How To Manage Overwhelming Student Loan Debt

What to do if you have too much student loan debt

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Among adults who went to college, over 40% have taken on at least some student debt, according to the Federal Reserve in 2021. Unfortunately, it can be a major challenge to pay back student loans. The average amount owed on student loans was $36,245 in 2021, according to a report from the Federal Reserve Bank of New York.

If you're struggling with too much student loan debt, you're not alone. The good news is that there are resources to help you pay back both federal and private student loans.


On Tuesday, Nov. 22, 2022, the Biden administration extended the pause on payments and interest on federal student loans for the eighth time. Borrowers with federal student loans won’t have to make payments, and loans won’t resume accumulating interest, until 60 days after court cases challenging Biden’s student loan forgiveness program are resolved or the Department of Education is allowed to move forward with the program. If the cases aren’t resolved by June 30, 2023, payments will resume two months after that.

Options for Paying Federal Student Loans

If you have too much student loan debt, examine all your options carefully. There are multiple ways to reduce your debt burden or monthly payment, but be aware, some may increase interest costs over the life of your loans.


On Aug. 24, 2022, President Joe Biden announced via Twitter the cancellation of $10,000 of federal student loan debt for eligible borrowers, and $20,000 for federal Pell Grant recipients.

Student Loan Consolidation

You can consolidate most existing federal loans through a Direct Consolidation Loan, which combines all your loans, creating one monthly payment. Consolidation can reduce your payment by allowing you to extend the repayment term up to 30 years (overall interest costs may increase). If you have loans other than Direct Loans, consolidation can also make your loans eligible for otherwise unavailable income-driven repayment plans. 

Income-Driven Repayment

Income-driven repayment plans cap payments at a percentage of income—typically between 10% and 20% of your discretionary income, depending on the plan. Repayment terms last 20 or 25 years, with any remaining balance forgiven at the end of the term. Compare plans closely to determine which is best for you. Loans currently in default are not eligible for income-driven repayment.


On Aug. 24, 2022, President Joe Biden’s administration proposed a new plan for federal student loan repayment for undergraduate loans. The plan would cap monthly payments at 5% of your monthly income. After 10 years, whatever remaining balance you have would be eliminated if the original loan balance was $12,000 or less.

Deferment or Forbearance

Both deferment and forbearance allow you to stop making payments temporarily. You must request a deferment or forbearance with your loan servicer and meet eligibility requirements to be granted one.

Financial hardship, participation in certain programs (such as the military, AmeriCorps, or a graduate fellowship), and cancer treatment are circumstances that typically qualify. If you have certain types of loans, such as Subsidized Direct Loans, you will not be responsible for paying interest that accrues during deferment. However, on most federal loans, the interest that accrues will be added to your balance once the deferment ends. You’re responsible for paying interest on any loans in forbearance.


When you pause loan payments via deferment or forbearance and interest accrues, that interest may be capitalized (added to your loan balance) once you begin repayment. This means you will pay interest on the interest added, thereby increasing costs over the life of the loan. 

Federal Student Loan Forbearance During COVID-19

The coronavirus relief legislation initially paused payments until Sept. 30, 2020, by putting federal loans into administrative forbearance. It also set the interest rate on federal student loans to 0%.

This relief has been extended until 60 days after court cases challenging Biden’s student loan forgiveness program are resolved or the Department of Education is allowed to move forward with the program. If the legal issues have not been resolved by June 30, 2023, payments will resume two months after that.

The 0% interest rate and payment moratorium apply only to loans held by the federal government. Federal loans owned by private companies, such as some Perkins and FFELP loans, are not included in these protections.

Ways To Manage Private Student Loans

If you have private student loans, federal coronavirus relief efforts do not reduce your interest rate or entitle you to pause payments. If you have too much student loan debt and want help making payments, ask your loan servicers what types of assistance they offer. 

  • Forbearance, deferment, and payment assistance: Private student loan servicers may offer forbearance, although it is important to ask your lender how interest is treated and whether there are fees associated with pausing payments. Loan servicers typically offer in-school deferment and other deferment options (such as active military duty, public service, or residency deferments). Some private loan servicers may offer payment-assistance options as well. 
  • Student loan refinancing: You may be able to refinance private student loans at a lower interest rate, to a lower monthly payment, or both. Refinancing involves securing a new loan with a private lender and using it to repay existing student loan debt. Typically, you’ll need good credit to qualify.


Refinancing can give you a lower monthly payment, but interest costs over the life of the loan could be higher if you extend the loan term.

Budgeting for Student Loans

Budgeting may sound basic and not very exciting, but the simple act of reviewing your expenses and finding ones you can eliminate or reduce can dramatically impact your financial well-being. Review bank and credit card statements for items you can cut, and remember that sacrifices you make now may not need to be permanent.

Reining in a few expenses is good practice and can empower you to accomplish other goals beyond paying back student loans, such as saving for a down payment on a home or for graduate school.

Financial Counseling

When facing too much student loan debt or any type of debt problem, consider reaching out to a credit counselor. Credit counselors are professionals that can evaluate your entire financial situation helping you make a budget and plan feasible. They may be available through credit unions, religious organizations, and nonprofit agencies. 

Only use an accredited counseling service. Accrediting organizations include the National Foundation for Credit Counseling and the Financial Counseling Association of America—either can assist you in getting the help you need.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Board of Governors of the Federal Reserve System. "Economic Well-Being of U.S. Households in 2020 (May 2021)," Pages 63, 65.

  2. Federal Reserve Bank of New York, Liberty Street Economics. “Three Key Facts from the Center for Microeconomic Data’s 2022 Student Loan Update.” (Click “linked here” in first paragraph for Excel download.)

  3. Department of Education. “Biden-Harris Administration Continues Fight for Student Debt Relief for Millions of Borrowers, Extends Student Loan Repayment Pause." 

  4.  Twitter. “@POTUS, Aug. 24, 2022 at 11:32 a.m.

  5. Federal Student Aid. "Student Loan Consolidation."

  6. Federal Student Aid. "Income-Driven Repayment Plans."

  7. Federal Student Aid. "Income-Driven Repayment Plans."

  8. Department of Education. “Biden-Harris Administration Announces Final Student Loan Pause Extension Through December 31 and Targeted Debt Cancellation To Smooth Transition to Repayment.”

  9. Federal Student Aid. "Student Loan Deferment."

  10. Federal Student Aid. "Student Loan Forbearance."

  11. Federal Student Aid. "Get Temporary Relief."

  12. Federal Student Aid. "COVID-19 Loan Payment Pause and 0% Interest."

  13. Consumer Financial Protection Bureau. "Should I Refinance My Private Student Loan Into One With a Lower Rate?"

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