How to repay $300,000 in student loans

If you owe $300,000 in student loans — or more — you might feel like you’re doomed to a lifetime of debt. While debt of this size is certainly a burden, it is possible to take control with the right repayment strategies.

If you’re looking to pay off $300,000 in student loans, consider the following steps:

1. Know your loans
2. Reduce your living expenses
3. Increase your income
4. Use the debt snowball or avalanche method
5. Consider income-based reimbursement
6. Explore Loan Forgiveness Programs
7. Consider refinancing your loans

1. Know your loans

Before you can start settling your debt, you need to know exactly what you’re working with. Chances are you owe multiple loans to more than one loan servicer. You might also owe a mix of federal and private student loans.

Find the details of your loans by logging into your various accounts. Write down your balances, interest rates, monthly payments and repayment terms. You can also use our student loan payment calculator to get an overview of your repayment plan and interest charges.

To find your federal loans, go to your Federal Student Aid account. However, your private student loan information won’t be there, so you’ll need to check with your lender directly or check your credit report to see what you owe.

Once you have a clear understanding of what you owe and to whom, you can start developing a plan to conquer your debt.

2. Reduce your living expenses

If you owe $300,000 in student loans (or any other large amount), you know how quickly interest charges can add up. For example, if you have a 5% interest rate on your loans, you will pay $81,836 in interest over a typical repayment period of 10 years.

However, if you can afford to pay off your loans faster, you can keep some of that money in your own pocket. One way to find more room in your budget for extra student loan repayments is to reduce living expenses.

Review your budget and identify major areas of spending. You may be able to lower your rent or mortgage costs by moving to a less expensive location. Or maybe you can lower your car payment by trading it in for a less expensive vehicle.

Along the same lines, try to avoid the allure of “lifestyle inflation” if your income increases. While it might be tempting to move to a nicer house or take an expensive vacation, you might be better off continuing to live like a college student for a while.

If you manage to limit your short-term expenses, you could pay off your $300,000 in student loans faster. Once that debt is out of your life, you can enjoy your income without having to pay student loans every month.

3. Increase your income

While saving more money is one side of the coin of budgeting, the other is increasing your income.

If you took out $300,000 in student loans to pay for college, for example, you could very well have a professional degree that boosted your earning potential.

But even if you have a high income, ask yourself if there are ways to increase it with a side hustle. If you can put together an extra stream of income, you could use that extra spending money to pay off your student loan.

From freelance writing to driving for Uber to starting your own online business, you might find a creative way to earn money that will help ease the burden of your debt.

4. Use the debt snowball or avalanche method

When it comes to making extra payments on your debt, there are a few particularly effective strategies: the snowball and the avalanche of debt.

With the debt snowball, you use any additional payments to target the loan with the smallest balance. If you have a $5,000 loan, a $10,000 loan, and a $50,000 loan, for example, you will first make additional payments on your $5,000 loan.

Once that balance is fully paid off, you move on to the loan with the next highest balance. This approach can help you achieve “quick wins” to keep you motivated.

However, the avalanche of debt might be better if you want to save money on interest. With the avalanche of debt, you first target the loan with the highest interest rate.

Of course, you will continue to make minimum payments on all your loans so as not to fall behind. But these strategies can help you reduce your debt faster and save money on interest.

5. Consider income-based reimbursement

While some borrowers aim to pay off their $300,000 in student loans faster, others need to lower their monthly payments. If your bills are unaffordable, consider claiming reimbursement based on income.

Income-based repayment plans adjust your monthly payments based on your income. Your federal student loan minimum payments will be adjusted between 10% and 20% of your Discretionary Income, depending on the plan you choose. (Discretionary income excludes necessities such as food and rent, as well as taxes.)

There are four options:

You can read the details of each plan to see which would benefit you the most. Alternatively, you can ask your loan manager to choose the plan that would give you the lowest monthly payment when you apply.

In addition to adjusting your student loan bills, these plans extend your loan term to 20 or 25 years. If you still owe money after this time, the rest will be forgiven.

Only federal student loans are eligible for income-oriented plans. If you have private student loans, contact your loan officer to learn about your options. You may also consider refinancing your loans, as this can sometimes result in lower monthly payments. (See below for more information on this option.)

6. Explore Loan Forgiveness Programs

Loan forgiveness programs can save the lives of borrowers who owe hundreds of thousands of dollars in student loans. These programs cancel all or part of your debt, usually in exchange for a certain period of service.

The Civil Service Loan Forgiveness Program, for example, forgives your full balance after 10 years of employment with a qualifying organization. Teacher Loan Forgiveness is available to teachers who work five consecutive years in low-income schools.

See this guide for more details on loan forgiveness programs.

You can also find out if your state or alma mater offers Loan Repayment Assistance Programs (LRAPs). While federal remission programs only repay federal loans, some LRAPs help students repay federal and private student loans.

Our database of state-based loan repayment assistance programs is a great place to start.

7. Consider refinancing your loans

When thinking about how to pay off $300,000 in student loans, don’t forget to consider refinancing. Refinancing student loans could result in a lower interest rate, which could save you money in the long run.

In addition to potentially offering you a lower rate, refinancing allows you to choose new repayment terms. You can choose a longer term for lower monthly payments, or opt for a shorter term to get out of debt faster.

Plus, refinancing lets you combine multiple loans into one for a single monthly payment. At the same time, your new lender may offer more benefits than your current lender, such as unemployment protection or co-signer release.

That said, refinancing is not suitable for all borrowers. For example, refinancing federal loans with a private lender will strip them of federal plans and protections. In other words, refinanced federal loans will no longer be eligible for income-driven plans, federal remission programs, or other federal benefits.

It should also be noted that you will need a decent credit score and a stable income to qualify for refinancing in the first place. If you can’t meet a lender’s criteria (and can’t find a co-signer who can), you won’t be able to refinance your loans until you strengthen your financial credentials.

Before committing to a refinance deal, you can check your rates with a few different lenders online without impacting your credit score. By shopping around, you can find the best student loan refinance deal for you.

Comments are closed.