Managing Student Loan Debt

If you borrowed money for school, you are not alone. Millions of Americans graduate with student loan debt. While that debt can feel overwhelming, it doesn’t have to define your financial future. The key is understanding what you owe, knowing your repayment options, and making smart decisions from the beginning.

Student loans are unlike many other debts. They generally cannot be discharged in bankruptcy*, they may follow you for decades if ignored, and missing payments can seriously damage your credit. Fortunately, they also offer repayment programs and protections that most other loans do not. Below is a simple roadmap to managing your student loan debt.

Know Exactly What You Owe

Some graduates honestly have no idea how much they borrowed! Before making your first payment, gather the facts for:

• Your total balance 

• Interest rate on each loan 

• Whether each loan is Federal or private 

• Your monthly payment 

• When repayment begins 

• Who services the loan

You cannot create a repayment plan until you know exactly what you're dealing with. This information will be available on-line in an account you establish with login credentials.

Federal vs. Private Student Loans

Not all student loans work the same way. Federal loans are funded by the U.S. government and generally offer fixed interest rates, flexible repayment plans, income-driven repayment options, temporary hardship protections, and, even, possible forgiveness programs for certain careers. These protections make Federal loans considerably more flexible than private loans.

Private loans come from banks and other lenders and often have higher or variable interest rates, fewer repayment options, less flexibility during financial hardship and no forgiveness programs. If you have both Federal and private loans, understand which is which beforemaking any decisions.

Choose the Right Repayment Plan

Federal loans offer several repayment options. Below is a general overview.

Federal Student Loan Repayment Options**

Repayment Plan

Tiered Standard Repayment:

• How it Works: Fixed monthly payments. The repayment period ranges from 10 to 25 years, depending on the amount borrowed.

• Best For: Graduates who can afford fixed payments and want the predictability of knowing what they will owe each month

RepaymentAssistance Plan (RAP)

• How it Works: Payments are based primarily on adjusted gross income (AGI)and the number of dependents. Payments generally range from 1% to 10% of AGI and adjust as income changes. The plan also includes interest assistance and a principal-payment match.

• Best For: Graduates whose income is relatively low comparedwith their student loan debt or who need payments that adjust with their financial circumstances.

A Note About Older Student Loans:

Federal student loan repayment rules changed on July 1, 2026. Borrowers whose loans were all first disbursed before that date may have additional repayment options, including Standard,Graduated, Extended, and certain income-driven repayment plans. If you have older loans, check StudentAid.gov to determine which plans are available to you.

If you can pay extra on your student loans, do it.

Even an extra $25 or $50 each month can make a meaningful difference. Extra payments reduce principal faster, reduce future interest, and shorten the life of the loan. When making extra payments, verify that your loan servicer applies the extra amount toward the loan principal rather than simply advancing your next payment due date.

What If You Cannot Afford the Payment?

Under no circumstances should you ignore the loan. Instead, contact your loan servicer immediately and ask about available repayment options. Determine whether you qualify for temporary relief or an income-driven repayment plan. Continue making payments whenever possible because missing payments can hurt your credit score and create collection costs. As in in life, communication is almost always better than silence.

Should You Refinance?

As your career grows and your credit improves, you may receive offers to refinance your student loans. Refinancing replaces your existing loan with a new one. If you obtain a significantly lower interest rate, refinancing could reduce your monthly payment or save money over the life of the loan. However, refinancing Federal student loans into a private loan permanently gives up Federal benefits such as income-driven repayment plans and certain hardship protections***. Lower interest rates are attractive, but understand exactly what you are giving up before refinancing Federal loans.

Beware of Student Loan Scams

Unfortunately, companies often target borrowers with phrases such as “immediate loan forgiveness”, “erase your student debt" or "special government programs." Many simply charge large fees for services you can do yourself. Never pay upfront fees for loan forgiveness assistance, and be cautious of anyone guaranteeing immediate debt cancellation. If something sounds too good to be true, it usually is.

Student Loans and Your Credit

Student loans affect your credit just like other installment loans, so making every payment on time helps build a positive credit history. Late payments can remain on your credit report for years and make it more difficult or expensive to qualify for credit in the future. Student loan repayment is not just about eliminating debt; it’s also an opportunity to build an excellent credit history.

