How to Get Out of Student Loan Debt

Of the millions of Americans who struggle to pay student loans, many want to know: Can I reduce or eliminate my student loan debt?  In very limited circumstances, it is possible to get rid of student loan debt. However, most people will not be able to wipe out some or all of their loans. The good news, though, is that some people are eligible to reduce monthly payments, get a temporary break from payments, or take advantages of other ways to better manage their student loan payments.

Many of these programs depend on the kind of loan you have. To find out about the different types of loans and get details on the below programs, see the articles in ourStudent Loan Debt area.

Below is an overview of your options if you struggle to pay your student loans.

Payment Plans for Financial Hardship

If your income is low or unstable, or you have very high student loan debt compared to your income, you might be eligible for one of the below plans.

Income Contingent Repayment Plan (ICRP) 

If you have a federal Direct Loan (other than a PLUS loan), you can opt for this plan which calculates your payment amount based on your income. Your payments could be as low as $5 or even $0. If you haven't paid off your loan after 25 years, the government will cancel the remaining balance.

Income Sensitive Repayment Plan (ISRP) 

In this plan, which is only available for a certain type of loan (called a FFEL), your payments are based on your annual income, family size, and total loan amount. Your payments must at least cover accruing interest and you must pay the loan off in ten years.

Income Based Repayment Plan (IBRP)

You can get an IBRP for both Direct loans and FFELs, but you cannot be in default to qualify. IBRP offers more flexible options than under ICRPs or ISRPs. Your debt is eliminated after 25 years of payments, payments can be less than the accruing interest, and may be less than under ICRPs or ISRPs. 

Hardship Repayment Plans for Perkins Loans

If you have a Perkins loan, you must pay at least $40 per month, but the school can extend repayment for another ten years or allow additional extensions for prolonged illness or unemployment.

To learn more about these types of plans, see Student Loan Repayment Options.

Payment Plans Without Financial Hardship

If you don’t qualify for a payment plan based on financial hardship, there are still several options for restructuring your payment plan for federal loans. You can opt for a graduated payment plan where your payment starts low and slowly increases as time passes. Or, if your loan is over a certain amount, you can stretch out your payments over 25 years (versus the usual ten years). To learn more, see Student Loan Repayment Options.

Consolidating Your Student Loans

A consolidation loan allows you to combine one or more of your federal student loans into a single loan with one monthly payment. A consolidation loan can be helpful if you want to reduce your interest rate, you don’t qualify for another payment plan program, you qualify for another payment program but still can’t afford the payments, or you want to get out of default.

To learn more about how to consolidate your loans, eligibility criteria, restrictions, and the pros and cons, see Student Loan Consolidation.

Deferring Student Loans

A deferment excuses you from making student loan payments for a set period of time because of a specific condition in your life -- such as returning to school, economic hardship, or unemployment. Interest will not accrue on subsidized loans during the deferment period.  (Learn more about deferring student loans.)

Getting a Forbearance

With loan forbearance, your loan holder gives you permission to stop making payments for a set period of time or to temporarily reduce payments. Common reasons supporting a forbearance include poor health, unforeseen personal problems, your inability to pay the loan within ten years (or other loan term period), or monthly loan payments that are more than 20% of your income. (Learn more about student loan forbearances.)

Cancelling Student Loans

In some situations, you can get rid of your student loans altogether. This is referred to as cancelling  or discharging loans. In order to do this, you must meet very specific criteria. The programs only apply to certain types of loans and sometimes only if you received the proceeds after January 1, 1996.. Sometimes, you can cancel part of the loan, but not the entire loan.

The circumstances in which you might be able to cancel your student loan include:

• You attended or were enrolled in a school that closed while you were there, before you started classes, or within a certain time frame afterwards. This program only applies to certain types of loans. (Learn more about cancelling a student loan due to school closure.)
• Your school refused to refund you money that it owed to you because you did not attend the school or withdrew. (Get details on cancelling a student loan due to unpaid refunds.)
• Your school did not make sure that you were qualified to attend the program. This is called false certification. (Get specific information on cancelling student loans due to false certification.)
• You work in certain occupations after graduation (like teaching or some public service jobs).  (Learn more about cancelling part of your loans due to your occupation, volunteer, or public service work.)
• You are unable to work because of an illness or injury that is expected to continue for five or more years or result in your death.
•  If the person owing the loan dies, the loan obligation ends. (Learn more aboutcancelling student loans due to permanent disability or death.)

