8 ways to pay down student loans

The average student loan debt for a 2011 graduate is expected to be $22,900, the most ever.

By Karen Datko Sep 15, 2011 7:10PM

The burgeoning student loan debt in the U.S. has caused some to wonder if it's a crisis in waiting. Some think the crisis is already here.


Student debt increased by at least 10% in each year of the first decade of this century, due in no small part to rising tuition costs, according to a Moody's analysis (.pdf file). The amount of Americans' student loan debt now exceeds the total owed on credit cards.


The average student loan debt for a 2011 graduate is expected to be $22,900, the most ever. And Moody's study suggests that those who entered college during the Great Recession and its lingering aftermath are increasingly likely to default. Those who do pay will have less money for other life pursuits, such as buying a home or starting a family.


It's scary stuff for new grads. But here are a few suggestions:

  • Figure out how much you owe and to whom. Now you can budget appropriately and explore whether loan consolidation make sense. (That budget should include enough savings to build an emergency fund and money set aside each pay period for retirement -- at least enough to qualify for your employer's 401k match. Hey, no one said life after college would be easy.)
  • Continue to live like a student. This tip -- my personal favorite and one I used back in the day -- comes from Deliver Away Debt, the blog of a guy who's made a name for himself by chronicling his pizza deliveries. Unless you've been using your student loans to live like a king, you already know how to be a pauper. That frees up more money to pay off debt.
  • Avoid other debt. You're in no position to buy a house or a new car. If you need wheels for work, use that good credit you've established by paying your student loans each month on time to qualify for a used-car loan at the bank or credit union -- if you don't have cash for a car.
  • Get a second job (assuming you have a first one). Jeff Kosolaat Deliver Away Debt said he made up to $1,800 monthly delivering pizza for 22 hours every week.
  • Pay the student loans off as fast as you can, particularly if you have a high interest rate. You will likely have an option of several payment plans. However, less time means less interest you'll owe on the amount you borrowed. Just make sure that any extra amount goes to the principal and that there is no penalty for paying off the loan early. 
  • Find every advantage. If you can get a lower interest rate by setting up automatic payments, do it. Some programs reward a track record of on-time payments.
  • Will your employer help out? Some private employers will help you with loan payments, so ask. Working for the government and in some other public service jobs may qualify you for loan forgiveness.
  • Inquire about hardship status if you truly can't pay. Getting the debt wiped out is extremely difficult, but you may be eligible for deferment or forbearance. "Financial irresponsibility is not a legitimate claim for hardship status," Deliver Away Debt warns. Post continues after video.

Of course, the best way is to avoid over-borrowing in the first place. For instance:

  • Limit your tenure in school. Rare is the student who can afford to dally, dragging out a four-year program into a fifth year or more. With careful planning and some high school advanced-placement classes under your belt, you can complete a four-year program in three years. (It wasn't fun, but I did it.) 
  • Attend a school that provides good financial aid. Rare is the student who pays the sticker price for tuition, but some schools are more willing to help out than others. (One reason I continue to donate to my alma mater each year is the percentage of the gift that goes to student aid.)
  • Tap every resource. Lots of scholarships exist. Apply for the ones whose criteria you meet. And if Grandma or a well-off childless aunt wants to help out with expenses, let her.
  • Use the student loan money for what it's intended. I know someone who borrowed to the max to fund an adventure living abroad after the overseas study program had ended. Last I heard, bill collectors were still hounding him.  

Why should you repay the loans, you might ask. Answer: You have to. Student loan debt can't be discharged in bankruptcy. One way or another, your creditors will get their due -- garnishing your paycheck, taking your tax refund or taking you to court.


More on MSN Money:


