Entering young adulthood saddled with debt has become standard for many who want an undergraduate degree, sometimes to the tune of tens-of-thousands of dollars.

Around 45% of 2025 high school graduates will go on to a four-year college, according to SL Consultation's analysis, and more than one-third of them will take on student loans to pay for their higher education. With interest rates on undergraduate federal student loans the highest in over 10 years, understanding how to best navigate college funding and loan repayment options can help these students prepare for the future.

2025 graduates could amass $40,000 in student loan debt

The average price that undergraduate students pay for tuition and fees at in-state, public four-year institutions — some of the most affordable — has been decreasing modestly since 2021, but this doesn't mean the cost of higher education has gotten easy to bear. In fact, the current average tuition and fees at these institutions is about $11,600.

Given current average loan amounts, according to the Department of Education, and a conservative growth rate, a 2025 high school graduate could take on an estimated $40,000 in student loan debt before they graduate with their bachelor's degree.

Keys to minimizing student loan debt

Choose an affordable school. Long before accepting a financial aid award, students should think carefully about which school they'll attend, and place a high priority on a good value.

Maximize "free" financial aid. Minimizing student loan debt begins early by filling out the Free Application for Federal Student Aid (FAFSA) each year.

Prioritize federal loans. Dependent undergraduate students can only take out up to $31,000 in federal student loans.

Consider making interest payments while in school. Unless your student loans are subsidized, they're accruing interest while you're in school.

Student loan forgiveness programs can erase some or all of your higher-ed debt. There are more than a dozen programs available, some of which have niche requirements, like working for a specific type of employer.

Federal student loan forgiveness programs

The U.S. government offers forgiveness options for federal student loan borrowers. These programs typically target borrowers with lower incomes, large amounts of debt or public service jobs.

1. Income-driven repayment forgiveness

The federal government offers several income-driven repayment (IDR) plans, which typically allow you to cap your loan payments at a percentage of your monthly discretionary income. Payments can be as low as $0 per month. When enrolled in one of these plans, your remaining loan balance may be eligible for forgiveness in 20 or 25 years, depending on the plan and the type of student loans you have.

2. Public Service Loan Forgiveness

Public Service Loan Forgiveness (PSLF) is available to government and qualifying nonprofit employees with federal student loans. Eligible borrowers can have their remaining loan balance forgiven tax-free after making 120 qualifying loan payments on an IDR plan and 10 years of full-time public service work.

3. Teacher Loan Forgiveness

Teachers employed full time in low-income public schools may be eligible for Teacher Loan Forgiveness after working for five consecutive years. They can have up to $17,500 in federal direct or Stafford loans forgiven.

Student loan discharge programs

Student loan discharge programs are available to students in extreme situations, like those whose school defrauded them or who cannot work due to a permanent disability.

4. Closed school discharge

You may qualify for a closed school loan discharge if your school closes. At the time of closure, you must have been enrolled or have left within 180 days, without receiving a degree.

5. Borrower defense to repayment

Borrowers defrauded by their colleges may qualify for debt relief under the borrower defense to repayment program.

6. Total and permanent disability discharge

If you cannot work due to being totally and permanently disabled, physically or mentally, you may qualify to have your remaining student loan debt canceled.

After years of steady increases and record highs, federal student loan interest rates will finally soften this summer — making college slightly more affordable for student borrowers in the upcoming academic year.

Here are the new 2025-26 federal student loan interest rates, according to a May 30 Education Department announcement:

• Direct subsidized and unsubsidized loans for undergraduate students: 6.39%, down from 6.53%
• Direct unsubsidized loans for graduate students: 7.94%, down from 8.08%
• PLUS loans, available to parents and grad students: 8.94%, down from 9.08%

This rate change becomes effective July 1, and it only affects students who take out new federal loans for the 2025-26 academic year.

How student loan interest rates impact college costs

Each May, the government sets federal student loan interest rates for the upcoming academic year based on the yield of the 10-year U.S. Treasury note and including an "add-on percentage."

The lower rates could save you money over the life of your loan — but not much. For example, let's say you take out a $12,500 direct loan, which is the maximum amount an undergraduate can borrow in a single year. At the previous 2024-25 interest rate of 6.53%, you'd pay about $4,555 worth of interest over a 10-year repayment term. That same loan taken out in 2025-26 at the new 6.39% interest rate costs you $4,448 over 10 years.

Minimize borrowing to make college more affordable

Lower interest rates can make your college debt feel more manageable. Even so, you should do everything you can to minimize borrowing in the first place.

Start by submitting the 2025-26 Free Application for Federal Student Aid (FAFSA). This form unlocks not only federal student loans, but also free aid that you don't need to repay — like need-based Pell Grants (up to $7,395 per year), work-study and scholarships.