Discharging Student Loans in Bankruptcy

It’s very difficult to discharge student loans in bankruptcy. You must demonstrate that it would be an undue hardship for you to pay them, and courts are very reluctant to find that debtors have met this standard. If you file for Chapter 13 bankruptcy, however, you may be able to pay all or part of your student loans through your Chapter 13 plan. To learn more, see Student Loans and Bankruptcy.

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Here's when you can get out of paying back student debt

With student loan debt soaring around the US, and Mark Cuban warning of a "student loan bubble" due to rising tuition costs, it's crucial for students to understand how to best pay off their student loan debt.

But not everybody realizes you can sometimes get out of paying some of your student loans.

The US government even discharges debt completely in some cases, like if your college collapses while you're still getting your degree. 

Full Discharge of loans

Full discharge of student loansoccurs in serious instances. If your school has closed down while you are still enrolled and you can't graduate, you are often eligible for a full discharge of your loans.

Full cancelation of loans also occurs in instances of death, permanent disability, and in rare cases, bankruptcy.

People who aren't eligible for a discharge through these extreme circumstances can be eligible for partial student-loan forgiveness through other means.

Public service loan forgiveness

This loan forgiveness plan offers a fairly quick way out of paying your student loans. If you work in public service (including jobs with the federal, state, or local government), or for a tax-exempt nonprofit organization, you may qualify for early termination of your loans after 10 years under the Public Service Loan Forgiveness Program.

To qualify, you must make 120 on-time payments. Paying ahead for future months does not count as one of your 120 scheduled payments.

The bottom line is that you can get out of your student loans in 10 years if you don't miss a payment and work at a public service job.

Teacher Loan Forgiveness

If you're a teacher at a low-income school, as indicated on an annual list determined the federal government, you are eligible for 100% discharge of your Perkins student loan (a type of need-based loan).

In addition to Perkins Loan forgiveness, those who teach in low-income schools for five consecutive years can also have $17,500 taken off their student loan balance of Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans.

Income-Driven Repayment Plans

Income-driven plans can help graduates tackle student loan debt if they don't have a job in public service and aren't a teacher. There are three types income-driven plans, all of which require at least 20 years of payments.

The Pay As You Earn Repayment Plan offers the ability to pay monthly payments that are 10% of discretionary income as long as you are a "new" borrower who got a loan on or after July 1, 2014. After 20 years of qualifying payments, your debt goes away completely.

The Income-Based Repayment Plan also offers the ability to make monthly payments that are 10% or 15% of discretionary income for 20 years until the debt is forgiven completely.

Via Flickr

Income-Contingent Repayment Plan offers payments that are recalculated each year based income. Forgiveness eligibility is available after 25 years.

While these plans may sound like excellent deals, some experts in student loan management warn students to be wary of income-based repayment plans. These plans result in students simply "treading water," according to Andrew Josuweit, CEO of Student Loan Hero, a company that helps students manage their debt. 

Income-based repayment plans reduce individual payments but may actually increase the student loan balance owed in the long term, according to Josuweit.

If your payment amounts are so low that you aren't even paying of the principal of your loan you won't be chipping away at the overall balance you owe. Or, if your payment amounts don't even cover all of the interest amount each month, the residual would be recapitalized to your loan, increasing the total balance owed.

Income-based repayment plans do provide benefits in certain situations, and Josuweit says they're better than defaulting on student loans if you’re completely unable to make your normal monthly payments.

There are loan calculators On Student Loan Hero that can help compare different plans and determine the best course of action for students who are trying to manage their seemingly unmanageable debt.

The Top 10 Student Loan Tips for Recent Graduates

Whether you just graduated, are taking a break from school, or have already started repaying your student loans, these tips will help you keep your student loan debt under control. That means avoiding fees and extra interest costs, keeping your payments affordable, and protecting your credit rating. If you're having trouble finding a job or keeping up with your payments, there's important information here for you, too.

1. Know Your Loans: It's important to keep track of the lender, balance, and repayment status for each of your student loans. These details determine your options for loan repayment and forgiveness. If you're not sure, ask your lender or visit www.nslds.ed.gov. You can log in and see the loan amounts, lender(s), and repayment status for all of your federal loans. If some of your loans aren't listed, they're probably private (non-federal) loans.  For those, try to find a recent billing statement and/or the original paperwork that you signed. Contact your school if you can't locate any records.