Sep 22, 2011 10:39AM
Umm, I would like to know what school these students are going to, to only be 25k in debt.  I had to pay my way on my own and I am 115k in debt from school.  My monthly payment is around 930 a month.  If I consolidate, I pay more in interest rates and I pay longer.  Instead of making payments for 10 years I would be making payments for 30.  What's really sad is that Institutions in this country as well as the government allow foreigners to come here and go to school for free. Everyone from every country abroad is finding away to  milk the money away from the American Taxpayer.  Its time we stand up and stop paying taxes that allow everyone else to live a free life.
Sep 22, 2011 7:44AM
I don't know who Ms. Datko surveyed or got her research from but she is WAY off her mark.  Loans are more like in the 100K mark when they graduate.  Maybe she means $22,900 per year!!!
Sep 22, 2011 10:11AM
Some of these tips this article points out may be helpful but I disagree with most of it, if it works for you good, great, grand, wonderful.  Most of us out there had to actually WORK while going to College, it wasn't all beer, pizza, and b!tches on the weekends for US.  SOME of us actually had to WORK FULL TIME while going to school, so yeah maybe you can graduate in 3 years because you are taking 26+ credit hours when you don't have to work because you have Grandma to live off of or an Arby's-eat-our-sh!t-and-get-an-education-grant.  So SOME of us actually had to accrue other debt to SURVIVE.  For SOME of us out there, College did NOT come easily and we had to retake a few classes, possibly because we were working 50+ HOURS a week at our JOB to pay for RENT, TUITION, BOOKS, etc.   MANY of us graduated in one of the worst recessions in recent U.S. history.  My point?  I have student loans.  I have other debt.  I have a house payment.  I have a car payment.  I have a very good job in which I am NOT using my degree.  I am doing FINE.  I CAN and WILL pay off my student loans in my own doing, and I followed exactly ZERO of these tips. 
Sep 22, 2011 9:11AM
average debt $22,000 try $40,000.....4 year degree working 2-3 jobs to get by. My loans are the same as a house payment and utilities. Oh and they wont do anything to help I can consolidate because of the type of loan I cant reduce my payments.... I cant do anything so now im trying to raise a child on my own with 3 jobs and I am still just getting by. Maybe I should just go on welfare :) I can get everything paid.... money handed to me..... food...and then I can have some time to spend with my child instead of him sitting in a daycare all day while i try to get by. 4 year degree and I make 1 dollar more than minimum wage for every year in college and now i am 40,000 in debt. Somethings wrong with this picture!
Sep 22, 2011 7:08AM

You mentioned getting through school as quickly as possilbe.  Here's another tactic. WORK your way through. My financing was with a credit union. I borrowed enough for a semester and then repayed that while I was going to school. It took me six years to get my BA, but at the end of it all, I only owed for my final semester which I paid off the following summer. Yes, it took longer to hit the job market, but I did it free and clear!

Sep 22, 2011 3:25AM
These solutions do not work for me. I have deferred my student loans so many times because I cannot pay the full amount every month. Right now, that is that largest monthly bill I have after my rent. Unless I change careers or come into some kind of money, I will be paying my student loans off for the rest of my life.  I do feel like it's beneficial to have an education, but it shouldn't cost so much!
Sep 22, 2011 9:48AM
Student loan debt is a huge debate... and I feel for those who have large amounts, but I feel there are things people can do to put themselves in a better position to pay them off.  I'd like to add a few points to the article.  Please note that my wife and I had a combined $80k-$90k in student loans when we graduated and will be free of Sallie Mae tomorrow after our final payment.

1.  Get an internship/Co-Op:  I'm in the engineering and manufacturing industry (probably one of the hardest hit industries by the economy) .  I'm 25 and hold a full time job with a profitable company 90% of you have heard of.  The reason?  I landed a Co-Op during my college years that had me go to school one semester, work a semester, go to school a semester, work a semester, and so on.  Not only was I making $12-$13 per hour, I got tuition assistance as well.  I took online classes while working and was still able to get my B.S. in 4 years.  Four months after I graduated, that company started hiring new engineers.  If it was not for the contacts and networking I did during college (and the good work I showed), I may still be looking for a job or be part of the military (as suggested before).

2.  Go to a cheaper school:  My wife is a pharmacist.  Her schooling was $40k a year, private.  I went into Engineering/Manufacturing and mine was $7k a year.  I debated other schools, but saved about $10k a year by deciding not to.  Same degree, same accreditation, less debt.  Private school shouldn't (and isn't) for everyone.

3.  Get married:  My salary pays the bills, my wife's paid off Sallie Mae in 1.25 years.  Things are a lot easier when you have two paychecks coming in.  Obviously, don't marry the first girl you see holding a diploma.

4.  Keep you tuition to salary ratio low:  Like I said before, my wife's tuition was $40k a year, but she also became a Pharmacist.  There were people going to the same school to become teachers.  NOTHING AGAINST TEACHERS!  I have several teacher friends, BUT, face it, our schools don't pay Elementary teachers $100K+ a year.  My school had a teaching program and was $30K less.  Do the math.

