Everyone agrees that there is a significant student loan debt crisis in the U.S. According to the credit bureau Experian, total student loan debt in the United States hit $1.41 trillion in 2019. The average American with student loan debt carries $35,359 in debt. Unfortunately, no one has yet come up with a silver bullet solution to this mounting debt issue.

With no magic cure in sight, it’s up to you to find ways to manage your student loan debt to avoid a crippling financial burden. We’ve prepared this guide so that you can find the best student loans, develop smart repayment strategies, know when to refinance or consolidate your debt, and get rid of those student loans as quickly and painlessly as possible. Whether you’re looking for new loans to help finance your education now and in the future or want to refinance existing loans to ease your repayment, you’ll find the resources you need here.

The coronavirus pandemic has had a massive impact on both education and student loan debt. In fact, the entire nature of education changed in 2020, and it’s unlikely to return to what we considered normal anytime soon. Meanwhile, the already tricky burden of student loan debt has become even harder to manage as new graduates struggle to find jobs, and others are laid off.

Recognizing these difficulties, the U.S. Department of Education has suspended both federal student loan payments and interest charges through December 2020. This does give borrowers a little breathing room, but remember that those loans will still be there when the suspension lifts. 

If you can manage it, set aside the money you would typically use to pay your student loans in a savings account. Once federal student loan repayments begin again, you can either use that saved money to pay down your principal or hold onto it in case of emergency (depending on how secure your financial situation is at that point). Either way, that extra money will give you a little more peace of mind in a very uncertain time.

How Federal Student Loans Work

Before you can get a federal student loan, the first step is to fill out the Free Application for Federal Student Aid (FAFSA) paperwork. These documents can also make you eligible for various scholarships and grants, a.k.a. free money, so it’s worth filling out the forms even if you don’t plan to get any loans.

Undergraduate students are eligible for two basic federal loan types:

• Direct Subsidized Loans are generally the best option, as the federal government will pay your interest on these loans for you until you graduate. Direct Subsidized Loans are offered based on perceived financial need. Each school will determine how much in Direct Subsidized Loans to provide you, using the information you provided in your FAFSA and the school’s tuition, fees, and other expenses to set the maximum amount available. You can choose to accept a smaller loan amount than the maximum offered if you want. Your repayment period for the loan will begin six months after you graduate or otherwise leave school.
• Direct Unsubsidized Loans are similar to Direct Subsidized Loans, except that you’re required to pay the interest on these loans during the entire time the loan is open. There is no specific financial need requirement for getting Direct Unsubsidized Loans; each school will calculate the maximum available loan based on the school’s expenses and other financial aid you’ll be getting. As with Direct Subsidized Loans, repayment begins six months after you complete your schooling.

Graduate students and professional students can apply for both Direct Subsidized Loans and Direct Unsubsidized Loans. In addition, they are eligible for a special type of federal student aid called the Direct PLUS Loan. To qualify for a Direct PLUS Loan, you must be at least a half-time student and have a decent credit history. Direct PLUS Loans are designed to cover the gap between your Direct Subsidized and Unsubsidized Loans and the full cost of completing graduate or professional school.

If you’re a dependent of your parents, they also can take out a Direct PLUS Loan. In this case, the loan will be in your parents’ names rather than your name, and the legal responsibility for repaying the loan will be theirs.

The repayment period for graduate and professional student Direct PLUS Loans begins six months after graduating or leaving school, or if you drop below half-time enrollment. However, the repayment period for parent Direct PLUS Loans begins immediately unless the parent requests and is granted a deferment.

Once you leave school and start repaying your loans, you have several different repayment plans to choose from. The plethora of repayment options is one of the most significant benefits of getting a federal student loan rather than a private one.

By default, federal student loan borrowers are placed on the standard repayment plan. This program sets your repayment period to 10 years and has a fixed payment amount. The standard repayment plan can be the best choice if you’re earning good money right out of college because it generally results in the smallest repayment amount. If you’re struggling to find a job after graduation or your income is low, you might do better with one of the alternative repayment plans, which include the following:

• The graduated repayment plan starts with a lower monthly payment and then gradually increases the payment amount year by year. Like the standard repayment plan, it has a 10-year repayment window.
• The extended repayment plan lets you pay off your federal loans over 25 years rather than 10 years, resulting in a much smaller monthly payment (but a higher total payment over the loan’s life, thanks to interest).
• The Pay As You Earn repayment plan sets your monthly payments at 10 % percent of your discretionary income (meaning whatever income you have left after factoring in basic expenses like rent). If you have no discretionary income, your monthly federal student loan payments will be zero. Any loan balance left over after 20 years of repayments will be automatically forgiven (25 years for graduate or professional student loans).