2. Know Your Grace Period: Different loans have different grace periods. A grace period is how long you can wait after leaving school before you have to make your first payment. It's six months for federal Stafford loans, but nine months for federal Perkins loans. For federal PLUS loans, it depends on when they were issued (see details). The grace periods for private student loans vary, so consult your paperwork or contact your lender to find out. Don't miss your first payment!

3. Stay in Touch with Your Lender: Whenever you move or change your phone number or email address, tell your lender right away. If your lender needs to contact you and your information isn't current, it can end up costing you a bundle. Open and read every piece of mail - paper or electronic - that you receive about your student loans. If you're getting unwanted calls from your lender or a collection agency, don't stick your head in the sand - talk to your lender! Lenders are supposed to work with borrowers to resolve problems, and collection agencies have to follow certainrules. Ignoring bills or serious problems can lead to default, which has severe, long-term consequences (see tip 6 for more about default.)

4. Pick the Right Repayment Option: When your federal loans come due, your loan payments will automatically be based on a standard 10-year repayment plan. If the standard payment is going to be hard for you to cover, there are other options, and you can change plans down the line if you want or need to. Extending your repayment period beyond 10 years can lower your monthly payments, but you'll end up paying more interest - often a lot more - over the life of the loan. Some important options for student loan borrowers are income-driven repayment plans such as Income-Based Repayment and Pay As You Earn which cap your monthly payments at a reasonable percentage of your income each year, and forgive any debt remaining after no more than 25 years (depending on the plan) of affordable payments. Forgiveness may be available after just 10 years of these payments for borrowers in the public and nonprofit sectors (see tip 10 below). To find out more about Income-Based Repayment and related programs and how they might work for you, visit IBRinfo.org.

Private loans are not eligible for IBR or the other federal loan payment plans, deferments, forbearances, or forgiveness programs.  However, the lender may offer some type of forbearance, typically for a fee, or you may be able to make interest-only payments for some period of time. Read your original private loan paperwork carefully and then talk to the lender about what repayment options you may have.

5. Don't Panic: If you're having trouble making payments because of unemployment, health problems, or other unexpected financial challenges, remember that you have options for managing your federal student loans. There are legitimate ways to temporarily postpone your federal loan payments, such as deferments and forbearance. For example, an unemployment deferment might be the right choice for you if you're having trouble finding work right now. But beware: interest accrues on all types of loans during forbearances, and on some types of loans during deferment, increasing your total debt, so ask your lender about making interest-only payments if you can afford it.

If you expect your income to be lower than you'd hoped for more than a few months, check out Income-Based Repayment. Your required payment in IBR can be as little as $0 when your income is very low. See tip 4 for more about IBR and other repayment options.

6. Stay out of Trouble! Ignoring your student loans has serious consequences that can last a lifetime. Not paying can lead to delinquency and default. For federal loans, default kicks in after nine months of non-payment. When you default, your total loan balance becomes due, your credit score is ruined, the total amount you owe increases dramatically, and the government can garnish your wages and seize your tax refunds if you default on a federal loan. For private loans, default can happen much more quickly and can put anyone who co-signed for your loan at risk as well. Talk to your lender right away if you're in danger of default. You can also find helpful information atstudentloanborrowerassistance.org.

7. Prepay If You Can: If you can afford to pay more than your required monthly payment - every time or now and then - you can lower the amount of interest you have to pay over the life of the loan. To pay down your loan more quickly, make sure to include a written request to your lender specifying that the extra amount be applied to your loan balance, and continue making payments each month. Otherwise, your prepayment may automatically be credited to a future payment and you may not be billed for the next month. 

8. Pay Off the Most Expensive Loans First: If you're considering paying off one or more of your loans ahead of schedule, start with the one that has the highest interest rate. If you have private loans in addition to federal loans, start with your private loans, since they almost always have higher interest rates and lack the flexible repayment options and other protections of federal loans.

9. To Consolidate or Not to Consolidate: A consolidation loan combines multiple loans into one for a single monthly payment and one fixed interest rate. If this is appealing, here are some pros and cons to consider. You canconsolidate your federal student loans through the Direct Loan program, and this calculator can help you figure out what your interest rate would be. For private consolidation loans, shop around carefully for a low or fixed interest rate if you can find one, and read all the fine print. Never consolidate federal loans into a private student loan, or you'll lose all the repayment options and borrower benefits - like unemployment deferments and loan forgiveness programs - that come with federal loans!

