Dear Penny: I Can Only Afford Interest on My Student Loans. What Can I Do?

A woman with a graduation cap made of money looks worried.
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Dear Penny,

I recently graduated with an associate’s degree in criminal justice. I just switched jobs, and I’m starting to pay back my student loans, but I am unable to pay the full amount. The interest is eating me alive.

I’ve been using surveys and side money to pay some back, which has really helped. But I am looking to pay these off within the five years.

Can you please give me advice on what to do? I feel lost.



Dear D.,

This lost feeling is common among new graduates facing their student loan debt payments for the first time — or anyone facing debt, for that matter. When paying the bill is a monthly struggle, it’s only natural to wonder if you’ll ever make progress or if you’ll just keep getting knocked back as interest accrues.

For some practical advice on managing student loan payments, I called on Paul Garrard of PGPresents, a student loan consultancy.

We were both confused by the five-year timeline you mentioned.

“The shortest repayment term on federal loans is ten years, and while there could be exceptions, it would be highly unlikely a private lender would require payment over a period that short,” Garrard explained by email.

If you have federal loans, an income-based repayment plan that adjusts your required monthly payment as your income changes can help ease your stress. The repayment period on these loans is typically 20 to 25 years.

Extending your payment period through one of these plans can amplify that overwhelmed feeling you already have about your debt. But keep in mind that 45 million other Americans are in a similar boat. Many of them are just starting out in their careers, too. With student loan debt averaging nearly $30,000 for borrowers from the class of 2018, many others are surely just as stressed as you are.

Remember that slow and steady wins this ugly race.

“Perhaps a realistic repayment objective is to find a repayment plan where the minimum required payment is comfortable and manageable, and then aggressively pay [extra] whenever possible,” Garrard said.

He recommends putting that payment on the loan with the highest interest rate. “While all payments on federal loans are applied to interest first, many private loan lenders allow borrowers to post additional payments against the principal balance of their [highest interest] loan, which helps pay it down even faster.”

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Lisa Rowan is a personal finance expert and senior writer at The Penny Hoarder, and the voice behind Dear Penny.