Switching from one repayment plan to another is typically as easy as logging on to the federal student aid management website and picking a different plan. Some repayment plans may require special qualifications, in which case you’ll have to jump through a few extra hoops to switch to that plan. As of this writing, the graduated repayment plan and Pay As You Earn repayment plan are available to all Direct Loan borrowers; the extended repayment plan is available if you have more than $30,000 in outstanding Direct Loans.

5 Best Private Student Loan Companies for 2021

Sometimes federal student loans aren’t enough to cover your educational expenses, in which case private student loans can be a lifesaver. It’s important to shop carefully before committing to a private student loan because fees and rates can vary widely. Unlike most federal student loans, private student loans often use a variable interest rate—so if rates shoot up suddenly, you’ll want to consider refinancing those loans. On the other hand, if interest rates drop, you can save quite a bit with a variable rate loan.

Ascent

Fixed APR: 3.53% to 14.50%

Variable APR: 2.72% to 13.00%

Repayment terms: 5, 10, or 15 years

Best for: student borrowers with no cosigner

Most private student loan companies require a cosigner for all student borrowers, but Ascent is a notable exception. This lender uses alternative factors to determine eligibility and lends to juniors, seniors, and graduate students. However, loans without cosigners are inherently risky, so expect slightly higher interest rates for Ascent student loans than cosigner-based loans.

College Ave

Fixed APR: 3.59% to 12.99%

Variable APR: 1.24% to 11.98%

Repayment terms: 5, 8, 10, or 15 years

Best for: parent borrowers

With lots of flexibility in setting up your loan and no origination fees, a College Ave student loan can be an excellent choice for any borrower. But it’s especially useful for parents borrowing to finance their children’s education. While student borrowers must have a cosigner, parents can open a loan with College Ave based on their own credit score.

Earnest

Fixed APR: 3.95% to 12.78%

Variable APR: 1.24% to 11.44%

Repayment terms: 5, 7, 10, 12, or 15 years

Best for: flexible repayment options

Earnest makes loan repayment as painless as possible, with a nine-month grace period, four different repayment options while you’re still in school, the opportunity to skip one payment per year, and an automated early repayment option. Loans are available for undergraduate and graduate students pursuing specific fields of study, including law school, medical school, and business programs.

Sallie Mae

Fixed APR: 4.74% to 11.85%

Variable APR: 1.25% to 9.44%

Repayment terms: 5 to 15 years (but Sallie Mae chooses the term for you)

Best for: non-collegiates

While most private student loan companies will only extend loans to undergraduates or graduates, Sallie Mae will happily lend money to finance private K–12 schools, career training, MBAs, dental and medical school, and more. Sallie Mae also has one of the fastest cosigner release options; borrowers can apply to have their cosigner released after just 12 on-time payments have been made post-graduation.

LendKey

Fixed APR: 4.25% to 12.35%

Variable APR: 1.25% to 11.15%

Repayment terms: 5, 10, or 15 years

Best for: comparing loan options

Unlike the other companies in this list, LendKey isn’t a lender; instead, it’s a loan aggregator that collects your information and presents you with several private student loan lenders that would be a good fit for you. LendKey doesn’t charge origination or application fees and can find loans for both undergraduate and graduate students.

Local banks and credit unions

You may also be able to get a private student loan from your local bank or credit union (think Citizens Bank, Discover, etc.). Sometimes you can get an excellent loan from a smaller private lender, but be careful. A less well-known and less-reputable lender may sneak punitive clauses into the loan documents or charge unusual fees that can hike up your total cost well above the norm.

If you do apply for a private student loan at a small or local lender, review the documents very carefully and compare them with loan documents from a major lender so that you can be sure you’re not getting ripped off. One thing you’ll want to check is whether the lender charges a prepayment penalty—that means they’ll charge you extra if you pay off your loan early. Since paying off student loan debt as quickly as possible is a very sound financial strategy, you definitely won’t want to subject yourself to such a penalty.