10. Loan Forgiveness: There are various programs that will forgive all or some of your federal student loans if you work in certain fields or for certain types of employers. Public Service Loan Forgiveness is a federal program that forgives any student debt remaining after 10 years of qualifying payments for people in government, nonprofit, and other public service jobs. Find out more at IBRinfo.org. There are other federal loan forgiveness options available for teachers, nurses, AmeriCorps and PeaceCorps volunteers, and other professions, as well as some state, school, and private programs (see some examples).

Your Options When You Can't Repay Student Loans

There are a few options for student loan repayment. But how can you go about getting your student loans cancelled, forgiven, or deferred when you can't pay them back?

It can be pretty scary when you are unable to pay back your student loans, and the consequences of defaulting on loans can be severe. You may start thinking about your credit score being ruined or having collection agencies start knocking on your door. However, don't panic, there may be some options available to you.

What is important is that you need to learn about the various options you have when it comes time to pay back your student loans. Default is something that you should try to avoid at all costs as it will not only damage your credit score, but it will also most likely increase the balance on your loans. Indeed, your loan holder may even get a court order that would allow them to take a portion of your paycheck or even grab your tax refund.

Student Loan Repay Options

There are several options that are available to you when you cannot make the payments on your student loans. These options include:

• Delaying payments on your loans through forbearance or deferment programs,
• Getting your loan canceled and eliminating all payments,
• Discharging your loan through bankruptcy proceedings,
• Getting on a income-sensitive or income-based repayment schedule, or
• Consolidating your loans into one loan.

Student Loan Deferments

In some situations, you may be able to obtain a deferment on your student loan payments. These deferments allow you to stop making payments for a certain period of time if you can show that you qualify. For instance, you may be able to get a deferment if you can show economic hardship, are returning to school, are unemployed, or looking for a job.

Depending on your type of loan, the deferment will not only allow you to stop making payments on the principal, but it will also stop interest from accruing on the unpaid balance. For other types of loans, you are only allowed to defer the principal of the loan, meaning that interest on your loan will continue to increase during the time you are not making payments. You will need to figure out what types of loans you have, as well as where you got them from, in order to see what kinds of deferments you are eligible for.

In most situations, you will be able to defer payments on your student loans if you meet one of the conditions that are described below (see the last section of this article titled "Conditions for Deferments on or Cancellations of Student Loans") and you are not currently in default on your loan. In some situations, you may even be able to qualify for a deferment even when you are in default this is called a retroactive deferment.

Like many things in life, deferments are never automatically put in place. In general, you must apply for a deferment. To do this, you should contact your loan holder and get the necessary paperwork. It can be a lot of work to get everything done correctly, but you should take the time and do it properly if a deferment will help you.

To get the necessary paperwork, you should contact your loan holder and talk to them about the various types of deferment that you think you may qualify for. Then, you should ask them to send you the right forms that you need to fill out. Doing this may help keep the loan holder from calling you about past due payments.

Student Loan Forbearances

If you are unable to qualify for a deferment, you may be able to postpone payments on your student loans by setting up a loan forbearance. A loan forbearance can generally be thought of as your loan holder allowing you to stop making payments for a set period of time. However, you should keep in mind that interest will continue to accrue during a forbearance so your loan balance will be higher when you come out of the forbearance. Generally, forbearances are easier to obtain than deferments because they are not linked to the type of student loans you have and they are not covered by the laws and rules that apply to deferments and cancellations of student loans.

Generally, you may be able to obtain a forbearance for a variety of reasons. For example, if you have suffered from poor health or unforeseen personal problems, you may be able to get a forbearance. Also, if you foresee that you will not be able to pay back your student loans within the period for repayment (generally 10 years), or your monthly payments are more than 20% of your income each month, you may be able to get a forbearance. Loan forbearances are generally granted for up to one year at a time and you may be able to get a forbearance even if you have defaulted on your student loans.

In order to apply for a forbearance, you should contact you loan holder and tell them about your inability to pay. You will probably have to fill out some forms, either online or via mail, to apply for a forbearance.

Bankruptcy and Student Loan Discharge

Another option that you have when you cannot pay back your student loans is to try to have your loans discharged through bankruptcy. However, this is very hard, indeed almost impossible, to accomplish under current law. Generally speaking, your student loans can only be discharged through bankruptcy if you can show that the burden of repaying your student loan would impose a severe hardship on you. This is quite a tough standard to meet. Courts generally consider a number of factors when you try to make this argument such as your age, health condition, income, expenses, and the length that your income problems are likely to persist.