5.  Call Sallie Mae and tell them to break up your loan groups:  Individual loans are grouped together.  These individual loans can have multiple interest rates.  We called Sallie Mae and had them break all of them part.  Yes, we went from 6-8 payments to 16 or more, but we paid the minimum on the lower rates and paid off the higher rated ones first.  I don't know how much this actually saved in interest, but I know it didn't hurt.

I'm not blaming people my age, and older, still struggling to pay off student loans.  I know how much of a struggle it can be.  My wife and I happen to be in a better position than a lot of post-graduate 25 year old adults, but I feel we did a lot of good things to put ourselves there.  However, I wanted to explain that there are many things that can be done to help students relieve themselves of the student loan companies. Good Luck.

Sep 16, 2011 8:38PM

My wife graduated medical school with 250 K in loans. I graduated dental school with 250K in loans. She now gets a resident salary for the next 3 years of 45K/year.


Before people start crying about the current price of healthcare, realize my wife and I have half a million in debt before we even started working. That's a lot of money we need to pay off...now you might have an idea why healthcare costs are skyrocketing.


And by the way, these 8 ways/suggestions for paying down debt are completely worthless/common sense.

Sep 22, 2011 11:01AM

The laws regarding student loans are a violation of the "equal protection" clause.  Any other debt can be dealt with through bankruptcy.  Even tax debts can be paid off for cents on the dollar.  So you get all this debt, trying to better yourself and contribute more to society and then can't get a decent job because they've all been outsourced to China or India -- even "professional" careers.  Someone else gets an equivalent amount of credit card debt - borrowing for vacations, concerts, extravagent meals.  Someone else builds up $60k in unpaid taxes.  The fool spending on the luxuries he/she can't afford can wipe it out.  The IRS will settle the $60k for $6k.  The student loans?  too bad.  You have a mortgage for the next 20 years, with nothing to show for it but a piece of paper

Sep 22, 2011 4:54AM
Have you Mommy or Daddy be in Congress!! Then you do NOT have to PAY!!

Sep 22, 2011 7:41AM
So what if you can't find employment? What if you can't live after the student loan sharks take 100% of your unemployment and this is after consolidation where they continue to compound high interest rates! The real story are the despicable private student loan companies who rape students. As a family of co-signers we all have offered to share the burden with the company if they would drop their eye-popping $1400 a month repayment schedule to a do-able amount. I was told to sell my house, to borrow money, to work as many jobs as I could get (in this recession, right. I'm lucky I have a first job) or to even cash out retirement funds to meet the $1400 monthly payment. After explaining that in order to keep my professional job I had taken a pay cut and had not had a raise in 4 years, they still would not relent. 

Our daughter, a student with a learning disability, graduated magna cum laude from a major university. Even as a minority, she did not receive much financial aid. We told her that a college degree was worth the cost. How could we predict the recession? How could we predict she could not get gainful employment? 

We want to pay back this loan. All we asked was that during this hardship period, that they lower the payment to an amount that is reasonable. We finally got them to agree to $750 a month. When you are unemployed its pay that or eat and pay rent. 

NJ Class is raping people financially. We don't see a way out of this mess and I'm worried about the mental stress this is placing on all of us. 

I'd like to see an article how to take on these private student loan companies. And, sorry delivering pizza isn't going to cut it--if you can even get the job to deliver them.

