How to budget to pay off student loans

By Kassondra Cloos | Published on March 6, 2026

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Student loan borrowers have been on a bit of a roller coaster over the past few years. First there was the pandemic-era payment pause, then the Biden Administration’s promises of sweeping loan forgiveness. More recently, there was the drama around the Saving on a Valuable Education (SAVE) plan, which a court order ultimately paused, leaving more than 8 million borrowers in administrative forbearance for the foreseeable future. In short: there’s been a lot of uncertainty. Unfortunately, it looks like payments are likely to resume for most borrowers by the end of 2025, and mass loan forgiveness isn’t likely to come any time soon. That means it’s time to take a hard look at your outstanding debts and figure out how to start tackling them, piece by piece.

That can seem pretty daunting at first, but keep in mind that this first step is always the hardest. Once you’ve mustered the courage to look your loans in the eye, you can come up with a strategy and start making real headway on repayment. To give you a hand, we’ve put together this guide. Here’s how to budget to pay off student loans in 2025.

Know your loans

The first thing you need to do is rip off the bandaid and do a full personal finance audit. Start by taking a hard look at your debts. Make a list or spreadsheet laying out the following information for each of your current loans:

• The name of the loan, and whether it’s a federal or private student loan. (If you’re also working to pay off a car loan or credit card debt, you can list these as well.)
• The name of the loan servicer
• The monthly payment amount and its due date
• The total remaining principal balance
• The interest rate
• The number of years and months until payoff

Add it all up so that you have a clear picture of your total monthly payments and your total outstanding debt. You should be able to find these numbers easily by logging into your federal student aid account, looking up your federal student loan servicer, or checking your private student loan dashboard.

Assess your monthly income and expenses

Now, go through all your assets. Write down your monthly after-tax income and the balances of your bank accounts, including all your checking and savings accounts. If you have an account earmarked as your emergency fund, write that down as well, even if you don’t plan on dipping into those funds for debt payment in the immediate future. If you have investments you could liquidate if needed, write those down, too.

Next, go through all your expenses and categorize everything into “essential” and “non-essential” categories.

Essentials could include:

• Rent
• Utilities
• Groceries
• Health insurance
• Car payments, gas, and maintenance
• Childcare

Non-essentials are anything you can live without. These could include:

• Concert, movie, sports, and theater tickets
• Dining out, including to-go coffees and delivery
• Streaming subscriptions
• Non-essential clothing or accessories
• Leisure travel

Instead of estimating your expenditures, go through your previous month’s expenses and calculate exactly how much you spent in each category over the course of the month. This will help you figure out where you can cut and save so you can reallocate that money for paying down your loans more quickly.

It’s important to approach this without judgment. It’s easy to criticize your past self for splurging here and there on social activities or non-essential purchases instead of saving money, but that ultimately won’t help you. Instead, view this as an information-gathering exercise that can help you spend and save more wisely in the future.

Determine your financial goals

Budgeting is enormously personal, and only you can determine what’s “okay” for you to spend considering your financial situation. Someone who’s saving to start a new business may have different spending habits and savings targets than someone whose biggest goal is to become debt-free.

Take some time to figure out your financial goals. That could involve buying a house or starting a family in the next five to ten years. It could involve going on a big vacation or saving up for grad school. Figure out how much you would need to accomplish your long- and short-term goals. Then, write down how much you need to save each year to hit those targets.

Depending on your goals, you may simply need to kick your Friday night delivery habit to make extra payments toward your student debt. Or, if the numbers just aren’t adding up, you may need to start a side hustle or get a second job to make extra money.

Either way, knowing these numbers and your “why” will help you make wiser choices every time you’re faced with a financial decision.

Pick a budgeting model

Once you’ve figured out your income, expenses, and goals, it’s time to create a realistic budget. Realistic is the key here—simply changing numbers on a spreadsheet to make more room for paying down debt won’t help you if you don’t have the money to spare.

You can find a lot of advice that suggests how to break down your income between “wants,” “needs,” and debt and savings. Some experts suggest borrowers follow a 50/30/20 rule, in which half your income goes toward housing and other essentials, 30% is disposable income, and 20% goes toward savings and loans. However, you’ll need to choose something that works best for you.

How will you know what works best for you?

