How to Deal with Student Loan Debt


The Budget Fashionista’s Annual “Being Broke Ain’t Cute” Series features tips and advice to help you improve your personal financial health. For more personal finance information, please visit our Financial Health Series.

As sad a fact as it may be, student loans for both undergraduate and graduate programs are quickly becoming the norm in the U.S. From a personal standpoint, we can say that a majority of our friends and peers have student loans in all shapes and sizes, and from what we can tell, they aren’t alone.

True, the underlying issue here is that college education has become increasingly more costly for families and students over the past few years. However, student loans are a reality we must deal with, and deal with it we will.

The first thing to keep in mind is that student loan debt is different than, say, credit card debt. It the world of “good debt/bad debt”, it falls in the “good debt” category. Why? It’s an investment in your future, allowing you greater earning power upon graduation and throughout your career that you would not have otherwise. However, it’s still debt, and it is a beast that must be paid!
The good news is, you probably have negotiated a decent interest rate for your debt that ranges from about 3-7% APR. Thankfully, this is much lower than your standard credit card debt, and makes paying off a $30,000 a little more manageable. The bad news? Your monthly payments will still most likely take a chunk of change out of your income.

In our opinion, the best strategy for getting out of student loan debt is as follows:

  1. Compare the interest rates of your student loan with your other debts (credit card, car loan, etc.)
  2. If your student loan interest rate is the lowest of your debts, you’ll want to put the bulk of your focus towards the other balances first. Pay the minimum on your student loan debt, and aggressively tackle the others.
  3. Once you’ve paid off any other high-interest debt, it’s time to “snowball”. Basically, snowballing your debt involves adding up the monthly amount that you were paying on your other debts, and putting it towards your remaining student loan debt. By paying more than the minimum, you’ll get out of debt faster and owe less in the long run.

Some other tips? Talk to your lender about consolidation, especially if the monthly payments are too much for you to handle, financially. You can also take time for financial hardship, where your payments will be put on hold for a period, however, this should be a last resort.
Obviously, the sooner you get out of debt the better. Yet, it’s important to keep in mind other debts and interest rates, to ensure that you are tackling them in a logical order.

For more info on student loans, visit

Amanda Gleason, 24, who lives in downtown Chicago with her new husband, started the Young and Broke blog over one year ago. She works for a beer importer/marketer and loves international travel, wine, fashion and film, not to mention saving money!

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