pay for school, higher than the national average of 57.5 percent for white students, according to Student Loan Hero. “Hispanic and black students graduated with higher amounts of student debt from private nonprofit colleges than white students. Black students also borrowed more at public colleges than white students.”

Women also face significant challenges paying off student loan debt. According to the American Association of University Women (AAUW), “women hold nearly two-thirds of the outstanding student debt in the United States—almost $929 billion as of early 2019.” Looking at 2016 alone, the cumulative student loan debt for a bachelor’s degree on average for men was $18,880, but for women it was $21,619, based on AAUW data.

What makes this situation even more difficult for women is that their earnings have been reported to be lower than men’s on average. In 2016, the median weekly pay for a woman with a bachelor’s degree was roughly just over $1,000. For men with a bachelor’s degree, the weekly earnings were closer to $1,400-$1,500. In terms of repaying the loans themselves, in 2016, 34 percent of women currently paying their loans had difficulty making payments, compared to 24 percent of men, based on AAUW data. Minority individuals and minority women in particular faced even more difficulties paying back their loans.

Types of Student Loans

Not all student loans are equal or work in the same way. Before considering taking out student loans, it’s important to understand the differences between them.

Federal loans

Federal student loans are those that are borrowed directly from the U.S. government rather than from a bank, credit union, or the school itself. There are three types of federal loans: Direct Subsidized, Direct Unsubsidized, and Direct PLUS. To obtain these loans, students must fill out a FAFSA (the free application for federal student aid).

According to banking company Sallie Mae, “subsidized loans are for students with demonstrated financial need, as determined by federal regulations.” No interest on the loans is charged while the student is in school at least 50 percent of the time, during the grace period after a student graduates (six months after they graduate or leave school), or if a graduate decides to defer their loan payments.

Unsubsidized loans aren’t awarded according to financial need, but are determined by the school’s cost of attendance as well as other financial aid factors. Interest is charged while a student is still in school as well as during all other periods when they finish their program.

PLUS loans generate interest that capitalizes, and that interest is active while a student is still in school and after they graduate. These loans can pay up to the cost of attendance after other financial aid options are exhausted, according to Sallie Mae. The loans are credit-based, which means a student’s credit history will come into effect when determining if they receive a loan and how much they will receive.

The benefits of federal student loans, states Sallie Mae, is that they can have flexible repayment options, such as payment based on salary, and that borrowers don’t need a strong credit history to obtain them. But like any other type of student loan, students will still have to repay them.

Private loans

Private student loans are those that are offered from another source besides the federal government, such as a bank, credit union, or other financial institution. They can be awarded based on a student’s credit history, and their interest rates may be higher or lower than those loans that are provided by the federal government. The terms of repayment for private loans may be stricter than for federal loans. For example, it may be determined that specific payments must be made each month regardless of income level, or differing amounts of deferment or forbearance.

Perkins loans

Perkins loans are those that are based on student need and pay a student’s interest while they are in school. However, these are not federal loans since the school itself acts as the lender, according to the Consumer Financial Protection Bureau. Payments on these loans start after a 9-month grace period after a student has finished their program.

Controversies and Challenges of Student Loan Debt

It isn’t just the amount of student loan debt itself that is of concern to many Americans. The procedures and policies for paying back this debt have also raised questions.

Discharging in bankruptcy

If a student or graduate must file for bankruptcy, they will likely have to take additional steps if they want their student loan debt discharged as well. According to the Federal Student Aid website, “You may have your federal student loan discharged in bankruptcy only if you file a separate action, known as an ‘adversary proceeding,’ requesting the bankruptcy court find that repayment would impose undue hardship on you and your dependents.” If undue hardship is proved, the loan could be fully discharged, partially discharged, or still be required to be paid but at a lower interest rate.

To prove undue hardship, student loan debt holders would have to prove the following, according to the Federal Student Aid Office:

  • If you are forced to repay the loan, you would not be able to maintain a minimal standard of living
  • There is evidence that this hardship will continue for a significant portion of the loan repayment period
  • You made good faith efforts to repay the loan before filing bankruptcy

There are still challenges with this process, however. For example, graduates who initially struggle to pay their loans may not be able to establish “good faith efforts” before they end up filing for bankruptcy.

Rising interest

What students may not take into account when borrowing money for their education is just how much they will have to pay in interest after leaving school. Consider a student who takes out a $10,000 loan at an interest rate of 6.80 percent over the course of 10 years. According to, if that student is making payments of $115.08 per month, they’ll have to pay $13,809.66 in total.

Paying as much as possible each month can help reduce the amount of interest a student will pay over time for a fixed-rate loan. But on a variable rate loan, the interest rate can change, which means a student may pay even more.

Unaccredited schools

Many students enter college with the hopes of later entering a rewarding career using the advanced education they gained. But sometimes, students may earn degrees from schools that are not accredited, and whose degrees aren’t usually valued as widely in the job market.

Student loans can still be used at these types of schools, but caution should be taken. Graduates may potentially find themselves in a position where they may not earn enough money or may have difficulty paying back their loans after graduation.

Managing Student Loan Debt

Student loan debt can be a challenging problem to face. But there are ways students can prepare themselves to handle this debt before and after graduation.

