Worried about student loan debt but don’t know where to start? You’re not alone.

In fact, a survey by Morning Consult for Abbott revealed that more 90 percent of young adults feel their mental and physical health has been affected by stress over student loans. To help clear up some of that anxiety, let’s break down the basics of this area of debt along with some tactics on how you can tackle it.

Types of loans

There are two main types: federal and private. Because they are backed by the US government, the former usually have lower interest rates and offer various ways to pay them back. Conversely, private loans are typically given out by banks or credit unions and have stricter rules for paying them back than federal loans.

In addition, federal loans can either be subsidized or unsubsidized. With the subsidized loans, your interest is paid for by the government while you are in school as long as you attend at least part time. Unsubsidized loans, on the other hand, start charging interest as soon as they’re dispersed; private loans are almost always unsubsidized.

Interest rates

Oftentimes, it’s the interest rates that can make people feel as if they’re drowning in debt. When a loan’s interest rate is low, there is less money going to the bank and more going toward paying off your loan which may increase the overall amount you end up paying in the long term. When a loan’s interest rate is high, there is less money going toward paying off your loan and more money going to the bank.

Knowing your interest rates is crucial when developing a debt repayment strategy. Fixed rates can offer predictability and allow you to plan your budget more effectively. Federal loans typically come with fixed interest rates. Whereas variable interest rates can fluctuate over time. While variable rates may initially start lower, they could increase in the future, potentially leading to higher monthly payments. Private loans often have these rate, so focusing on paying off variable rates could help you save money in the long run.

Grace periods, forbearance, and deferment

Even though these terms seem similar—and do, in fact, both offer short-term help—they mean different things.

Grace period
This is a short period (usually six months) after you graduate, leave school, or drop below part-time attendance during which you don’t have to make payments. Most federal and private loans offer a grace period, though any required payments on private loans, such as interest, would still need to be paid during this time. The intention is to give students time to find a job before having a take on the financial burden of full payments.

Forbearance
When someone goes through hard times financially, they can temporarily put off payments through forbearance. While the specific timeframe may vary depending on your loan servicer and loan type, federal loan forbearance is typically granted for periods of twelve months at a time, with a maximum cumulative limit. Private loan forbearance terms can differ, so be sure to check with your servicer. Keep in mind that interest keeps adding up during this time, so it isn’t necessarily a viable long-term option.

Deferment
Unlike forbearance, deferment pauses both your loan payments and interest accrual for a qualified period. This option is ideal for situations like going back to school part time, serving in the military, or experiencing temporary financial hardship due to a medical residency or national disaster. However, eligibility requirements vary, so check with your loan servicer for details.

Paying it back

Now that you know more about your loans, we can look at some options on how to pay them back. For federal loans, most borrowers initially choose or are put on a fixed repayment plan such as the Standard Repayment Plan, which involves making the same fixed monthly payments over a set amount of time, usually ten years. If your payments feel too high, however, you can always look into switching to another one that may better fit your budget. For instance, there are several income-driven (IDR) plans that consider your income and family size to potentially lower your monthly payments. Though there is some variation between the four plans available, each caps your payments at 10 to 20 percent of your discretionary income and offers loan forgiveness after twenty or twenty-five years. Here’s a quick look at the plans:

• Income-Based Repayment (IBR) Plan: With this plan, your monthly payment is capped at a certain portion of your discretionary income, which is the money you have left over after paying for your basic needs.
• Pay As You Earn (PAYE Plan): This is like IBR, but the monthly payments might be even smaller, and after twenty years of qualifying payments, the loan is forgiven. However, PAYE has a longer repayment term, meaning more interest paid overall. Talk to your loan servicer to see if PAYE aligns with your financial goals.
• Saving on a Valuable Education (SAVE) Plan: The Department of Education introduced the SAVE plan in late 2023, replacing the REPAYE plan. It calculates your monthly amount based on income and family size, just like other income-driven repayment plans. But SAVE goes a step further: it covers unpaid monthly interest and offers potential loan forgiveness after a set time. If you have federal student loans and REPAYE, you’re automatically enrolled in SAVE.
• Income-Contingent Repayment (ICR) Plan: This plan considers your income and family size, which could give you a lower monthly payment. ICR automatically chooses the lesser of two options: a fixed payment based on income or 20% of your discretionary income. This can be a great safety net, but remember to check with your loan servicer to see if ICR aligns with your long-term financial goals.

There are a few factors that affect which plan may suit you best:

• Your income: If you have a job that pays well, consider opting for a fixed repayment plan to help you pay off your loans faster.
• Your career goals: An IDR or graduated repayment plan (which has your payments start lower, then increase every two years) might be a good short-term choice if you expect your income to grow in the future.
• Your family size: IDR plans take family size into account, which can help people with children pay less each month.

Private loans typically offer less flexibility than federal loans. They often have fixed or variable interest rates, and repayment usually involves standard monthly payments over five to fifteen years. Refinancing to a lower rate can potentially reduce your payment. Unlike some federal loans, there’s usually no penalty for early repayment of private loans, so you can save on interest by prioritizing paying them off sooner. Always consult your loan servicer to discuss the specific repayment options and eligibility requirements for your private loans.

Other ways to reduce your debt

Beyond switching your repayment plan, there are several useful strategies you can utilize to work on paying down your student loan debt.

Stick to your routine
Avoid late fees and missed payments by staying on top of your deadlines. Set reminders in your phone to alert you to a due date, or set up autopay in your account so you never have to worry about forgetting.

Pay more than just the minimums
If you can, put a little extra money toward your loans every month to cut down on the time it takes to pay them off. Utilize budgeting apps or create a spreadsheet to help monitor your spending habits and identify where you can cut back to free up some cash. Every dollar saved can be another dollar paid into your debt.

Refinance your loans
Consider refinancing your loans; you can do this with both private and federal loans, though both must be done through a private lender. You might be able to get a lower interest rate this way, which will save you money in the long run.

Look into scholarships
Did you know there are scholarships just for people who are paying back college loans? Check around to see what options you may qualify for to help pay your bills.

Increase your income
If you have some extra time, side jobs like freelancing, online gigs, or even a part-time job can give you extra cash to put toward your loans. Think outside the box, and find something that works for you!

If you’re feeling overwhelmed by student loan debt, don’t forget that you aren’t on your own. There are a lot of tools out there. Seek help from a financial professional to gain insights on all the ways you can shrink your loan payments or pay them off completely.