So What's the Good News?

The good news is that student loan debt is usually flexible, relatively cheap, and available to folks who may not have much, if any, credit history.

Now, your debt might not feel cheap to you—particularly if you consolidated when rates were high and then watched others lock in rates of 4% or less as loans got cheaper. But historically student loans have been among the least expensive unsecured debt you can find. The federal government helps make sure of this by offering student lenders subsidies to make these loans available.

What's more, student lenders typically offer a variety of ways to structure and pay off your debt. If you lose your job or otherwise can't pay, you can get a forbearance or deferral for up to three years. If your budget's tight, you can opt for income-sensitive or graduated repayment programs.

Most borrowers can take longer than the standard 10 years to pay back their loans if they want. If Michelle tried to pay back her $120,000 in loans in 10 years, she would face a whopping $1,215 monthly payment (assuming a 4% interest rate). If she consolidated and opted for a 30-year repayment plan, she could get her monthly minimum down to $573, or less than half the original amount.

Stretching out the term means you may pay more in interest—typically, a lot more. The 30-year payback period would boost Michelle's interest costs by about $60,000.

But lower minimums can help you manage your student loan debt and still have money left over to save for retirement or buy a home. Such investments should ultimately offer a much bigger return than paying off a 4% loan.