In order to have the best chance of having your student loans discharged through bankruptcy, you will have to file a separate court action and you should probably also hire an attorney to help you make the most convincing argument possible.

Cancellation of Student Loans

Much like a loan deferment, there are only certain situations in which you may be able to have your student loans cancelled. Just like a deferment, you will have to show that you fall into a specific situation (see the last section of this article titled "Conditions for Deferments on or Cancellations of Student Loans") depending upon what types of loans you have. Also, cancellation does not always take care of an entire loan and you may only end up getting a portion of your loan cancelled.

The first step in the loan cancellation process is to contact the holder of your loan or the Department of Education's Debt Collection Services Office. You will be required to fill out a loan cancellation application and submit this form with any requisite documentation (like proof of a disability via a note from your doctor that describes your physical condition and how it impacts your ability to work).

Conditions for Deferments on or Cancellations of Student Loans

Here are the conditions that may allow you to defer or cancel your student loans. Keep in mind that some of the conditions may only qualify you for loan cancellation, others for both deferment and cancellation, and others for only deferment. Be sure to read carefully.

• The borrower has died. If the person that took out the student loan has died, the executor of the borrower's estate will most likely be able to cancel any student loans that the deceased had outstanding.
• The borrower is suffering from a permanent total disability. If you have suffered a personal injury that prevents you from working for an indefinite period of time or that will likely cause your death, you may be eligible to cancel any student loans you have. Generally speaking, to qualify for this cancellation, you cannot have had this permanent total disability before you applied for your student loan, or your situation must have deteriorated significantly since that time. In order to prove this, you will need to supply a letter from your doctor, most likely on a form that your loan holder will provide.
• The borrower is suffering from a temporary total disability. If you have a student loan that you took out before July 1, 1993, you may be able to defer loan payments for up to three years if you can show that you, your spouse or a dependant has suffered from a temporary total disability. If you are claiming you have the disability, you must be able to show that you are unable to attend school or a work a job for at least 60 days. If it is your spouse or dependant that suffered the disability, you must be able to show that the disabled person needs you to care for them for at least 3 months.
• The borrower is enrolled in a rehabilitation program for his or her disability. If you are currently enrolled in a rehabilitation program for a disability you suffered, you may be able to defer your loan payments for the length of the program and an additional six months after the program ends.
• The borrower is unemployed. If you are currently unemployed, but are looking for work, you may be able to defer your loan payments. In order to qualify for this deferment, you will need to prove your unemployment (for example, by stubs for unemployment benefits) and/or your search for a job (written documentation of job applications). In order to qualify, you must be looking for full-time employment, meaning at least 30 hours a week for a period that is at least three months long.
• Economic hardship. If you have a loan that was obtained after June 30, 1993, you may be able to defer payments for up to three years if you can prove that you are suffering from an economic hardship. If you receive public assistance (such as welfare or SSI), you are automatically entitled to this deferment. However, if you are not receiving public assistance, you must apply for an economic hardship deferment. This application will look into your wages and compare them to the federal minimum wage as well as the federal poverty level. You will need to provide proof of your income, most likely through pay stubs.
• The borrower is currently enrolled in school. If you return to school on at least a half-time basis, you will most likely be able to defer you payments until you leave school again.
• The borrower enters uniformed service. If you are currently serving the country in one of the uniformed services (U.S Military, National Oceanic and Atmospheric Corps or the Public Health Service), you may qualify to have your loans deferred or cancelled. You should talk to your commanding officer as well as your loan holder to see what you qualify for.
• The borrower is teaching a needy population. If you are currently a teacher that is teaching for a needy, low-income population, you may be able to have your student loans canceled or deferred.
• The borrower is serving a needy population. If you are currently serving a needy population, but not teaching them, you may also be able to qualify to have your loans deferred or cancelled.
• The borrower is performing community service. If you have student loans and are currently performing community service (such as serving in the peace corps or volunteering with local associations that assist low income families), you may be able to partially cancel your student loans or get a deferment.
• The borrower is working in the health-care field. Borrowers that are currently working in the health-care field (for example, nurses or doctors in residency) can sometimes have their loans canceled or deferred.
• The borrower is working in law enforcement. If you are working full time in the law enforcement field (police force and sheriff's office), you may be eligible to have some of your older Perkins loans cancelled.
• The borrower went to a trade school. If you were goaded into attending a trade school only to have the school close before you could obtain your degree, or if you were falsely told that taking out a student loan for trade school would benefit you, you may be eligible to have all of your student loans forgiven.
• The borrower was a victim of identity theft. If someone used your identity falsely to obtain a student loan, you will most likely be able to get the loan canceled.
• The borrower left school but never got a refund. If you were a student that took out a student loan but withdrew from the school before attending any classes, or only attended less than 60% of the class before withdrawing and never received a refund, you may be able to cancel your loan up to the amount that you should have received as a refund.

