How to manage undergrad student loans before grad school

By Carolyn Morris | Published on October 21, 2025

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For Americans, the average education level is on the rise. According to the most recent Survey of Earned Doctorates, the number of people earning PhDs each year has soared to an all-time high, surpassing 57,000 in 2022. And as of 2021, about 14% of Americans held an advanced degree of some kind.

While a more educated population is a good thing, there is also rising student debt to consider. According to the Education Data Initiative, the average debt for master’s degree completion is currently around $64,000, while debt for doctorates tops $89,000 per person.

Furthermore, many grad school students start their programs with undergrad debt — around $30,000 for the average undergraduate borrower. Tack on some grad school loans, and those numbers start adding up pretty fast.

To give yourself the best chance of paying off your debts seamlessly after graduation¹, it may make good financial sense to rein them in before beginning a new program. Here are some of the best ways to manage undergrad loans before grad school.

Federal loan consolidation

Federal student loan consolidation is a debt management service offered by the U.S. Department of Education. Through this program, you can combine federal student loans into one consolidated loan, called a Direct Consolidation Loan. The interest rate on your new loan will be the weighted average of all the interest rates on your current federal loans. Applicants also have the option to select a new repayment term ranging from 10 to 30 years.

When consolidating federal student loans, you can lower your monthly payments by extending the repayment term. (Note that this will make your payments more affordable but will increase the amount of interest you pay in the long run.) Furthermore, making one monthly payment on a consolidated loan is simpler to manage as you begin graduate school.

A federal consolidation loan is still a federal loan — which means your consolidated debt will still remain eligible for federal protections like forbearance, loan forgiveness, and deferment, including in-school deferment. In-school deferment is a program that automatically puts your payments on pause while you’re enrolled at least part-time as a graduate student. (Interest will still accrue on any unsubsidized loans during this period, but you won’t be on the hook for any payments until after you graduate.)

There are a few downsides, however. First, you cannot get a lower interest rate through federal consolidation, and you cannot use consolidation to reduce the overall cost of your loan. Finally, only federal student loans are eligible; private student loans cannot be consolidated with the federal government.

Debt avalanche method

The debt avalanche method is a common strategy for paying off multiple debt accounts. The method prioritizes paying off debts with the highest interest rates. The general goal of the debt avalanche method is to get rid of your most expensive debt first.

With the debt avalanche strategy, you’ll continue making minimum payments on all your outstanding credit accounts. Each month, devote any extra cash to making larger payments on the loan with the highest interest rate. Repeat this each month until the high-rate loan is paid off. Then use the amount you were putting toward that debt each month to chip away at your next highest-rate loan.

The debt avalanche method is one of the best ways to reduce your credit card debt and other high-interest debts. That’s because you can rely purely on budgeting and planning to make it happen. Although it’s effective, it comes with challenges. For one thing, it can be difficult managing multiple loan accounts simultaneously. This method also requires that you have a higher income relative to your student loan debt balance.

Debt snowball method

The debt snowball method is similar to the debt avalanche method, but instead of high-interest debt, it prioritizes paying off your low-balance debts first. You’ll start by making larger payments toward whichever credit account has the lowest balance. Once that balance is paid off, repeat the procedure with the next lowest balance.

This method can keep borrowers motivated. Being able to cross a loan off the list early on during repayment can feel like a huge victory. It will also leave you with fewer loan accounts and loan servicers to deal with, which simplifies repayment moving forward.

Keep in mind that, like debt avalanche, this method requires you to budget carefully and manage multiple loan payments proactively. You’ll also need to have a high enough income that you've got some extra cash to work with. This may not be the case for all grad students, particularly those enrolled full-time.

Income-driven repayment plans

Income-Driven Repayment (IDR) programs are a great way to make sure your student loan payments remain affordable. Under this plan, the federal government will cap your monthly payment amount as a percentage of your income. For example, you could pay only 10% of your income each month under the Income-Based Repayment (IBR) plan. You’ll make these payments for 20 to 25 years. Afterwards, your remaining loan balance will be forgiven. If you’re attending grad school, this could be a great way to keep payments low and ultimately reduce the total cost of your student loans.

However, there is a major drawback to consider: the cost of repayment. If your income is too low, capped payments may not be large enough to pay down a significant part of the principal balance. When payments are too low, the debt balance may actually grow as interest capitalizes on the relatively untouched principal. If this is the case, you may end up paying much more than the original loan amount after 20 years on an IDR plan.

Also keep in mind that IDR plans are available only to graduates with federal student loans. They are not offered for private student loans.

Biweekly payments

Making bi-weekly payments is a simple way to pay off debt more quickly. Typically, student loan payments are made monthly, meaning 12 full payments annually. If you make bi-weekly payments instead, you’ll make a half-payment every two weeks. After 52 weeks on the bi-weekly payment schedule, you will have made 26 half-payments, which is equivalent to 13 full payments. This is a great way to modestly expedite debt payoff without having to think too much or budget for big, lump-sum extra payments. It also does not require as much money as the debt avalanche or snowball method.

Student loan refinancing

Student loan refinancing is similar to federal consolidation, but it offers more benefits to borrowers who are looking to save money on their student loan payments. When you refinance student loans, you apply for a new loan from a bank, credit union, or other private lender. (Your application will be strongest if you have good credit and a history of on-time payments.) If your application is accepted, this private lender will agree to pay off any previous loans for you. It will then issue you a new loan in their stead. You’ll pay off this new loan under a new interest rate and repayment term.

Refinancing will turn any federal loans into private loans, which means they’ll no longer qualify for federal borrower protections. However, refinancing offers qualified borrowers a chance to get a lower interest rate on their undergraduate student loans². That can help you lower your monthly payments before you start pursuing your graduate degree. Some private lenders, including Earnest, also offer in-school deferment as long as you maintain at least half-time enrollment in your graduate program.

There are other perks to refinancing with Earnest. For one thing, we never charge any fees — including origination fees or prepayment penalties. We also allow all borrowers to skip one payment³ per year. Want to check out the benefits for yourself? Use our refinance calculator to crunch the numbers, or go ahead and check your rate today. We’ll do the math for you, giving you a free customized rate estimate according to your financial profile. It only takes minutes, and it won’t affect your credit score.

About the Author

Carolyn Morris

Carolyn is a content marketer and editor who specializes in financial services. With over a decade of experience in the financial services industry, Carolyn has a passion for demystifying the loan application and repayment process for students and their families.

Disclaimer

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 As was announced by the U.S. Department of Education (ED), federal student loans have resumed accruing interest starting September 1, 2023, and federal student loan payments were reinstated starting in October 2023. Please note that you may lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan. See studentaid.gov for more information.

2 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.

3 Earnest clients may skip a payment through a one, one-month forbearance during a 12 month period. Your first request to skip a pay can be made once you’ve made at least 6 months of consecutive on-time full principal and interest payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Any unpaid accrued interest may capitalize (added to the principal balance) at the end of the forbearance period by adding unpaid accrued interest to the outstanding principal as permitted by law and the terms of the loan agreement.

Interest will not be capitalized on loans originated to Michigan residents under the Regulatory Loan Act of 1963. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest's discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.