Debt Management Strategies

In this section, we will discuss some of the most common strategies used to manage and even reduce debt as well as what to consider before making changes to your loans or repayment plans.  

Student loans are not one-size-fits-all, and neither are the solutions to manage them. 

A quick  internet search for how  to manage student loan debt will generate plenty of advice from so-called experts. While there may be some merit to the recommendations offered on the different blogs and websites you find, student loans are not one-size-fits-all, and neither are the solutions to manage them. With so many suggestions out there related to navigating student debt, how do you know what advice is legitimate and which options to consider in your own life? 

For borrowers who are:

  • Still in school
  • In the midst of their grace period
  • Experiencing the initial challenges of debt management

The secret to budgeting with student loans: Spreadsheets

One of the best ways to prepare for your repayment and start managing your debt is to estimate what your monthly student loan payment will be and how this new expense fits in with your anticipated income and cost of living. Depending on your student loan balance, you may need to base decisions on housing, transportation, or even where you relocate to on whether or not you'll be able to afford your student loan payment. Review the Student Loan 101 homepage to access different repayment calculators.  

As a federal student loan borrower, you are eligible for a quarter of a percent reduction on your interest rate if you elect to have your student loan payments made through automatic pay. This option tends to be an easier way for individuals to save themselves a little bit of money because once the auto-pay is set-up, you don't have to think about it again. Just be sure to know what day the payment occurs and which bank account you have linked to your loan servicer account to avoid insufficient fund penalties or fees associated with overdrafts. 

After you select your desired repayment plan, you may find you are able to pay more than you are required to. There is no penalty for paying more than your monthly payment amount and many borrowers choose to contribute additional funds to pay down their student loans faster. But which loans should you try to pay down first? From a strictly financial perspective, paying down your loans with the highest interest rates first will save you more money in the long run because the loan will be paid off sooner and less interest will have accrued. You may also find it advantageous to target down a private loan, even one with a comparable interest rate as your federal loans, as these types of loans do not have the same repayment plan options available. If your financial situation changes, you will not have the same type of flexibility to adjust how much you pay on your private student loan. 

The other targeting strategy you may come across is called the snowball effect. This strategy holds that  borrowers should target pay their smallest debt first, regardless of interest rate. While this strategy may not save you money in the long run, it is designed to foster positive behavior change and provide emotional gratification. Since the borrower targets the smallest debt, they are likely to have that amount paid in full in a relatively short amount of time. That accomplishment can serve to further encourage you to pay off your debts quickly and may result in even more money being put towards your student loans, creating a snowball effect of debt management that the strategy gets its name from. If you struggle to find the motivation to pay off your debts or feel discouraged because it does not look like you are making any progress towards your debt, this strategy may be worth considering. 

For borrowers who are:

  • Currently repaying loans and need additional debt management strategies

Student Loan Repayment Options

One of the benefits of borrowing from the Federal Government are the numerous repayment plan options available. Selecting the right repayment plan to align with both your financial goals and constraints isn't as straightforward as it seems- after you review the 8 different repayment plan options, these are the considerations you'll want to make before selecting a new plan: 

  • Maximum monthly pay: Based on your current income and living expenses, what is the most you can afford to pay? 
  • Cost of flexibility: Income driven repayment plans are designed to provide you with a more manageable monthly payment and that additional flexibility comes at a cost...interest accrual. Paying down smaller amounts of your loan each month means that it will take you longer to pay off the loan, giving more time for interest to accrue.  
  • If you are a borrower pursuing Public Service Loan Forgiveness, keep in mind that only certain repayment plans are eligible under the program. The eligible repayment plans are Income Driven Repayment Plans or the Standard Repayment Plan. Consider an Income Driven Repayment Plan to maximize the forgiveness benefit. 

What is Public Service Loan Forgiveness? Learn more at Federal Student Aid or read below for additional information!

Speak with your loan servicer about exploring the right repayment plan for your financial situation. 

