How To Pay Off $200,000 in Student Loans

More than 1 million Americans owed $200,000 or more in federal student loans as of the end of 2024, according to the U.S. Department of Education. Carrying this level of debt can feel overwhelming, but there are strategies to make it more manageable, and even reduce the total cost over time.

Here's how you can take control of high student loan debt and work toward becoming debt-free.

The financial impact of $200K in student debt

A student loan balance of $200,000 is comparable to a mortgage, making it a significant financial obligation you'll likely manage for years.

“There are no easy answers in terms of paying the funds back,” says Steven Conners, founder and president of Conners Wealth Management. “Given the high dollar amount of your student loans, hopefully, your future earnings will support repayment.”

If you earned a professional degree and secured a well-paying job, you might be able to afford payments on the Standard Repayment Plan, even with a high debt balance. However, your debt will still appear on your credit report, potentially affecting your ability to qualify for other loans.

You'll also need to fit student loan payments into your budget, which may limit the money you have available for other financial goals or discretionary spending.

Current student loan refinance rates

What's the best repayment plan to pay off $200K?

Choosing the right repayment plan depends on your financial goals and how much flexibility you need.

If you have federal student loans

If you have more than $200,000 in federal loan debt, you have several different repayment options.

• Standard Repayment Plan: This plan comes with fixed monthly payments and is designed to pay off your loans in 10 years. It's ideal if you can afford higher payments now and want to minimize the total interest paid over time. Borrowers with stable, higher incomes often benefit the most from this option.
• Graduated Repayment Plan: Payments start low and increase every 2 years, with a 10-year repayment term. This plan works well if you expect your income to rise significantly over the next decade. However, you'll pay more in interest compared to the Standard Plan due to smaller early payments.
• Extended Repayment Plan: This plan stretches your repayment term up to 25 years, significantly lowering your monthly payments. It's a good option if your budget can't accommodate the higher payments required by shorter-term plans. Keep in mind, though, that you'll pay far more in interest over the life of the loan.
• Income-driven repayment (IDR) plans: IDR plans base your monthly payments on your income and family size, and forgive your remaining debt after 10 to 25 years, depending on the plan. This is best if your income is low relative to your debt.

“You can use the loan simulator on StudentAid.gov to estimate your monthly payments and compare plans,” says Jack Wang, wealth advisor with Innovative Advisory Group. The loan simulator tool is available on the Federal Student Aid website and allows you to explore how different repayment plans impact your budget and long-term costs.

If you have private student loans

Private student loans work differently than federal loans. You can't switch repayment plans with your student loan lender. To adjust your loan terms, you'll need to refinance.

“Consider having a cosigner, even when one isn't necessarily required, in order to get better rates,” advises Wang.

Securing a lower interest rate will save you money, but it's also important to think carefully about your repayment term:

• Longer term: Extending your repayment term can lower your monthly payments, making them more manageable in the short term. However, you'll pay more in interest over the life of the loan.
• Shorter term: A shorter repayment term often means higher monthly payments, depending on how much you reduce your interest rate. However, it can significantly cut your total repayment costs.

“Keep in mind that not every loan has to be on the same repayment plan,” Wang says. “You can set some loans to a plan with a lower monthly payment and use the savings to accelerate the payoff on another loan.”

Another advantage of private student loans is that most don't have prepayment penalties.

“Choosing a longer repayment period doesn't necessarily mean you have to keep the loan that long,” Wang explains. “But a longer term with a lower payment can help with finances in the short term.”

Strategies to pay off $200K faster

Managing a $200,000 student loan balance requires a clear strategy to reduce costs and pay down debt as efficiently as possible. Here are some approaches to consider.

Pay more than the minimum each month

Paying only the required amount each month keeps you on track, but it won't reduce your debt quickly. To make meaningful progress on a high debt balance, try to pay more than the minimum amount whenever possible.

Even small additional payments can go a long way toward lowering your principal balance, reducing the total interest you'll pay over time. Consider adjusting your budget to free up extra funds, such as cutting discretionary expenses or allocating windfalls like tax refunds or bonuses toward your loans.

Debt avalanche

“Pay off the highest-rate loans first,” recommends Conners. This approach is called the debt avalanche method and focuses on eliminating the loans with the highest interest rates first while continuing to make minimum payments on the rest.

For someone with $200,000 in debt, this approach can save thousands of dollars in interest over time. The savings are especially significant if your loans include a mix of federal and private loans or variable-rate loans with higher rates.

Debt snowball

If motivation is your biggest challenge, the debt snowball approach may be a better fit. This method focuses on paying off the smallest loan balance first, regardless of interest rate. As you eliminate smaller debts, you'll gain momentum and confidence to tackle the larger ones.

For someone managing $200,000 in student loans, the psychological boost of seeing progress can be crucial.

Loan forgiveness and repayment assistance programs

If you're facing $200,000 in student loan debt, pursuing loan forgiveness programs or repayment assistance could help reduce the burden. Here are some options to consider:

Public Service Loan Forgiveness (PSLF)

PSLF is available for federal student loans and offers forgiveness after 120 qualifying payments under an income-driven repayment plan. To qualify, you must work full-time for an eligible not-for-profit or government agency. This program could be a good fit if you're pursuing a career in public service and want to eliminate a significant portion of your debt.

Income-driven repayment forgiveness

Income-driven repayment plans can also lead to federal loan forgiveness after 10 to 25 years of qualifying payments, depending on the plan. While this option can take longer, it's helpful if your income is low relative to your debt and you're struggling to afford higher payments.

State-sponsored programs

Many states and professional fields offer loan repayment assistance programs to eligible borrowers. Teachers and health care professionals like doctors, nurses, dentists, and veterinarians may qualify for repayment assistance if they work in underserved areas or commit to specific roles for a set number of years. Research programs in your field or state to find options tailored to your career path.

Employer student loan assistance

Some employers, including large companies like Google, Estée Lauder, and NVIDIA offer student loan repayment assistance. These programs may provide up to $5,250 per year tax-free to pay down your loans, with any amount above this considered taxable income. If you're employed by a company offering this benefit, it can be an effective way to lower your balance without impacting your monthly budget.

See Also: How To Get Student Loan Repayment Help

Budgeting tips to manage high student debt

When you're managing a large student loan balance, every dollar counts. Creating a detailed budget can help you take control of your finances.

“If you want to pay down your student loans, you need to make them a priority,” says Domenick D'Andrea, financial adviser and founder of DanDarah Wealth Management.

Start by making your loan payments an essential part of your budget. This includes not just the minimum payment but also extra payments whenever possible. These additional contributions can make a big difference in reducing your overall loan costs.

“Start looking over your monthly budget to see if there are any expenses you can cut back on,” D'Andrea recommends.

“If you can find ways to cut back on spending, you can use those extra dollars to help pay more than the minimum payment. If you can't cut down on expenses, you could potentially find a part-time job to increase your income to be able to make larger payments.”