Eliminating student loans can feel overwhelming, especially if your loan debt is significant. If you owe $200,000 or more, making payments can feel like a drop in the bucket.
About 800,000 federal borrowers owe at least $200,000 in student loans, according to fourth-quarter 2022 data from the Federal Reserve. Typically, student loans of this size are tailored more specifically to medical, law, and graduate students and others entering high-paying fields.
While paying off $200,000 in student loans is challenging, it can be done by taking consistent action like refinancing student loans, applying for student loan forgiveness, and following a debt repayment strategy.
- Apply for student loan forgiveness
- Use the debt avalanche method
- Use the debt snowball method
- Income-driven repayment option
- Do student loans ever go away?
- Consider refinancing your student loans
- How to refinance federal student loans
- Find a qualified cosigner to improve your interest rate
- How to refinance private student loans
Apply for student loan forgiveness
You may qualify for a student loan forgiveness program if you have a federal student loan (private student loans are not eligible). Most forgiveness programs require you to work in certain occupations and make eligible payments for a specific period.
For example, the most common student loan forgiveness program is Public Service Loan Forgiveness (PSLF). To qualify, you must have federal student loans and work for a qualifying government agency or nonprofit.
Qualifying careers for student loan forgiveness include:
- Doctors
- Government workers
- Lawyers
- Nurses
- Peace Corps and AmeriCorps volunteer
- Teachers
Speak with a student loan counselor or servicer to determine if your occupation qualifies for student loan forgiveness.
Under the PSLF, if you work for a qualifying company or organization and you make 120 qualified monthly payments, the remaining balance on your student loans is discharged tax-free. As you can imagine, the amount you may be forgiven could be substantial.
Related: Student Loan Refinance Rates for August 14, 2023
Use the debt avalanche method
Many debtors use debt repayment strategies to pay off all types of debts — including student loans — faster.
One popular strategy is the debt avalanche method, which prioritizes paying off the loans with the highest interest rate first while making minimum payments on your other loans. Once you repay that loan, repeat the process with the next-highest-interest loan until your loans are paid off.
Bottom line: The advantage of the debt avalanche strategy is saving the most in interest charges since you are paying off high-interest loans first.
Use the debt snowball method
If staying motivated to tackle $200,000 in student loans is difficult, the debt snowball method may suit you better.
This strategy works similarly to the debt avalanche method, but instead of focusing on high-interest loans, you’ll prioritize your student loan with the smallest balance. Try to make extra payments on your lowest-balance loan while making minimum payments on all your other loans.
Once you pay off your smallest balance, you can direct the amount you were paying on that loan, apply it to the loan with the next lowest balance, and repeat the process until your loans are paid off.
Bottom line: The debt snowball method may appeal to you if you are motivated by small wins that build momentum — like a snowball rolling downhill.
Income-driven repayment option
If your federal student loan payments are too high for your income, you may qualify for an income-driven repayment (IDR) option. An IDR plan can make your plan more affordable so you can continue to make payments and avoid a forbearance or deferral, which can delay your timeline to repay your loan.
An IDR plan allows you to set a payment amount you can afford based on your income, allowing you to make monthly payments of 10%, 15%, or 20% of your discretionary income.
You can also extend your 10-year standard repayment plan to 20 or 25 years. Your monthly payment will be lower, and any remaining balance after the repayment plan concludes will be forgiven.
Do student loans ever go away?
Yes, student loans can go away once you pay them off, and if you have a large loan, it will take time.
In some circ*mstances, your loan servicer may discharge your federal student loans. For example, your loan might be discharged if you have a Perkins loan and you’ve served in an eligible teaching position. Similarly, student loans may be discharged if you’re permanently disabled or your school closed while you were a student.
If you have student loan debt, you’re not alone, as over 43 million Americans owe money on their student loans. Fortunately, by using one or more of the options above, you may be able to accelerate your repayment timeline and pay them off sooner.
Consider refinancing your student loans
Student loan refinancing involves replacing one student loan with another, ideally with a lower interest rate and payment. In that case, more of your student loan payment would pay down the loan’s principal.
Best for:
- Borrowers with private student loans: Refinancing with a private student loan is usually a better option for borrowers who already have private loans. That’s because when you refinance a federal student loan with a private student loan, you’ll lose significant federal loan benefits like income-driven repayment plans and the potential for student loan forgiveness.
- Borrowers with good credit: Qualifying for a refinance loan with a lower interest rate requires strong credit. If your credit is less than ideal, consider applying with a cosigner to improve your odds of landing a lower rate.
How long will it take to pay off $200k: Your timeframe for repaying your student loans will depend largely on the interest rate you receive on a new loan. If refinancing reduces your payment by $300 each month, and you apply that $300 to the loan principal, you could bring down your principal an extra $3,600 each year. Depending on your monthly payment amount, that $3,600 could equal one or two extra payments a year, allowing you to pay off your loan early.
Run the numbers using a student loan refinance calculator to see if refinancing could benefit you.
Find a qualified cosigner to improve your interest rate
Most lenders require good to excellent credit to qualify for student loan refinancing. A good credit score range begins at 670, but you may need a credit score of 700 or higher to obtain a new loan with a favorable rate.
If your credit score isn’t where you’d like it to be, a cosigner with good credit may be able to help you cross the finish line. A cosigner can be a close friend or family member who doesn’t mind taking on the responsibility or going through the application process to determine their eligibility.
Remember: If you fail to make your payments, your cosigner will be responsible for paying the loan.
How to refinance federal student loans
Refinancing your federal student loans with another federal loan involves combining them into one Direct Consolidation Loan. You won’t be able to lower your interest rate, but you can extend your repayment term up to 30 years.
If you have federal loans and work in public service, you might qualify for Public Service Loan Forgiveness (PSLF). This program allows your loans to be forgiven after you make 120 qualifying payments (10 years of monthly payments).
You can apply for a Direct Consolidation Loan at the Federal Student Aid website by taking these steps:
- Choose the loans you wish to refinance. You can consolidate some or all of your federal loans. You may wish only to refinance those loans that don’t include forgiveness benefits.
- Select a repayment plan. Choose which repayment plan makes sense for you, such as an income-driven repayment plan or Public Service Loan Forgiveness. The latter option could allow you to pay off some of your $200,000 student loan debt faster if you’re eligible for forgiveness.
- Complete the application. The online application is fairly easy to complete. You can view an example application beforehand to help you determine which documents you’ll need when you apply.
How to refinance private student loans
Refinancing student loans with a private lender is a simple process:
- Compare rates. Shopping and comparing rates and terms from multiple lenders can help to ensure you’re getting the lowest rate. Depending on the lender, you may be able to prequalify for the loan before you apply. In this case, the lender will perform a soft credit inquiry, which won’t affect your credit score. Prequalifying can help you gauge your approval odds before formally applying for the loan.
- Select your terms. Terms for private loans generally range from five to 20 years. Accelerate your payoff for $200k in student loans by choosing the shortest term you can comfortably afford, which will also help you minimize your interest payments.
- Submit the application. You can usually apply on the lender’s website. It usually takes a couple of days to approve your loan. Additional time may be necessary if you need to provide supporting documents or to review the qualifications of any cosigner on the loan.
- Review and sign the agreement. Once approved, you can review the terms and sign your loan agreement electronically. Don’t forget to continue making payments on your previous loan until your lender officially closes your account.