Look for Loan Assistance and Forgiveness Opportunities

Loan Assistance

Loan repayment assistance programs are employer sponsored benefits for employees. The assistance can take the form of direct payments towards the loan repayment or as a reimbursement of funds you have already paid. There are generally monetary limits for how much assistance you will receive from your employer as well as hours or months worked before you are eligible to receive the assistance.

Interested in learning more about current loan assistance programs? Check out these links!

Loan Forgiveness

Similar to loan assistance programs, loan forgiveness opportunities can provide relief during repayment. Loan forgiveness programs are almost exclusively tied to specific employment criteria and are generally sponsored by federal or state governments. While conversations around wide-spread federal loan forgiveness have been increasing, there have been no changes to the current loan forgiveness opportunities available.

The most well-known loan forgiveness program in existence today is the Department of Education’s Public Service Loan Forgiveness. This program is eligible to those with Direct Subsidized, Direct Unsubsidized, Direct PLUS, and/or Direct Consolidated Loans.

In addition to qualifying federal loans, there are other eligibility criteria to consider before deciding to pursue Public Service Loan Forgiveness:

  • You must be working full-time for a qualifying employer, generally a government agency, which includes federal, state, local, or tribal; or a non-profit organization designated with a 501c3 tax code.

*Resource Spotlight: Confirm your employer is qualified for the PSLF program using the new Help Tool on studentaid.gov!

  • You must make a total of 120 payments towards your student loan balance before the remaining amount is eligible for forgiveness
  • Each of your payments must be made under an Income Driven Repayment Plan
  • You must submit documentation to your servicer annually to verify your continued eligibility for PSLF

When each of those items have been fulfilled, federal borrowers can expect to receive 100%, nontaxable forgiveness on their remaining balance.

Other types of Loan Forgiveness Programs include:

If you have been assigned multiple servicers to manage your federal loans, are looking for lower monthly payments, or would like more time to pay off your loan, loan consolidation may be an option worth considering. Loan consolidation combines all of your eligible federal loans into one loan and uses the average weighted interest rates of your previous loans to serve as the new interest rate. The terms of the consolidated loan allow you to pay off the loan in 30 years. This typically results in the borrower making a lower monthly payment, which could make managing the loan easier for an individual. Keep in mind that consolidation does not mean you will owe less; in fact you may discover that over the life of a consolidated loan you paid more in total due to additional amounts in interest accrual. Be sure to refer to studentaid.gov as you weigh all of the pros and cons with loan consolidation. 

  • NOTE: The Department of Education offers consolidation for eligible federal loans. If you are working with a lender outside of the federal government and the term consolidation is used, please be aware that it is not true loan consolidation through the Department of Education. You will lose access to the benefits available to federal borrowers such as repayment plan options and loan rehabilitation. 

The option to refinance your loans and find a new lender that offers a lower interest rate is another way that borrowers look to better manage their debt. Refinancing a loan occurs when a borrower replaces their current loan with a new loan. The new lender essentially takes responsibility for the old loan and the borrower is assigned a new loan from the lender in return. Refinancing is typically most advantageous for individuals who borrowed a private loan at a high interest rate or for individuals who borrowed federal loans and do not need to rely on the flexibility and financial security that comes with the numerous repayment plan options. Individuals with excellent credit history and/or high, regular income tend to receive the best interest rates and repayment terms compared to other borrowers. 

  • NOTE: To reiterate, if you are a borrower currently working with the federal government and are considering refinancing your loan with a private lender, consider the impact that losing the benefits of being a federal student loan borrower will have on your financial situation. 


For borrowers who are:

Recipients of the following loans-

  • Duke Educational Assistance Loan
  • Federal Perkins Loan 
  • Nurse Faculty Loan 
  • Primary Care Leadership Track Loan 
  • Durham Teaching Fellowship


Managing your Duke Institutional Loan may require the submission and procesing of certain forms or documents. 

Please visit our loan servicer Heartland ECSI's website to download respective forms for Forbearance, Deferment, Cancellation, and/or Discharge.