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How Can I Reduce Student Loan Debt?

Student Loans
Written by Jaeme Velez
Updated: June 12, 2024
10 min read
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The opinions expressed in this article are the author's own and do not reflect the view of Pathward®.

The burden of student debt can be overwhelming and hinder financial progress. However, taking proactive steps to reduce student loans can go a long way toward helping you achieve financial freedom and a debt-free future. In this article, we will explore various strategies, budgeting tips, and additional ways to minimize student debt, as well as how to prepare for a debt-free future.

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What Is Student Loan Debt?

Student loan debt is money borrowed to fund education expenses, such as college tuition, books, and living expenses. Unlike other forms of debt, student loans often come with favorable repayment plans and terms, such as low-interest rates and deferment options.

Student loan debt refers to the total amount of money borrowed by students to finance their education. According to the latest statistics from the Federal Reserve, the total outstanding in the United States exceeds $1.7 trillion, affecting many students' ability to save, invest, and achieve other financial goals.

Many individuals carry student debt well into their thirties, forties, and even beyond. This means that the financial impact can be felt for a significant portion of one's adult life.

Moreover, many students pursue advanced degrees, such as master's or doctoral programs, which can result in even higher levels of student debt alone. The pursuit of higher education is often seen as an investment in one's future, but it's crucial to understand the potential long-term financial implications.

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The Impact of Student Loan Debt on Your Finances

The heavy burden of student debt can have long-term implications for your financial well-being. Monthly student loan student loan payments can consume a significant portion of your income, limiting your ability to save for retirement, purchase a home, or invest in other areas.

Carrying a large amount of debt can affect your credit score and make it more difficult to qualify for other types of loans, such as mortgages or car loans. Lenders take into account your debt-to-income ratio, which is the percentage of your income that goes towards debt payments. The higher your debt-to-income ratio, the riskier you may appear to lenders, potentially resulting in higher interest or even loan denials.

Additionally, the stress and anxiety associated with carrying a significant amount of debt can also take a toll on your mental well-being. Constantly worrying about making payments and feeling trapped by debt can lead to feelings of hopelessness and frustration.

It's important to be proactive in exploring strategies to reduce its impact on your finances. By understanding the basics of debt and its implications, you can make informed decisions and take steps toward financial freedom.

Strategies for Reducing Student Loan Debt

1. Refinancing Your Student Loans

One option to consider is refinancing your student loans. Refinancing involves obtaining a new loan with a lower interest rate and using it to pay off your existing student loans. This can potentially save you thousands of dollars in interest payments over the life of the loan.

It's important to carefully consider the terms and conditions of the new loan. Look for a reputable lender that offers competitive interest rates and favorable repayment terms. Additionally, take into account any fees associated with refinancing and calculate whether the potential savings outweigh the costs.

Before making a decision, it's crucial to assess your financial situation and determine if refinancing makes sense for you. Consider factors such as your credit score, income stability, and long-term financial goals. Consulting with a financial advisor can provide valuable insights and help you make an informed decision.

2. Applying for Loan Forgiveness Programs

Loan forgiveness programs provide a path to potentially eliminate a portion or all of your student debt. These programs are typically available to individuals who work in public service, education, or eligible nonprofit organizations.

For example, the Public Service Loan Forgiveness (PSLF) program offers loan forgiveness after making 120 qualifying monthly payments while working full-time for a qualifying employer. This program can be a game-changer for those pursuing careers in public service, such as teachers, nurses, and government employees.

Remember, student loan forgiveness programs often require a long-term commitment, and keep in mind that each student loan forgiveness program has specific requirements and application processes, so it's essential to thoroughly understand the eligibility criteria and follow the necessary steps.

 3. Accelerating Your Repayment Plan with Student Loan Payments

If you have the financial means, accelerating your repayment plan can significantly reduce the total amount of interest paid over the life of your loans. Consider making extra payments towards your principal balance or increasing the amount of monthly payments to reduce the accrued interest.

One effective strategy is to allocate any windfalls or unexpected income towards your student loans. For example, if you receive a tax refund or a work bonus, consider using that money to make a lump sum payment towards your principal balance. This can help you pay off your loans faster, save money on interest, and contribute towards an effective repayment plan.

Another option is to set up automatic payments that are higher than the minimum required amount. By doing so, you'll be consistently chipping away at your debt and reducing the overall interest accrued.