If you prefer borrowing from small banks, a great way to minimize risk is to use LendKey; small lenders finance many of the loans you’ll find on that platform. Getting the loan through an aggregator makes it easier to compare loans from different companies of various sizes, so it’ll be easier to spot a predatory lender.

Best Ways to Pay Off Student Loans in 2021

Most college students end up with tens of thousands of dollars in loan debt, taking decades to pay off. Worse, all the money that goes into student loan repayments detracts from important financial goals like buying a home, starting a family, or saving for retirement. The sooner you get those loans paid off, the sooner you can start putting your money into things that will benefit you in both the short and long term. Here are some great ideas for knocking out those loan balances.

Pay off the highest-interest loans first

Most student loan borrowers end up with multiple loans by the time they graduate, and those loans likely have a range of interest rates. Once you start repaying your student loans, pay the minimums towards the lower interest rate loans and put in extra money toward paying off the high-interest rate ones. The sooner you get those high-interest loans taken care of, the less you’ll pay over the loan’s life.

Use a standard repayment schedule if possible

Both federal and private student loans often come with a range of repayment options, including longer loan terms and graduated payment plans. The latter options can be beneficial when you have little to no income, but there’s a price attached—you’ll inevitably pay far more in interest over the life of the loan than if you’d just stuck with the standard repayment plan. If you need to go on a special repayment plan during a time when you’re short on income, make sure to switch back to the standard repayment plan as soon as it becomes feasible.

Use money from your 401(k)

Thanks to the CARES Act, anyone affected by the coronavirus pandemic can take up to $100,000 out of a 401(k) or IRA without paying an early withdrawal penalty. This means if you or someone in your family has been diagnosed with COVID or if you’re facing any financial hardship due to the pandemic, you’re eligible to take money out of your retirement savings and apply it to your student loan debt without the extra 10 percent penalty. However, you’ll still have to pay income taxes on whatever you take out.

Note that even without the 10 percent early withdrawal penalty, draining your retirement savings early is not a great financial strategy. However, if you’re facing a genuinely crushing debt load and can’t see any other way to get rid of it, this may be the best option for you.

Consolidate or refinance loans

Interest rates in 2021 are relatively low, so this is a good time to refinance old fixed-rate loans stuck at a high rate or even consolidate all your student loan debt into a single loan. You’ll find suggestions on choosing a loan refinance or consolidation lender in this guide’s next two sections.

3 Best Options for Student Loan Refinancing in 2021

Refinancing your student loans means taking out a new, private loan and using it to pay off one or more existing loans. This process has several potential benefits:

• Switching from a variable to a fixed interest rate loan or vice versa;
• Replacing a high-interest rate loan with a low-interest rate one;
• Getting a cosigner removed from your loans;
• Locking in a more affordable monthly payment; or
• Moving from a lender with poor customer service to one with better service or more options.

During 2020, the federal government suspended both required federal student loan payments and interest charges through the end of the year.

That means this is not a great time to refinance your federal student loans, since you would then no longer qualify for this suspension. However, with interest rates so low right now, it’s a great time to refinance private student loans to lock in a better rate. If your student loan rates are higher than you’d like or you want to take advantage of some of the above benefits, check out these options.

Education Loan Finance (ELFI)

Fixed APR: 3.19% to 5.99%

Variable APR: 2.39% to 6.01%

Repayment terms: 5 to 20 years

Best for: if you want to get rid of a cosigner

ELFI is a good choice for borrowers with good to excellent credit scores, particularly if you want to refinance to get rid of the cosigner on your original loan and won’t need a cosigner on the new loan. Rates and customer service are excellent; you’ll even get your own personal loan advisor assigned to you when you refinance.

SoFi

Fixed APR: 2.99% to 6.24%

Variable APR: 1.99% to 6.24%

Repayment terms: 5 to 20 years

Best for: getting free perks with your refi

SoFi has tons of repayment options that can give you great flexibility, whether you’re looking to pay off your loan fast or reduce monthly payments to keep them in line with your income. You also get some nice extra benefits you won’t find at most private student loan refinance companies, such as free career planning, job search tools and guidance, and even help with starting your own business.