Don’t take out more than you need

When applying for loans, students may have the ability to take out more than what they actually need to pay for education costs. For example, a school may have a policy that states if a student drops a course within the first three weeks of the semester, they don’t have to pay for the course. For a student enrolled in 15 credit hours, they may drop one class and the school might pay them back the additional loan money for that class. Another example may occur when a student requests more loan money than what is actually needed to cover tuition and expenses.

Ultimately, the more money a student takes out in loans, the more they will have to pay back later on. Additionally, a student’s financial status or plans may change unexpectedly in the future, and they may have trouble paying back loans they initially took out on the presumption they’d be earning more money. Being responsible and only taking out what is absolutely necessary in loans can help avoid student loan debt issues.

Consider cheaper education alternatives

One of the reasons student loan debt is so high is that students are borrowing money to attend institutions that have high tuition rates. One way that potential loan borrowers can avoid this issue is to pursue less expensive but comparable alternatives to a four-year school.

Community and two-year colleges have proven to be an immensely beneficial way for students to take introductory courses at a much lower rate than they would pay at larger universities. Students can then transfer to a four-year school to finish their degree while having saved a substantial amount of money on tuition.

Accredited online degree programs are another potential option for students seeking an alternative to on-campus education. Many prestigious universities now offer these programs. While the tuition rates of online programs are still the same or similar to on-campus programs, they provide the flexibility to attend part-time or potentially work full-time in conjunction with school.

Consider refinancing and related options

For students who are facing financial difficulties or having trouble repaying their loans, there are options available to help.

Loan consolidation enables borrowers to combine their debt into a larger loan, often with a lower interest rate, ultimately costing less to pay off over time. For a graduate who is paying off four different student loans from different providers, consolidating those into a larger loan can help them save more money in the long term.

Additionally, borrowers may not be aware that they can request to adjust their payments on certain loans. For a graduate who is struggling to make their $300 monthly payment, they can contact their provider to inquire about potentially having that monthly payment reduced. The provider may agree in exchange for the graduate paying over a longer period of time. However, it is important to consider that not all lenders act alike. Some may be more stringent or flexible than others regarding adjusting loan payments.

Loan forgiveness programs

There are loan forgiveness programs available to borrowers who meet certain criteria. The Federal Student Aid website provides a thorough list of different loan forgiveness options. For example, individuals who worked for the government or a nonprofit organization can receive a type of loan forgiveness, as well as those employed as teachers. Borrowers who meet certain disability requirement, were enrolled in a school that closed, or have experienced certain life events may qualify as well. These are only for federal loans.

Another potential option is the borrower’s defense discharge. With this, borrowers can argue that their school misled them regarding such things as their education, enrollment procedures, the quality of the degree, or engaged in misconduct that was in violation of state law. If the application is approved, that student’s entire federal student loan debt will be forgiven, or the partial amount they took out to attend that school.

It’s important to note, though, that borrower’s defense is a rare and extreme example of successfully having loans discharged or forgiven. According to the latest quarterly report available on the Federal Student Aid website, there had been 218,366 claims received, with 158,110 still pending and 47,942 approved.

But, according to InsideHigherEd, “the department hasn’t taken any new action on claims since a federal court ruled that a partial loan-relief formula established by Education Secretary Betsy DeVos was illegal.” This means that students may have to wait a long time to hear back on their claim.

“For denied applications, the Department will apply a credit that approximates any interest that accrued beyond one year after the borrower defense application is filed,” according to the Federal Student Aid website. The student can put their loans in forbearance during the period in which a case is evaluated, but interest still may accrue on those loans in the meantime. Students who do make payments on their loans before their application is approved can potentially receive the money they have already paid back.

It’s important to remember, however, that students who were unhappy with their experience or did not find employment in their desired field won’t necessarily have their debt cancelled. Additionally, unaccredited schools are more likely to deceive or defraud students into taking out loans to attend their programs than established two-year or four-year colleges. For example, Corinthian Colleges “defrauded the borrowers with misleading data about career opportunities and post-graduation job placement,” according to USA Today. For loan forgiveness, students must show that the school misled them, such as school administrators promising the student they’d have a six-figure job after graduation.

Student loan debt can be daunting, and it is proven to be an issue for individuals across the world. But by following certain tips and using certain resources, students can work to avoid problems with their educational debt.

American Association of University Women,
“Women’s Student Debt Crisis in the United States”
CNBC, “Here’s how much more expensive it is for you to go to college than it was for your parents”
Consumer Financial Protection Bureau, “What is a Perkins loan?”
Federal Student Aid, “Bankruptcy”
Federal Student Aid, “Borrower’s Defense Discharge”
Federal Student Aid, “Borrower Defense to Repayment Loan Forgiveness Data”
Federal Student Aid, “Repayment Forms”
FinAid, “Loan Calculator”
Forbes, “Student Loan Debt Statistics In 2019: A $1.5 Trillion Crisis”
Forbes, “These states have the most student loan debt”
National Association of Student Financial and Administrators, “Report: Low-Income Students Cannot Afford 95 Percent of Colleges”
Sallie Mae, “Federal student loans”
SoFi, “How The World’s Top 5 Nations In Education Handle Student Loan Debt”
Student Loan Hero, “Study: Student Loans Weigh the Heaviest on Black and Hispanic Students”
USA Today, “Student loans: Court fight looms over debts of former Corinthian Colleges students”