Budgeting should help you feel more in control of your finances, not less. If your budgeting model is creating unnecessary stress because you’re struggling to comply with a too-strict budget that doesn’t work for your lifestyle, it might not be the right one for you.

Paying more than the minimum can be really helpful, however small

It’s important to remember that any amount of money over your minimum payment will help you reduce your student loan principal and therefore the total amount you have to pay in interest over the life of the loan. That can help you save money and get out of debt faster. As long as your loan doesn't have pre-payment penalties, even an extra $5 per month can still help you. You can use a loan calculator to estimate your savings.

Explore loan repayment assistance programs

Even if you’re not struggling to make your student loan payments, you could still qualify for student loan repayment assistance from your state, your employer, or other organizations. Many programs will repay some or all of your debt if you work in a qualifying field. Some are specifically for teachers and people in healthcare careers, but it’s worth doing a quick search even if you think you’re not eligible.

You can also look into Public Service Loan Forgiveness (PSLF) if you work in a qualifying industry. Other loan forgiveness options also exist for people who have been making payments consistently on an Income-Driven Repayment plan (IDR) for an extended period of time.

Consider student loan refinancing and/or consolidation

Student loan refinancing can help you get a lower interest rate on your student debt, while student loan consolidation can simplify your federal student loans and keep you eligible for federal loan benefits, like PSLF and income-driven repayment. Here’s how to decide which program is right for you.

What is student loan refinancing?

Student loan refinancing is the process of replacing one or more existing student loans with a new loan from a private lender. When you refinance your student loans, a private lender pays off your existing loans, and in return, you receive a new loan with new terms and conditions.

Here are some key things to know about student loan refinancing:

• Refinance federal or private loans: Student loan refinancing involves working with a private lender—often a bank, credit union, or online lending institution—to refinance either federal and/or private student loans.
• Paying off existing loans: With student loan refinancing, the new lender pays off your current student loans in full. Then, they issue you a single new loan in its place.
• New loan terms: When you refinance, your new loan will have new terms. That could include a lower interest rate if you meet your lender’s eligibility requirements. It could also include a revised repayment period and a different monthly payment amount.
• Potential savings: The goal of refinancing is often to secure a lower interest rate. If you keep your loan term the same but get a lower interest rate, that could result in significant savings over the life of the loan.

It’s important to note that refinancing federal student loans with a private lender may cause you to lose certain federal loan benefits, such as access to income-driven repayment plans, loan forgiveness options, and deferment or forbearance programs. Carefully consider the pros and cons before you refinance a federal student loan. Once a federal student loan is refinanced, the process is irreversible.

What is student loan consolidation?

Student loan consolidation refers to the process of combining multiple federal student loans into a single Direct Consolidation Loan from the U.S. Department of Education.

Here are some key points about student loan consolidation:

• Simplified repayment: Consolidating your federal student loans into one loan streamlines the repayment process, making it easier to stay on top of payments. You’ll only have to make one payment every month instead of multiple to several different loan servicers.
• New repayment term: Consolidation provides the option to extend or shorten your repayment term. Extending your term will lower your monthly payments but increase the amount you pay in interest over the life of the loan, while shortening your loan term will increase your monthly payments but save you money in interest over time.
• Retaining federal loan benefits: One of the biggest benefits of consolidating is retaining federal benefits, such as eligibility for loan forgiveness programs, income-driven repayment plans, and deferment or forbearance options.

It’s important to note that student loan consolidation applies only to federal student loans and not to private loans. Consolidating federal loans can’t get you a lower interest rate, but if you anticipate taking advantage of student loan forgiveness, or hardship options like income-driven repayment, consolidating may be a better choice than refinancing.

Try a debt repayment strategy

Working student loan payments into your current budget is also about managing other debt. If you’re in high-interest credit card debt, for example, it may make sense to pay this off while paying the minimum due on your lower-interest debt. Consider using a debt repayment strategy like the snowball or avalanche method.

The debt avalanche method

The avalanche method is a debt repayment strategy that prioritizes paying off debts with the highest interest rates first. Here’s how it works:

• List your debts from highest interest rate to lowest: Make a list of all your debts, including credit cards, student loans, car loans, etc. Include the outstanding loan balances and interest rates, and arrange the debts in descending order based on the interest rates.
• Pay minimum payments on all debts: Make the minimum payments on each debt to avoid any late fees or penalties.
• Allocate extra funds to the highest-interest debt: Look for any additional funds in your budget that can be directed toward debt repayment. Put these extra funds toward the debt with the highest interest rate on your list.
• Repeat and continue: Once the debt with the highest interest rate has been paid off, allocate the funds that were being used to pay it off to the debt with the next highest interest rate. Keep repeating this process until all your debts are paid off.