Splash Financial

Fixed APR: 2.88% to 7.27%

Variable APR: 1.99% to 7.10%

Repayment terms: 5 to 20 years

Best for: getting multiple refi quotes

Like LendKey, Splash Financial is an online loan aggregator. You can enter your information and compare rates without subjecting yourself to a hard credit check, which means your credit history and score will be unaffected. At this time, Splash Financial offers loans from just three different lenders (U-Fi, Laurel Road, and PenFed), so you may want to review some of the other refinance lenders as well to give yourself a more comprehensive range of possibilities.

Best Ways to Consolidate Student Loans 2021

Student loan consolidation simply means using a single new loan to repay all your existing student loans. It’s like refinancing all your student loans at the same time. Instead of paying off multiple loans at the same time, you’ll then have just a single student loan to worry about—which can significantly simplify your financial life.

When it comes to student loan consolidation, you have two basic options:

•  You can use a Direct Consolidation Loan to consolidate your federal student loans (including Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans). A Direct Consolidation Loan is free, typically relatively easy to get, and gives you access to more repayment options, including repayment terms of up to 30 years. However, getting a Direct Consolidation Loan will typically result in a slight increase in your interest rate.
• You can get a private student loan and consolidate all your existing student loan debt, both federal and private. You’ll usually have way more options with private student loan consolidation, including the possibility of reducing your overall interest rate (depending on where current interest rates stand and what interest rates you have on your existing student loan debt).

If you’re interested in getting a Direct Consolidation Loan, log in to the Federal Student Aid website and fill out an application. It usually takes less than 30 minutes to complete the process and get a quote for your new loan.

For private student loan consolidation, you can use any of the options listed in the refinancing section of this guide. Don’t forget that if you consolidate your federal student loans using a private loan, you’ll no longer be eligible for the 2020 suspension of federal student loan payments.

OnesFinance’s Top Tips for Paying Off Student Loans

Want to get rid of your student loan debt as soon as possible? Try some or all of these strategies.

• Start making payments while you’re still in school. Sure, you can wait to start paying your federal student loans until after your graduate, but you’ll save yourself a bundle in interest if you start paying right away.
• Find extra income streams. The more income you have, the more money you can pay into your loans. This doesn’t have to be as extreme as working three jobs; even little income sources, such as holding a garage sale, selling items on eBay, or putting in a few weekends a month as a rideshare driver, can make a real difference.
• Make more than the minimum payment. Most loans give you the option to put extra money toward the loan principal every time you make a payment. Chipping away at that principal early means less interest to pay later.
• Set up automatic payments. Not only do these ensure that you’ll never miss a payment, but many lenders will slightly lower your interest rate if you use auto-pay.
• Pay off the loans with the highest interest rates first. Make minimum payments on all your other loans, but throw as much money as possible at your highest interest rate loan. Once you pay that one off, focus on the next highest and so on.
• Refinance your high-interest student loan debt. Take a look at your existing student loan debt’s interest rate and compare it to current refinance rates. If there’s a big difference, refinancing will be well worth the cost.
•  Find a cosigner. Many students and recent graduates have either no credit or bad credit, which means the interest rates on your student loans may be relatively high. Getting a cosigner with good credit for your student loans can really slash your interest rates. Cosigners can help with interest rate reduction on student loan refinancing and consolidation, too.
• Explore student loan forgiveness programs. Student loan forgiveness is a bit of a longshot, but if you can make it work for you, it can save you thousands of dollars. Joining the military, working as a teacher in an inner-city school district, or taking a qualifying public-service job are all options.

FAQ: Best Student Loans

Which bank is best for student loans?

As a rule of thumb, you’ll want to start by getting as much of your financing as possible from Direct Subsidized Loans issued by the federal government. These loans will usually work out to be the best deal both in the short term and in the long term. Once you’ve exhausted your federal funding, you can then turn to private student loans. There is no one best private student loan lender; you’ll want to compare loan packages from several different companies to see which one is the best fit for your specific situation.

What are the best student loans available in 2021?

Federal student loans are generally superior to private student loans. When shopping around for a private loan, look for a loan package with low or no fees, competitive interest rates, and repayment options that suit your particular lifestyle and preferences. Choose the highest monthly payment that you can comfortably manage, as this will result in less interest paid over the life of the loan.

What is the best way to pay off student loans?

Focus on paying off your highest interest rate student loans first by making the largest possible monthly payments on those loans. If you struggle to pay more than the minimum on your high-interest rate debt, consider refinancing to get a lower interest rate and/or smaller monthly payment. Meanwhile, throw every extra penny you can get your hands on into paying off your student loans.