- See more at: http://bankruptcy.findlaw.com/debt-relief/your-options-when-you-can-t-repay-student-loans.html#sthash.sz10b0Gd.dpuf

The 5 fastest ways to repay your college loans

The 5 fastest ways to repay your college loans

Getting out from under college loan debt

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If there's one obstacle that prevents most millennials from investing either independently or with a financial adviser, it's the burden of college loans. These loans weigh down graduates, preventing them from seizing new financial opportunities until they clear their debt. In 2012, the Federal Reserve Bank of New York reported that the average outstanding student loan balance was $24,301, with 10 percent of borrowers owing more than $58,000.
So how can you get out from under that debt quickly? We spoke to investment managers and financial planners for their top tips to become free of that student loan. While they may be faster, some will definitely not be cheaper -- at least initially. But all are worthwhile in the end.

Treat the loan like a mortgage

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If you can afford it, treat the loan like a mortgage and simply make larger payments to reduce the principal more quickly, says financial planner Allan Katz, CFP, president of Comprehensive Wealth Management Group in New York's Staten Island.
For example, a $25,000 student loan with 6.8 percent interest with a 10-year payback period would cost $288 a month. Paying $700 a month instead of $288 enables the borrower to repay the loan in just over three years, Katz says.
By doing this, borrowers are "paying the principal down more quickly, which results in lower interest charges," he says. By paying extra, the entire loan would cost $28,000 rather than $34,560.
Another strategy is adding payments and sending in checks every two weeks rather than monthly.
Once that college loan is repaid, the benefits proliferate. "It's one less debt you owe. The money you make is now free to be invested and applied to owning a house, saving for retirement or putting a child through college," Katz says.

Create a 3- to 5-year plan

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Clayton Shearer, a Certified Financial Planner at Wellness Financial Services in Thornton, Colo., urges clients to create a three- to five-year plan to pare down college debt. Knowing exactly when the loan ends is comforting for many clients. Clients "have a goal in place, they're committed to it and they know exactly what to pay monthly," Shearer says. Paying it becomes part of their monthly routine comparable to submitting checks for mortgages, cable TV and telephone.
For example, two clients had $50,000 combined in college debt and were making around $100,000 a year jointly. To pay it off, they established a budget and curtailed spending. Their budget was helped by two sizable bonuses from work, resulting in their sending $800 per month for two years to cancel their college debt. Had they not prepaid, it would have taken about 15 years to pay off the loan. The result, Shearer says, is clients "get debt-free and have a load lifted off their shoulder."

Establish a college repayment fund

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If a graduate can save an additional $100, $200 or more a month and deposit it into an account via automatic savings, it can expedite repayment. Having money moved automatically is effective because it's forced savings, Katz says. It enables people to set aside money to grow what otherwise would be spent on TVs or iPhones, Katz says. Just make sure to set up an account that will be used only for paying back your college debt. Don't use checking or savings accounts you already have because you might use that money for something other than your loan.
When you create the account, you can tie it to mutual funds, saving accounts, annuities and stocks that offer dividend reinvestment plans. The most effective way to ensure that the money saved multiplies is to let the money grow until it accumulates into a lump sum and then transfer it a chunk at a time to pay off the loan balance. "How long somebody must save depends on the returns they get, as well as the amount they are investing and how much they owe," he says.
Of course, there's risk associated with savings in investments like mutual funds because the stock market is volatile and can falter. Typically over the span of a five-year or longer loan, stock market investments recover and grow, he says.

Start early with a part-time job in college

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Earning money while attending college is one way to be proactive about keeping college debt in check, says Charles Sachs, a principal at Private Wealth Counsel in Miami. He says it's a win-win because "getting a paid position while still in school generates some money that offsets loans and builds invaluable industry-specific knowledge."
If a student can manage to put away $1,000 a month, "that's $12,000 (a year) less in student loans and not having to take that money out in loans -- a big savings," Shearer says.
Working part time while attending college can also strengthen a student's ability, Shearer says. It develops discipline, provides real-world experience and earns income to lower future debt obligations, he adds.