Before implementing an accelerated repayment plan, review your budget and ensure that you have enough disposable income to comfortably meet the increased payment obligations.

strategies for reducing student loan debt

4. Smart Spending: The Bold Debit Card

While increasing monthly payments or making lump sum contributions are effective ways to accelerate your student loan repayment, another strategy worth considering is utilizing your spending habits to chip away at your debt.

This is where the Bold Debit Card comes in, offering a unique approach to managing education expenses and earning rewards* directly applicable to reducing your student loan burden.

With every $2 spent, you earn 1 Bold Point.* What's the best part? You can redeem these points for cashback and directly towards your student loan payments. One thousand Bold Points translate to $15 in student loan payments, compared to $10 in cashback, incentivizing you to prioritize debt reduction with your everyday spending.

The Bold Debit Card goes beyond rewards. It has no hidden fees, including annual or foreign transaction fees, catering to student budgets. Convenient features like direct deposits and easy transfers streamline money movement, and robust security measures help ensure peace of mind.

Ultimately, how to accelerate your repayment plan depends on your circumstances and financial goals. Remember, while the Bold Debit Card offers a valuable tool, combining it with responsible budgeting, careful planning, other repayment assistance, and exploring other options like refinancing or loan forgiveness programs can create a comprehensive approach to tackling your debt effectively.

Budgeting to Pay Off Student Loans

Creating a Budget Plan: Your Monthly Payment

Start by assessing your income and expenses to understand your financial situation. Take note of your monthly income from all sources, such as your full-time job, freelance work, or side gigs.

After analyzing your income, list your essential expenses. These include rent, utilities, groceries, transportation, and other necessary costs.

Once you have a clear picture of your income and expenses, subtracting your expenses from your income will give you a realistic view of how much money you have available for loan repayment each month. This step is crucial in determining how much you can allocate toward your monthly payment amount to pay off your student loans.

Allocating Funds for Loan Repayment

Now that you have a budget plan in place, allocate a portion of your disposable income towards loan repayment.

Automating payments can streamline your loan repayment process. When set up correctly, it can save you time and effort and help prevent missed payments or late fees. 

Note: Ensure sufficient funds are available in your account to avoid any potential charges. Be sure to double-check your automatic payment setup for accuracy.

It's also worth mentioning that you can explore various strategies to accelerate your student loan interest and repayment. For instance, you may consider making extra payments whenever possible or allocating any unexpected windfalls toward your student loans.

minimizing student loan debt before graduation

Additional Ways to Minimize Student Loan Debt

Working Part-Time While Studying

Consider working part-time while studying to generate additional income to put towards your education expenses. Not only will this help you financially, but it can also provide valuable work experience and enhance your resume.

Many universities offer on-campus job opportunities that are flexible and cater to students' schedules. You can explore positions such as library assistants, research assistants, or campus tour guides.

Applying for Scholarships and Grants

Scholarships and grants are excellent sources of funding that don't require repayment. They can significantly reduce your reliance on student loans. Research and apply for as many scholarships and grants as possible to increase your chances of receiving financial and federal student aid together.

Start by exploring scholarships offered by your university or college. Many institutions have specific scholarships based on academic merit, leadership qualities, or extracurricular involvement. These scholarships may be based on various criteria, such as your field of study, ethnicity, or community service.

Participating in Work-Study Programs to Pay Federal Student Loans

Another way to minimize debt is by participating in work-study programs. These programs provide part-time employment opportunities for students with financial need. The positions are typically on-campus and can range from administrative work to research assistance.

Work-study programs not only provide you with a paycheck but also offer valuable professional experience. You can develop transferable skills, build relationships with faculty and staff, and gain insights into your field of study. Additionally, work-study earnings are often exempt from certain taxes, allowing you to maximize your income.

To participate in a work-study program, you'll need to complete the Free Application for Federal Student Aid (FAFSA) to determine your eligibility.

Preparing for a Debt-Free Future

While repaying your student loans is a significant focus, it's crucial to also plan for a debt-free future. One important aspect of preparing for a debt-free future is creating a comprehensive financial plan with student loan repayment options.

This plan should include retirement savings, investments, and emergency funds. Working with a financial advisor can help you develop a personalized plan that takes into account your unique financial situation and goals.

Financial Planning for Post-Graduation

Work with a financial advisor to create a comprehensive financial plan that includes retirement savings, investments, and emergency funds. By starting early, you can take advantage of compounding interest and establish a strong financial foundation for the years to come.

When it comes to retirement savings, consider contributing to a 401(k) or an Individual Retirement Account (IRA). These accounts offer tax advantages and can help you build a nest egg for your future. It's important to contribute regularly and increase your contributions as your income grows.