Sep 22, 2011 10:54AM
I graduated a year and a half ago with top honors as a paralegal. When I started attending college, there were many jobs in the field. Now, I have attorney friends that are taking paralegal jobs because they can't find anything else. I planned on continuing on in school but wanted to take a break and work for a year, pay down my loans, and get my life in order. I am a divorced, over 40 mother and it was difficult enough for me to go back to school in the first place. In order to postpone paying on student loans when I can't even feed my kids at this point in time, I was forced to continue on with my education, making a larger bill in the long run but avoiding starvation at the same time. I have moved in with my sister, drive an '89 van that is paid for, go to church clothing drives for my kids, and never spend anything without weighing all options as to whether we REALLY have to have it or not. As careful as I am, we are barely making it and I owe a couple family members some money just for bare necessities. I have sold everything of any value and have not had a paycheck in over two years. Now, tell me where I am going wrong. Am I "taking advantage" of the system or, in reality, is the system taking advantage of me?
Sep 16, 2011 8:45PM
okay, while all you guys are talking about interest and stuff, I'd like to ask what pizza joint this person worked at and made $1800 a month working 22 hours a week.  That's $450 a week, and averaged out, over $20/hr.  I worked at a pizza joint before I went back to school and never made close to that, working nearly 30 hours a week.  People don't tip anyone much anymore.  They feel the cost of the product includes a decent salary for the delivery person, when in most cases, that person is getting paid less than minimum wage, which is legal since it's a position in which tips can be accepted.  Think about that next time you order out for delivery.
Sep 22, 2011 10:02AM
I know a chiropractor who graduated and has been practicing since 1997. Her husband set her up in a state-of-art office which she refuses to make payments on to him. To my knowledge she has not paid a cent to her over $100,000 student loans. She says it is simple to ask and receive a deferment of payment. She drives and Escalade, purchasing home, buys all her children's clothes from the most expensive department store in town, children have every toy and bit of technology available, she wears the best including Farragamo (Italian) shoes, eats in the best restaurants often. Now just what is fair about people losing their homes, lives when she is allowed these privileges? I read a statistic once that doctors are the least likely to pay student loans and they make more money than God. Pay up! A deadbeat is a deadbeat regardless of title and arrogance!
Sep 22, 2011 10:48AM
I'm in student loan repayment hell right now.  I paid for college myself.  I spoke with many different financial advisors at schools to learn the best way to get myself through college.  Everyone's advise was just take out loans.  Didn't get enough from FSA, here's a private bank education loan.  Don't worry about it you'll be fine paying it back after college.  Now I'm $60,000 in debt and struggling to get by each month.  I am unable to consolidate my private loans and only half of the money qualifies for income base repayment.  I am almost 30 years old and don't see being able to buy a house, have a family, or pay for a wedding for a very long time.  The only blessing I see is I found a job close to my field and I don't have any other debt. 
Sep 16, 2011 9:40PM

The student loan balloon is full fledged!  The more the government loans to students, the more colleges raise their tuition rates.  Meanwhile, every other commercial is for some mail in college where you can get a worthless degree.  When I see 3 new colleges pop up in a year in my city alone, it makes me think that they must be make some mega bucks (kind of like the mortgage companies and others involved made a ton of money).

Sep 16, 2011 6:58PM
I paid on my student loans like a mad man when others were telling me I was stupid for doing so because the interest is a "tax deduction".  Long story short,  I'm debt free while those others are in allot of financial pain.  If being stupid leeds to financial stability;  I'll be stupid any day.  Oh yeah I got a degree that was marketable as well.
Sep 22, 2011 11:44AM

I know the author of this article is not talking about students with a 4 year degree have an average debt of $22,900!!!! Where did she get THAT number???? More like $60,000, $80,000 and in some cases even over $100,000 in debt. That flub alone makes me realize she doesn't have a clue what she's talking about. I stopped reading after I read that amount. That is laughable!

Oh and that loan forgiveness for working for the government or service job does not mean you won't have to pay. I am in school now and working full time in a government job. The loan forgiveness means that you have to be employed full time in a qualified governement or public service job. You have to pay on your loan for 10 years. No defaults, you can't be late, any of that. If you pay your loans for ten years straight without defaulting, without being late, without skipping payments, THEN you will be forgiven the remainder of your loan. Which actually sounds pretty good IF you can keep from missing a payment for 10 years AND if you can keep your job for that long.

Sep 23, 2011 2:41AM
You have got to be kidding me.. Get a second job and live like a student. We are having to do that already to survive.. How will one actually have any extra cash to pay student loans down when all of their income is needed to just survie?  Another article by someone who is completely out of touch with the student loan crisis. 
Nov 8, 2011 3:24PM

@ r (rb3868)    


I completely agree! My first year out of law school was in 2008, and I was hired on as an attorney at a small firm for $40k/year. I ended up handling most of the bankruptcy cases for the firm because it was such a growing area.It was very frustrating that the majority of my clients came to see me because they had wildly overspent and lived far beyond their means for years. On average, the couples would have 10-20 credit cards, all maxed out due to multiple vacations, tons of shopping, and other extravaganeces. Meanwhile, I was driving an old car, had taken a low-paying position because I needed a job that paid something, had a roommate to help with the cost of rent, and lived as frugally as possible. These couples were able to discharge their debt, and it will be off of their credit reports before I'm through making my sizable student loan payments. I decided to take out my debt, just as those couples did, and I feel genuinely sorry for people who fall on hard times and need to use bankruptcy as their last hope. However, I do find it odd that  you can go out and run up tens of thousands of dollars in unnecessary purchases and be put on a modified payment plan or have that debt wiped away fairly easily. Yet, student loans are nearly impossible to discharge.

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