Student loan strategy 101

Student loans look like one category of debt but are actually two: federal and private. They work so differently that treating them the same is the single most common mistake borrowers make.

Federal loans: flexible, forgivable, slow

• Fixed interest rates set by Congress, usually 5–8%.
• Access to income-driven repayment plans (IDR) that cap payments at a percentage of discretionary income.
• Potentially eligible for Public Service Loan Forgiveness (PSLF) after 10 years of payments in qualifying employment.
• Deferment and forbearance options when life gets hard.
• Discharged on death and total/permanent disability.

Private loans: rigid, expensive, fast

• Rates determined by credit, usually 5–15%, sometimes variable.
• No access to IDR plans or forgiveness.
• Fewer hardship options.
• Can sometimes be refinanced at much lower rates as your credit improves.

The basic playbook

1. Stay current on minimum payments, always. Delinquency on federal loans is catastrophic.
2. If your income is low relative to your loan balance, enroll in an income-driven plan. This isn't giving up — it's how the system was designed.
3. If you work in public service or nonprofit, understand PSLF. You might be 10 years from forgiveness without knowing it.
4. If you have private loans and your credit has improved since school, shop refinancing.
5. If you have extra cash and stable federal loans, weigh extra payments against investing. If your rate is under 5–6%, investing wins on expected return.