It's also important to have a well-diversified investment portfolio. This can include stocks, bonds, and other investment vehicles. Diversification can help spread out risk and can potentially increase your returns over time. However, diversification cannot ensure a profit or protect against loss in a declining market. It’s a strategy used to help mitigate risk.

It’s best to consult with a financial professional before making any investment decisions to help you decide whether they align with your risk tolerance and financial goals.

Building an Emergency Fund

An emergency fund is a crucial element of financial stability. Allocate a portion of your income towards building an emergency fund to cover unexpected expenses, such as medical emergencies or car repairs. This will prevent you from turning to credit cards or loans in times of need, further increasing your debt burden.

Experts recommend having at least three to six months' worth of living expenses saved in your emergency fund. This can provide a safety net in case of job loss, unexpected medical bills, or other unforeseen circumstances.

Investing in Long-Term Financial Health

Consider investing a portion of your income in diversified investment portfolios, such as index funds or mutual funds. Investing can generate substantial returns over time and contribute to your overall financial well-being. However, it's essential to consult with a financial professional and assess your risk tolerance before making investment decisions.

When investing, it's important to have a long-term perspective. The stock market can be volatile in the short term, but historically, it has shown positive returns over the long term. By staying invested and not reacting to short-term market fluctuations, you can potentially benefit from the power of compounding and grow your wealth over time.

Review and rebalance your investment portfolio to ensure it aligns with your goals and risk tolerance. This can involve selling investments that have performed well and buying more of those that have underperformed, maintaining a diversified and balanced portfolio.

student loan debt

Frequently Asked Questions about Reducing Student Loan Debt

How can I create a budget to pay off my student loans?

Track your income and expenses and prioritize essential expenses such as rent, utilities, groceries, and transportation. Set aside a consistent amount for loan repayment and make automatic payments to stay on track and avoid late fees.

What are some ways to minimize student loan debt before graduation?

Apply for scholarships and grants to add to your federal student aid: Free money can significantly reduce your reliance on loans. Depending on your employment status, participate in work-study programs while gaining valuable experience on campus.

How can I prepare for a debt-free future after graduation?

Create a comprehensive financial plan: Include retirement savings, investments, and an emergency fund. Seek diverse investment options and consult a professional for guidance.

Reducing student loan debt requires a proactive approach and disciplined financial habits. By understanding the basics of student loan debt, implementing effective strategies, creating a budget plan, and exploring additional ways to minimize debt, you can pave the way toward a debt-free future.

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Jaeme Velez
Content Writer

About Jaeme

Jaeme Velez is an exceptionally dynamic writer, researcher, and avid enthusiast for science and technology. He brings a deep understanding of securing scholarships, obtaining student loans, and navigating the transition from community college to university.

As a first-generation college student, Jaeme began pursuing the dramatic arts and made a significant transition to pursuing academic studies at L.A. Valley College, focusing on Communication and English. He graduated cum laude with a B.A. in Creative Writing at Columbia University in the city of New York. His academic excellence has been recognized through the Casdin Family Scholarship Award and his membership in the Columbia University Honor Society.

Jaeme's academic path is marked by a profound passion for literature and storytelling, particularly in exploring the confluence of diverse cultures and languages while addressing social disparities. Alongside his literary interests, Jaeme maintains a keen curiosity for science and technology, actively engaging in research and projects related to Artificial Intelligence, Design, and human-computer interaction.


Balancing work and full-time studies as a first-generation college student has endowed Jaeme with a wealth of experience and insights. In his role as a Content Writer at, Jaeme shares invaluable wisdom and advice, drawing from his personal journey to provide the guidance he wishes he had received at the start of his academic journey. 

His work is fueled by the desire to equip the next generations of students with the knowledge and tools necessary to navigate their unique academic paths. From financial literacy to maintaining a healthy lifestyle, Jaeme strives to contribute to the ongoing discourse on education and support the next generations of scholars, regardless of their age, background, or current stage in life, as they traverse the complexities of higher learning.

Since joining the team in 2023 as a Content Writer, Jaeme has employed his distinctive background as a first-generation student alongside his familiarity with scholarships and student loans to guide students through the intricacies of academic life, emphasizing that every student's journey is distinct and worthy of recognition. 

Through his writing and advocacy, Jaeme leverages his personal and professional experiences to provide comprehensive support to students. He is dedicated to empowering students and addressing the challenges they encounter in their pursuit of higher education. 

Quote from Jaeme

“Who is the person? What's their problem? Do your research. Offer solutions.”

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