How to pay off student loans when you’re broke

If you can’t pay your student loans, these tips could help. (iStock)

The U.S. is facing a student loan debt crisis. Right now, students and graduates have a cumulative total of $1.5 trillion in student loans. Nearly 30 million Americans under the age of 39 are struggling to repay their debt. With the average borrower owing more than $30,000, repaying student loan debt can be intimidating, if not impossible, for some.

If you’re struggling to repay your student loans, you’re not alone. Nearly 11 percent of all student loans are 90 days or more past due, and more than 20 percent of borrowers have fallen behind, to some degree, on their student loan payments.

Several options could make repaying your federal or private student loans a little easier:

1. Consolidate or refinance your student loan

One way to help ease the financial burden of your student loan is to consider a student loan consolidation or a refinance. Both options could (and should) reduce your monthly payment and/or the total cost of your loan.

If you have a federal student loan, consolidating your loans could help lower your monthly payments, potentially reduce the rates on at least some of your loans, and allow you to maintain the benefits of having a federal loan. A loan consolidation takes all of your student loans and combines them into one loan.

Alternatively, you could refinance your student loan. A refinance would allow you to take advantage of low-interest rates. If you lower your interest rate by at least one percent, a refinance could be a cost-effective option and a long-term solution. Don’t forget to visit Credible to research rates from different private student loan companies to ensure you save as much money as possible.


However, it's important to note that you cannot refinance into a federal loan, so if you choose to refinance your federal student loans, you’d have to work with a private lender. It’s also important to note that both a refinance and debt consolidation consider your income and credit history for qualification.

Use a tool like Credible to find your personalized rates and make sure you’re saving as much money as possible.


2. Adjust your loan repayment plan

Sometimes a few adjustments to your current plan could make a huge difference. If your payment date conflicts with your rent or other large payment, consider talking to your lender to change the date your payment is due.

If you need more help, there are a few plans that could be worth looking into. Still, most of these options apply only to federal student loans. If you have private student loans, talk with your lender for more information.

Income-driven repayment plans: Federal student loans could qualify for one of four different plans including:

The Revised Pay as You Earn Repayment Plan (REPAYE)

Pay as You Earn Repayment Plan (PAYE)

Income-based Repayment Plan (IBR)

Income-Contingent Repayment Plan (ICR)           

Each of these plans bases your monthly payment on your income. The first three listed determine your payment using 10 percent of your discretionary income. The ICR plan uses 20 percent of your discretionary income. All plans last between 20 and 25 years.

You can use the Federal Loan Simulator to estimate your monthly payment under such a plan.


Economic Hardship Deferment: If you are unable to make any student loan payments, you may qualify for an economic deferment. If you use an economic hardship deferment, in conjunction with an income-driven plan, any remaining balance owed at the end of the payment period goes away. 

Public Service Student Loan Forgiveness Plan: Borrowers who work full-time for the government or a non-profit organization could have their student loans forgiven. Borrowers must repay their loans under an income-driven plan and make at least 120 qualifying payments.

Interest-only repayment: Private lenders may allow you to make interest-only payments. Some students make these payments to avoid accruing interest while attending school. You may also qualify for an interest-only repayment if you have financial difficulties.

3. Cut unnecessary expenses

Whether you qualify for one of the above options or not, you can make repaying your student loans a little easier by reducing costs. You could save a significant amount of money each month by lowering these expenditures:

Cell phone bill

Internet and cable expenses

Streaming services

Grocery bill

Car insurance

Dining out






It is rare for student loans to be completely wiped out through bankruptcy. If you are unable to make payments, your best option is to talk with your lender. They can work with you. Avoiding payments could result in a lawsuit, garnished wages, the loss of tax refunds, and/or social security benefits. Additionally, your lender (federal or private) will report delinquencies to credit reporting agencies.