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Last updated Jun. 28, 2024 by Peter Jakes

Graduating from college is a significant milestone that comes with an array of emotions, from excitement to relief and sometimes a bit of anxiety, especially when it comes to managing student loan debt. For many new graduates, student loans are the first substantial financial commitment and can seem like an insurmountable obligation. However, with the right strategies, managing student debt can be more manageable and less stressful. Here are 12 ways new graduates can manage their student debt effectively.

1. Understand Your Loans

The first step in managing student debt is understanding the types of loans you have. Federal student loans, private student loans, subsidized, and unsubsidized loans all have different interest rates, repayment plans, and forgiveness options. Knowing the specifics of each loan can help you make informed decisions about repayment.

2. Create a Budget

Budgeting is crucial when managing any type of debt. Track your income and expenses to see where your money goes each month. Prioritize your student loan payments, and identify areas where you can cut back on spending to allocate more funds towards your debt.

3. Explore Income-Driven Repayment Plans

Federal student loans offer several income-driven repayment plans that can lower your monthly payment based on your income and family size. These plans can make managing your debt more affordable, especially if you are just starting your career and earning a lower salary.

4. Refinance or Consolidate Loans

Refinancing your student loans can provide a lower interest rate, which can save you money over the life of the loan. Consolidating multiple federal loans into one can simplify repayment by reducing the number of payments you need to make.

5. Make Payments During Grace Periods

Whenever possible, start making payments on your student loans during grace periods or while you are still in school. This can reduce the amount of interest that accrues and lower your principal balance faster.

6. Automate Your Payments

Setting up automatic payments can help ensure you never miss a payment, which can positively affect your credit score. Some lenders even offer interest rate reductions for borrowers who enroll in automatic payments.

7. Make Extra Payments

If you can afford to, make extra payments on your student loans. Additional payments can reduce the principal balance faster and decrease the total amount of interest paid over the life of the loan. Ensure that extra payments apply directly to the principal.

8. Look Into Loan Forgiveness Programs

Certain professions, such as teaching, nursing, and public service, may qualify for loan forgiveness programs. Research if your career path offers any loan forgiveness options and take advantage of them to reduce your debt burden.

9. Build an Emergency Fund

Having an emergency fund can prevent you from missing loan payments if unexpected expenses arise. Aim to save three to six months’ worth of living expenses to create a financial safety net.

10. Seek Employer Assistance Programs

Some employers offer student loan repayment assistance as part of their benefits package. Check if your employer provides this perk or consider seeking job opportunities that include student loan repayment assistance.

11. Use Windfalls Wisely

If you receive a windfall, such as a tax refund, bonus, or gift, consider using a portion of it to pay down your student loans. This can provide a significant boost to your repayment efforts and help you become debt-free faster.

12. Stay Informed and Seek Help

Always stay informed about changes in student loan policies and repayment options. If you find managing your student debt overwhelming, consider seeking advice from a financial advisor or a nonprofit credit counseling agency that specializes in student debt management.

✓ Short Answer

Graduates should understand their student loans, create a budget, explore income-driven repayment plans, and consider refinancing or consolidating loans. Making payments during grace periods, automating payments, and making extra payments can also be beneficial. Look into loan forgiveness programs, build an emergency fund, and seek employer assistance if available. Use windfalls wisely, stay informed, and seek help if needed to manage student debt effectively.


1. What are the types of student loans?

Student loans can be categorized into federal student loans and private student loans. Federal student loans are funded by the government and offer more flexible repayment options. Private student loans are provided by banks, credit unions, and other financial institutions.

2. How do income-driven repayment plans work?

Income-driven repayment plans adjust your monthly payments based on your income and family size. These plans can reduce your monthly payment and extend the repayment period, making your debt more manageable.

3. What is the benefit of refinancing student loans?

Refinancing student loans can provide a lower interest rate, which can reduce the total amount of interest paid over the life of the loan and lower your monthly payments.

4. Can I consolidate both federal and private student loans?

While you can consolidate multiple federal student loans into one federal Direct Consolidation Loan, private student loans cannot be consolidated with federal loans. However, you can refinance both federal and private loans with a private lender.

5. How does loan forgiveness work?

Loan forgiveness programs forgive a portion or all of your student loan debt if you meet certain criteria, such as working in a qualifying career field for a specified number of years. Different forgiveness programs have different eligibility requirements.

6. Is making extra payments on student loans beneficial?

Yes, making extra payments can reduce your principal balance faster and decrease the total amount of interest paid over the life of the loan. It can also help you pay off your debt sooner.

7. What should I do if I have trouble making payments?

If you’re having trouble making payments, contact your loan servicer immediately. They may offer options to temporarily suspend payments, lower your monthly payment, or change your repayment plan.

8. How can an emergency fund help with student debt management?

An emergency fund can provide a financial buffer in case of unexpected expenses, preventing you from missing loan payments. It ensures that you have a safety net and can continue managing your debt even during financial difficulties.

9. Do all employers offer student loan repayment assistance?

Not all employers offer student loan repayment assistance, but it’s becoming more common as part of employee benefits packages. Check with your employer to see if this is an option, or consider seeking employment with companies that offer this benefit.

10. How often should I review my repayment plan?

It’s a good idea to review your repayment plan annually or whenever you experience a significant change in income or financial situation. Regular review ensures that your repayment plan remains the best option for your circumstances.

11. What’s the difference between subsidized and unsubsidized loans?

Subsidized loans are federal loans where the government pays the interest while you’re in school, during grace periods, and deferment periods. Unsubsidized loans accrue interest during all periods, and you’re responsible for paying the interest, even while in school.

12. Can a financial advisor help with student loan management?

Yes, a financial advisor or nonprofit credit counseling agency specializing in student debt can provide personalized advice and strategies to help you manage and repay your student loans effectively.

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