If you have multiple student loans or student loans plus other debt, you needa repayment strategy. You can pay extra toward the smallest balance first while making minimum payments on the others which can give you quick psychological wind and build motivation to pay off the others faster. Or you can pay extra toward the highest interest rate first which will provide the lowest overall interest cost and saves the most money over time. Both strategies work, but the best strategy is the one you will consistently follow.

Loan Forgiveness

Some borrowers may qualify for loan forgiveness programs after meeting specific requirements. Examples include certain public service careers, teaching in qualifying schools, or other government-authorized programs. These programs have strict eligibility rules that may change over time, so you should never build your financial future assuming your loans will eventually be forgiven. Instead, make repayment decisions based on what you know today, and treat any future forgiveness as a bonus rather than a guarantee.

One of the most widely available career-based federal student loan forgiveness programs is the Public Service Loan Forgiveness (PSLF) Program.**** Borrowers who work full-time for qualifying federal, state, local, or tribal government agencies or eligible nonprofit organizations may qualify to have the remaining balance of their federal Direct Loans forgiven after making 120 qualifying monthly payments while employed in public service.

Careers that commonly qualify include public school teachers, military personnel, police officers, firefighters, nurses, physicians employed by qualifying nonprofit hospitals, and many other government and nonprofit employees. Because eligibility requirements and program rules may change, borrowers should review the current requirements before relying on loan forgiveness as part of their financial plan.

Tax Deductibility

There may be a small silver lining to those student loan payments: some of the interest you pay may be tax deductible. Under current federal tax law, eligible taxpayers can deduct up to $2,500 of qualified student loan interestpaid during the year. Even better, you don't have to itemize your deductions to claim it—the student loan interest deduction is an adjustment to income, sometimes referred to as an “above-the-line” deduction. See lesson, Preparing Your Form 1040, U.S. Individual Income Tax Return.

There are rules, of course because this is taxes! The deduction is subject to income limits and gradually phases out as your income increases. Your filing status and whether someone else can claim you as a dependent can also affect your eligibility. And remember, it's generally the interest you paid that may qualify for the deduction, not the repayment of the loan principal.

If you're paying student loans, don't simply make the payments and forget about them. Keep track of the interest you pay and check each year to see whether you qualify for the deduction. Your student loan servicer may provide you with Form 1098-E, Student Loan Interest Statement, showing the amount of interest you paid. It may not make you happy about paying student loan interest, but if Uncle Sam is willing to give you a tax break for some of it, you might as well take it! Remember, it’s your liability, not the American taxpayer’s, not your parent’s, or anyone else’s for that matter. You willingly signed the loan documents, received the money, used the money, and now it must be paid back.

Your Student Loan Action Checklist

✓ Know every loan you owe.

✓ Record each interest rate.

✓ Know who services your loans.

✓ Understand when repayment begins.

✓ Set up automatic payments if possible.

✓ Create a realistic monthly budget.

✓Make every payment on time.

✓ Track the interest paid.

✓ Obtain the Form1098-E, Student Loan Interest Statement annually.

✓ Increase payments whenever your income grows.

✓ Review your repayment plan annually.

Final Thoughts

Your education is an investment in your future, but how you manage the debt that helped pay for it can have a lasting impact on your financial well-being.

Student loans are a serious financial obligation, but they do not have to stand in the way of your financial freedom. The key is to understand what you owe, know your repayment options, and make informed decisions before small problems become expensive ones.

With a little planning, discipline, and determination, you can take control of this debt and move confidently toward financial independence.I'm cheering you on every step of the way.

Very truly yours,

Aunt Anna

• * U.S. Department of Education, Federal Student Aid, “Student Loan Default and Collections: FAQs,” accessed August 11, 2026, StudentAid.gov; U.S. Bankruptcy Court for the Northern District of Florida, “What Debts Are Not Dischargeable?,” accessed August 11, 2026, U.S. Bankruptcy Court

• ** U.S. Department of Education, Federal Student Aid, “Repayment Plans,” StudentAid.gov, accessed August 11, 2026; see also Federal Student Aid loan-servicer guidance regarding repayment plan changes effective July 1, 2026.

• ***U.S. Department of Education, Federal Student Aid, Exit Counseling Guide for Federal StudentLoan Borrowers, 32, accessed August 11, 2026

• ****U.S. Department of Education, Federal Student Aid, “Student Loan Forgiveness (and Other Ways the Government Can Help You Repay Your Loans),” Federal Student Aid, accessed August 11, 2026, StudentAid.gov.