Paying Off $150,000 in Student Loans: Strategies and Tips

Nearly 3.5 million federal student loan borrowers have $100,000 or more in outstanding loans, according to the College Board. Fortunately, if you owe $150,000 after earning your degree, there are ways you can tackle your debt and get your finances under control.

This guide will help you learn some of the best ways to deal with your loan balance.

Understanding $150K in student loan debt

Six-figure student loan debt may make you feel like it's hard to accomplish other goals, like saving for retirement. Owing so much can also impact your ability to borrow money for things, such as a car or a home, because your balance will affect the debt-to-income ratio lenders look at when deciding whether to approve a loan.

Your choice of repayment plan and having a solid debt repayment strategy can make a big difference in making your finances feel more manageable.

“Repaying a large amount of student loan debt can seem overwhelming, but with a structured strategy, you can make progress efficiently,” says Cameron Burskey, senior partner and managing director of retirement security at Cornerstone Financial Services.

Repayment options for $150K in student loans

When you have a large student loan balance, looking at your payment plan options is critical.  “Students should be aware that there are usually options other than the normal repayment terms,” says Hillary Saylor Schulze, director of student financial services counseling at Alvernia University.

Federal student loan repayment plans

If you have federal student loans, you have several options, depending on your loan type:

• The Standard Repayment Plan: This plan allows you to repay your debt in 10 years by making fixed monthly payments.
• Income-driven repayment (IDR) plans: There are 4 IDR plans, which limit payments to between 5% and 20% of your discretionary income, depending on the plan. You can qualify for loan forgiveness after 10 to 25 years on one of these plans if any balance remains after your loan term.
• The Graduated Repayment Plan: Your payments on this plan start lower and increase every 2 years over a 10-year repayment period.
• The Extended Repayment Plan: This plan is available to borrowers with more than $30,000 in eligible loans. It extends repayment to 25 years, and offers fixed or graduated payments.

You can use the Department of Education's loan simulator tool to compare these plans and decide which one best aligns with your goals.

The standard and graduated plans come with higher monthly payments, but you'll be debt-free faster and pay less interest over time. These plans may be best if you can afford them and want to be done with your loans quickly.

Income-driven and extended plans can provide more breathing room in your budget but leave you saddled with your loans for many more years.

Private student loan repayment options

While you have many options for federal student loan repayment, your choices are more limited if you have private loans. When you borrowed, you'd have chosen a payment plan with your lender. You'll typically have to follow it unless you refinance your loans into one new loan to change the terms.

Some private student loan lenders offer forbearance or deferment if you're facing financial hardship and need student loan repayment help. However, interest continues to accrue even if payments are paused. You should try to avoid this option unless you can't make payments, as you won't make progress on debt repayment and your balance will grow as interest adds up over time.

Strategies to pay off $150K faster

Becoming free of your $150,000 debt as soon as possible can improve your financial life.

“Start by assessing and understanding your loans. List all your student loans, noting their balances, interest rates, and terms,” advises Burskey. “Federal and private loans often have different repayment options and benefits.”

Once you know your current loan terms, the next step is to create an early payoff plan. There are two common strategies:

• Debt avalanche: This involves making extra payments on your highest-interest debt first. It's the strategy Burskey recommends. “Focus on repaying loans with the highest interest rates first, as this reduces the total cost over time,” he says.
• Debt snowball: This involves paying extra on your loan with the lowest balance first so you can repay it in full more quickly. This method can be a good option if you need help staying motivated, as you're able to score quick wins.

Whichever approach you choose, as you pay off each loan, you'll roll over the money that you were paying on that debt to make a larger payment on the next loan you're tackling.

If you come into extra money throughout the year, you can also put that money toward extra payments.

“Use tax refunds, bonuses, or other unexpected funds to make lump-sum payments toward your loans,” says Burskey.

Refinancing could help you pay off debt faster

In some cases, refinancing your student loans could also help you to pay down your debt. Refinancing involves getting a new loan from a private lender and using it to repay your current student debt. If the new loan comes at a lower rate, it makes payoff cheaper since more of each payment goes toward the loan principal. Refinancing is different from consolidating student loans, which is done through the Department of Education and does not lower your interest rate.

“If you have good credit and steady income, refinancing private loans can reduce your interest rate and save money,” says Burskey. “Be cautious though, as refinancing federal loans forfeits benefits like deferment and forgiveness.”

If you're refinancing only private student loans, you don't need to worry about this downside. You do, however, want to pay attention to whether you're extending your payoff time, as making your repayment period longer will result in paying more interest over time.

Current student loan refinance rates

Budgeting tips for repaying high student loan debt

Managing your money carefully is also important when you have a large amount of student debt to repay. You can track your spending to identify areas where there's room to save, then redirect that money toward your loans by making a budget that treats debt repayment as a top priority.

However, while it's ideal to put extra money toward your loans, you also don't want to neglect other important financial goals. For example, you should aim to build an emergency fund before you start sending extra money to your student loan servicer. Otherwise, you could end up having to rely on credit cards to pay for unexpected expenses. Cards have higher interest rates and are costlier than student loans if you make late payments, which could damage your finances in the long run.

Making a detailed budget allows you to balance competing priorities like these and ensure that you're on track for financial success.

Alternative options to manage or reduce debt

While many people with large student loan balances repay their loans in full over time, there are also some alternatives worth considering. Other options include:

• Take advantage of income-driven repayment forgiveness: If you have federal student loans and are on an income-driven repayment plan, you automatically qualify to have your remaining balance forgiven at the end of your repayment term. This can be a tremendous help when you owe $150,000 in student loans.
• Pursue Public Service Loan Forgiveness: If you work full-time for a qualifying government employer or not-for-profit agency in public service, you may be able to get your loans forgiven after making 120 payments.
• Explore employer tuition assistance programs: Some employers offer help with student debt payoff through up-front funding or tuition reimbursement. Check with your employer to find out what options it offers.