The avalanche method works by focusing on paying off debts with high interest rates first, which will help you to pay less in interest over time. While it may take longer to pay off debts with high interest rates, the avalanche method can save you money in the long run. However, that’s only if you stick with it. And this approach can be particularly difficult to stick with because it could take time to see tangible results.

The debt snowball method

The debt snowball method is a debt management strategy that focuses on paying off your debts from smallest to largest, regardless of interest rates. It works like this:

• List your debts: Make a list of all your debts, including credit cards, student loans, car loans, etc. Include the outstanding balances and minimum monthly payments.
• Order debts from smallest to largest: Arrange the debts in ascending order based on the outstanding balance.
• Pay minimum payments on all debts: Ensure you make the minimum payments on each debt to avoid any late fees or penalties.
• Allocate extra funds to the smallest debt: Look for any additional funds in your budget that can be directed toward debt repayment. This can include cutting back on discretionary expenses or boosting your income through side gigs. Apply these extra funds to the smallest debt on your list.
• Snowball effect: Once you pay off the smallest debt, take the entire amount that was being used to pay it off (minimum payment + extra funds) and apply it to the next debt on the list. This creates a snowball effect, where the amount available for each subsequent debt increases.
• Repeat and continue: Keep repeating the process, focusing all your extra funds on the next debt in line. As each debt is paid off, the amount available to pay off the remaining debts grows larger and helps build momentum.

The idea behind the debt snowball method is that it provides a psychological boost through quick wins as smaller debts are paid off.

Although the debt snowball method may not be the most mathematically efficient approach, since it doesn’t account for interest rates, its effectiveness lies in the psychological aspect. By gradually eliminating smaller debts, it builds momentum, boosts motivation, and provides a clear path toward becoming debt-free.

Stay committed

Paying off student loans requires discipline and perseverance. Stay motivated by setting goals, rewarding yourself for milestones, and visualizing the financial freedom you’ll have once the loans are paid off. Surround yourself with a supportive network, whether it’s friends, family, or online communities dedicated to debt repayment.

By creating a well-thought-out budget, prioritizing loan repayment, and seeking opportunities to save and earn more money, you can take significant steps toward paying off your student loans. Remember, every dollar counts, and with persistence, dedication, and proper budgeting, you’ll be well on your way to financial freedom.

Take advantage of hardship programs when you need them

Federal student loan borrowers are eligible to apply for several different repayment options. Some could even help you earn loan forgiveness after a certain number of qualifying payments.

Deferment and forbearance

The U.S. Department of Education offers a few different relief options for federal borrowers suffering severe financial hardship. If you can prove that you’ve had a significant life change that’s impacting your ability to make your loan payments, you could qualify for federal student loan deferment or forbearance. Both of these programs put your loan payments on hold for a certain period of time, giving you a chance to get back on your feet.

Income-driven repayment plans

If you’re struggling to afford your current loan payments, you might qualify for an income-driven repayment plan. This is an umbrella term that contains a few different programs—including income-contingent repayment (ICR), income-based repayment (IBR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE) plans. These plans use slightly different formulas and formats, but they all cap your student loan payments based on your discretionary income and family size. That way you’ll never have to spend more than a certain percentage of your take-home pay on loan bills each month. Plus, if you’re enrolled in certain IDR plans, you could have the remainder of your student loan debt forgiven after you make payments for a total of 20 to 25 years. Note: the SAVE Plan is currently suspended due to a court-ordered injunction, but the other programs are still accepting applications. Right now, the IBR plan is the only plan actively offering student loan forgiveness after a certain number of qualifying payments; the other plans are currently under review.

Hardship options from private lenders

Private student loan companies don’t offer the same repayment plans as the federal government does. However, your lender may be able to work with you to lower your payments by extending your repayment term.

Earnest, for example, offers hardship options to borrowers, including the option to skip a payment once per year if they’re in good standing. That payment will then be redistributed evenly throughout the rest of your loan term.