How To Get Out Of College Debt

By Staff Writers

Published on October 14, 2021 is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

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Facts & Figures and Strategies for Getting Out of Debt Fast

Due to the rising cost of college, the phrase “student loan debt” now makes just about anyone cringe. According to Forbes, in 2018 student loan debt reached $1.5 trillion, second only to mortgage debt and beating credit cards and car loans. On the flip side, college enrollment is up, meaning more people are choosing to pursue a college education. While student loans do provide opportunities for many who could otherwise not earn a college degree, the resulting debt can easily become a financial burden long after graduation. Get more information on the shocking statistics and learn what you can do to limit your debt or get out of debt quickly.

How Much Do Students & Graduates Owe?

More than 44 million borrowers collectively owe a staggering $1.5 trillion in student loans. And that's just within the U.S. alone. The following section provides various snapshots of student loan debt to give you a better picture of what the numbers looks like. Most figures are based on federal student loans. For more information on the data, all sources have been provided.

Average Student Loan Debt by State


Source: The Institute for College Access & Success, 2016

Median Student Loan Debt by School Type

Public two-year$11,650
Nonselective four-year$21,230
Selective four-year$25,890
Most selective four-year$26,490
Source: College Board, 2013-14

Delinquency & Default Rates

Because student loan debt is so high for graduates, some struggle to keep up with payments. If you miss a scheduled payment on your federal loan, it's considered delinquent. After 90 days it will be reported to the main credit reporting bureaus, which will have a negative effect on your credit score.

Default is when you stop paying your loans all together. This can ruin your credit, cause garnishment of wages and tax returns, and will prevent you from qualifying for additional federal financial aid. Federal loans typically default after nine months of delinquency. This timeframe can vary for private loans and depends on the rules and conditions set forth by the lender. Some private loans go into default as soon as you miss a payment. The following section breaks down delinquency and default rates.

Default Rate by Income & School Type

Above $55,000 mean income351320
Below $55,000 mean income422130
Source: Federal Reserve Bank of New York, 2017

How to Approach Student Loans

For many potential students, the opportunity to pursue a college education can only happen with financial help, often by way of student loans. Whether a student is right out of high school and going to college immediately, an older student deciding to go back to college for a career change or someone going back to finish a partial degree, it's important to think and plan ahead. Below are strategies potential borrowers should consider before taking out a student loan.

Fill out a FAFSA

Many grants and scholarships are based on the financial information you and your parents provide on the FAFSA so make sure to complete this step to be considered for free money.

Exhaust all other avenues of financing first

While it may seem easier take out loans for all college-related expenses, taking time to see what other options are out there is a must. Grants, scholarships, paid internships, work-study and employer tuition assistance are all ways to pay for college without accruing any debt. A Google search alone will turn up many scholarships and grants that you may be qualified for and will lead you to several online scholarship databases. Your college's financial aid department is also a great resource to see what internal and external scholarships you are eligible for. State, corporate and local organizations may also provide valuable scholarship leads.

Start researching and applying for scholarships early on

The search for scholarships is time-consuming and can be overwhelming, as a lot of scholarship applications require paperwork, essays and references. However, the time commitment is worth it – scholarships can greatly reduce the amount of loan money needed and might even eliminate the need for borrowing all together. The less you borrow, the less interest you accrue, which means lower, more manageable payments down the road.

Work while in school to cover other expenses

Work as much as possible without sacrificing time to do schoolwork. This can help you pay for college-related expenses as you go. For example, try saving for and paying cash for books or rent books each semester. Check to see if your college offers an interest-free payment plan for tuition so you can pay the school directly rather than take out student loans or arrange to pay for one class per term to lessen the amount borrowed. Pay for room and board by working rather than taking out extra loans, ask for help from family or live at home to further cut expenses.

Consider a community college

You may have an idea of what your dream college is, but does it come with too steep a price tag? Can you get an equally good education at a different college with a lower cost? Student loan expert and founder of Tim Stobierski suggests attending a community college for two years to combat future student loan debt, as tuition is much cheaper at a two-year college. You can then transfer several credits or your entire associate degree towards a bachelor's degree at the four-year college of your choice. Speak with college advisors at both the two-year and four-year colleges you are interested in ahead of time to ensure the credits you are planning to earn will be transferable.

Determine which loans are best for you

If you do need to take out a loan, carefully research your options before applying and compare interest rates between lenders to find the lowest rate. Stobierski says, “Generally speaking, federal student loans are always preferable to private student loans because they come with lower interest rates and important protections and benefits (like forbearance/deferment options, forgiveness and payment plans) that are hard to find in the private loan marketplace.” Other factors to consider when finding the right loan are whether parents or another co-signer will be needed when applying for the loan, whether you'll have a fixed or variable interest rate, loan re-payment flexibility and loan consolidation options.

Get an idea of what future loan payments will be

While it can be hard to visualize life after graduation, it's important to see how those loan payments will fit into your budget. Use a student loan calculator to get an idea of what loan payments will look like after graduation. Calculations are based on factors such as the size of the loan, interest rate and length of the loan term. Keep in mind that you might not find a high enough paying job right out of school, so borrowing the least amount possible will help keep interest from accumulating, which will make payments more manageable.

Tips for Paying Off Loans Quickly & Painlessly

Once you start making payments, there's a lot you can do to stay on top of things and pay off your debt quickly and painlessly.

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