Financial Advice

Living with High Student Loan Obligations

Living with High Student Loan Obligations

College graduates often leave their universities with an unwelcome burden -- a significant amount of debt.

It is important to note how much student debt has grown over the last five years. According to's latest report, student loan debt has increased from $1.15 trillion in 2013 to $1.766 trillion in 2023. And according to that same report, the average student loan debt is currently at $40,499.

That means that the odds are good that college graduates will leave school with at least some debt to repay. It says, too, that paying back this amount of debt will be problematic for some graduates who struggle after entering the workforce to find jobs that pay decent wages.

The good news is that there are options for graduates who cannot afford their monthly student loan payments. The bad news? Those graduates who ignore these possibilities could face serious financial consequences.

Don't Ignore It

The worst move college graduates can make when their student-loan debt becomes overwhelming is to ignore the problem.

It is tempting for students to ignore their late bills and hope that the problem goes away. However, it will not. Graduates who do not make their student loan payments on time could face severe financial penalties. They will also see their credit scores take a hit. That is terrible news: Lenders of all kinds -- mortgage, auto, and personal -- rely on these scores when determining who gets loans and at what interest rates. The borrowers with low credit scores will either not qualify for loans or credit cards or have sky-high interest rates for loans they can obtain.

So what should graduates do if their loan payments become too much of a burden? First, they should call their lenders. That might be embarrassing, but lenders will often work with graduates to come up with a solution to their financial woes.


Many graduates choose to consolidate their student loans. Under consolidation, multiple loans get combined into one. That simplifies paying back these loans: Graduates now have to make just one payment every month. Consolidation can also lower the monthly payments of graduates because the process gives them up to 30 years to repay their loans.

The downside? Graduates who increase the length of their repayment period will pay far more in interest during the life of their student loan debt. That is why loan consolidation is not always the best financial solution for college graduates.


Some lenders might allow graduates to postpone their loan payments during unemployment or other financial crises. That gives graduates extra time to shore up their finances or find a better-paying job.

The problem? Adding months to the lifespan of a student loan means that borrowers will usually have to pay more interest over the life of the loan. The best way to handle student loan debt is to pay it back as quickly as possible. Postponements instead make debtors spend more months paying back their loans.

Payment Plans

Another option for borrowers is to request a new payment plan from their lenders. Lenders might be willing to lower the money that borrowers have to pay each month. They might also help reduce the interest rate attached to the loan.

Borrowers who took out federal student loans might qualify for income-contingent repayment plans. Under these plans, graduates only pay a monthly payment of a set percentage of their monthly incomes. Such plans are a boon for borrowers whose monthly incomes are low.


Graduates can also sign up for specific careers or programs to reduce the student loan debt they owe. For instance, graduates who signup for the Peace Corps can eliminate 70 percent of their student loan debt from Perkins loans. In addition, those who took out Stafford and consolidated loans can receive a deferment of up to 27 months.

Graduates who sign up as volunteers for Americorps can receive nearly $5,000 to pay off their student loans after one year of service.

Facing monthly student loan payments can prove stressful to recent college graduates. Moreover, graduates struggling to find good-paying work in their field will face even more stress when those student loan payments come due.

However, students who want to overcome their debt will have to be proactive. There are options out there. It is up to graduates to do the research necessary to find the best ones.

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