A college degree isn’t cheap. And unless you’ve got a rich uncle or parents who planned WAY ahead, you may find yourself in student loan debt after graduation. Understanding what you’re up against can help you tackle your student loan debt wisely … even on a low income.
Know What Type of Student Loan You Have
Private Student Loans
Private student loans are issued by banks, credit unions, and other private lenders. Interest rates are based on creditworthiness, so most college students require a co-signer to qualify. Hopefully, you shopped around to get the best terms.
Federal Student Loans
These loans are funded by the federal government and typically offer lower interest rates, flexible repayment options, and borrower protections. There are several different types of federal student aid. The loan you (or your parents) were offered was based on certain criteria, such as your financial need and your university’s agreement with the Federal Student Aid program.
Direct subsidized loans: These loans are available to undergraduate students who demonstrate financial need. The word “subsidized” means that the federal government pays the interest while you are in school and usually for a deferment period following graduation. Direct subsidized loans usually have the lowest interest rates of all student loans.
Direct unsubsidized loans: These are available to students regardless of financial need. Because they are unsubsidized, they accrue interest immediately upon disbursement. Interest rates are generally higher than subsidized loans but lower than private student loans.
Direct PLUS loans: Parent PLUS loans are for the parents of dependent undergraduate students. Grad PLUS loans are for graduate and professional students, such as those in master's or doctoral programs. The interest rates of Direct PLUS loans are based on the borrower’s credit history, and the interest rates are higher than direct subsidized and unsubsidized loans.
Get Federal Assistance Repaying Student Loans
If you’ve graduated from college but chosen a less-than-lucrative career, your debt/income ratio may make it difficult to repay your loans. The federal government (and even some states) provide assistance.
Student Loan Forgiveness Programs
Certain individuals with federal student loan debt may be eligible for Student Loan Forgiveness Programs. There are two federal student loan forgiveness programs available in 2025.
Public Service Loan Forgiveness (PSLF): If you work for a government or nonprofit employer, the remaining balance of your federal student loan may be forgiven after making 120 qualifying payments. It is important to note that you will forfeit your eligibility if you default on your loan, so always pay your minimum payment on time each month.
Teacher Loan Forgiveness: If you are a teacher in a low-income school, you may qualify for up to $17,500 in loan forgiveness.
Look for additional state-sponsored loan forgiveness plans if you work in education, healthcare, or public service.
Income-Driven Repayment Plans
Other individuals may qualify for an Income-Driven Repayment (IDR) Plan. The federal government calculates eligibility based on your income and family size, so your information must be updated each year. IDR Plans lower your monthly payments to 10% of your discretionary income and forgive any outstanding debt after 20-25 years of regular payments.
There are five different IDR Plans available in 2025. It is important to read the stipulations of each plan carefully. Some subsidize interest payments at 100%, some at 50%, and some receive no interest relief at all. In other words, some IDR plans will cause your principal to grow significantly over 20-25 years. And, you may be responsible for paying income taxes on the amount of the loan that is forgiven.
Apply for Income-Driven Repayment Plans through the Federal Student Aid office.
Deferment or Forbearance for Unique Circumstances
Life happens. And sometimes, people find themselves in difficult financial situations that require additional consideration.
If you’ve lost your ability to work for whatever reason (e.g., medical reasons, personal or family responsibilities, workforce or legal barriers), you may qualify for Unemployment or Economic Hardship Deferment or Forbearance. In general, deferment is for long-term financial hardship, and forbearance is for short-term financial struggles.
If you think you may qualify for deferment, contact your loan servicer. Be prepared to submit supporting documentation. To avoid penalties and possible denial, continue to make your minimum monthly payments.
Prioritize Loans with the Highest Interest
Follow these guidelines to maximize your monthly payments by saving money on interest in the long run.
First, determine what kind of loan or loans you have: private or federal and subsidized, unsubsidized, or PLUS loans.
Private loans often come with the highest interest rates and fewest government protections. To save the most money over time, pay private loans first. If you have several private student loans, it is advisable to consolidate them into a single loan with one monthly payment.
If you have multiple loans of various types, you should pay the most each month on your highest-interest loans but continue to pay the monthly minimum payment on all other student loans.
Direct PLUS loans such as Grad PLUS loans have terms—interest rates and minimum monthly payments—similar to private loans but with some government protections. So you should prioritize paying off Direct PLUS loans before unsubsidized or subsidized federal student loans.
If you have different types of federal student loans, you should pay the unsubsidized loans off first because they generally carry the highest interest rates, and the interest on these loans has been accruing since the loan was disbursed, compounding over time.
If you have multiple federal student loans, you must continue to make the minimum monthly payments on all other loans while paying the most toward the unsubsidized loan as possible.
Subsidized federal loans usually have the best terms. The interest rates are generally lower than other student loan types, and interest only begins accruing after graduation or even after a grace period following graduation. You should always make minimum payments on subsidized federal loans but concentrate on paying off private and unsubsidized federal loans first.
Other Tips for Managing Student Loan Debt on a Low Income
If you have applied for any assistance that may be available to you, and you’re repaying your remaining student loans using our suggested guidelines, there are a few other tips and tricks to minimize interest and pay off your loans faster.
Make Small, Extra Payments When Possible
The minimum monthly payment is the lowest amount you can pay to keep your loan in good standing. It is a recommendation meant to benefit the lender by increasing the amount of interest accrued over time. It is NOT intended to help the borrower. ALWAYS pay as much over the minimum amount as possible.
Also, consider making biweekly payments instead of paying monthly. Not only do biweekly payments impact compounding interest, but they also help you pay an extra payment each year. Simply pay half of the amount you would normally pay each month at the first of the month and half in the middle. You’ll make progress toward repayment faster.
Refinance for a Lower Interest Rate
Now that you have proven your creditworthiness and you have a secure and stable income, you may qualify for loans with lower interest rates. Shop around before you apply so as not to ding your credit history. Consider asking a parent or other trusted friend to co-sign to increase your chances of getting favorable loan terms.
Stick to a Budget and Prioritize Loan Payments
Cut unnecessary expenses and use the surplus to pay down the balance on your student loans.
Increase Your Income
If you’ve followed all the advice outlined in this post, and the balance on your student loans just doesn’t seem to budge, you may need to find a way to increase your income. Look for gig work like freelancing, tutoring, or rideshare driving to earn extra money. Turn your hobby into a side hustle by selling products like honey, garden produce, or handmade items. Or earn advanced certifications that might qualify you for a raise or promotion at your primary job.
Key Takeaways
Paying off student loans isn’t easy, but it is doable when you know your options.
Apply for assistance paying federal student loans if you qualify.
Seek deferment or forbearance in special circumstances.
Prioritize payments on unsubsidized loans and loans with higher interest rates.
Use our tips and tricks to minimize accrued interest and pay off your loan faster, even on a low income.
No matter where you are in your repayment journey, AMG Finance can help you move toward a stronger financial future. Whether you're looking to consolidate debt, cover unexpected expenses, or create more financial breathing room, we offer loan options that can help.
