Instructions

1

Apply to the Department of Education's Federal Student Aid for a direct consolidation loan. A direct consolidation loan from the government reduces your overall monthly payment, gives you only one monthly payment and one lender for all your loans, and can even lower your interest rate.
2

Select and apply for the income-contingent or income-based repayment plan if you're experiencing financial hardship and want your payments to be based on a portion of your income in relation to the federal poverty level. These plans allow the remaining unpaid portion of your federal student loans to be forgiven after 25 years. Otherwise, apply for the graduated or extended repayment plans if you want to make payments based on the accrued monthly interest, and stretch out the loan term if you have more than $30,000 in federal student loans.
3

Seek employment with a public service organization that is eligible for the Public Service Loan Forgiveness (PSLF) program. Any federal, state and local government organizations and most non-profit organizations that have the 501(c)(3) designation from the IRS qualify for the PSLF program, including public and private schools, colleges and universities, law enforcement and public health employers. Continue repayment of the consolidated student loans during this time. Apply for a request for loan forgiveness under the PSLF after making 120 monthly payments, which results in the forgiveness of the remaining balance of your direct loans.
4

Claim the student loan interest deduction when filing your tax returns each year -- if you meet the income qualifications for the year -- to reduce your taxable income by up to $2,500, as of 2009. Send a lump sum payment to your student loan servicer in the amount of the tax savings you obtained as a result of claiming the interest deduction.
5

Join the Peace Corps or AmeriCorps and complete a service term of around one to two years, depending on your assignment. Send the lump sum educational award you receive after you complete your service term (usually anywhere around $5,000 to $7,000) to your federal student loan balance.
6

Evaluate your budget and discretionary income. Find ways to cut back on expenses. Pay more than the required monthly payment on your student loans, using the money you've saved from cutting back on expenses.
7

Set up a retirement savings account through your employer, such as a 401(k) or Roth IRA. Contribute as much as you can annually to the retirement account and allow the money to grow tax-free. After a period of five to 10 years, withdraw a portion of the principal and make a lump sum payment on your student loans.