How to Deal With Student Loan Debt

Deal With Student Loan Debt
Deal With Student Loan Debt

How to Deal With Student Loan Debt. New research on college tuition suggests that 40 percent of graduates will take at least 10 years to pay off their student loans. Other studies indicate that the amount of student debt increased by a whopping 25 percent in 2008 and another 6 percent in 2009. Why the rising costs? Some say it's the economy, while others believe the cost of higher education is increasing because more people are attending.

In an article by "The Chronicle of Higher Education," statistics show that college admission is up 30 percent since the 1970's. Given the increase costs of college and competition for admission and scholarships, learn how you can keep your student loan payments under control.

Before you take out a student loan, be sure to apply for and use federal loans to pay tuition before seeking private loans. Federal loans have lower interest rates than private ones and their repayment plans will save you money because some loans do not accrue interest while you are in school. Private loan lenders can be difficult to work with and may have hidden rules that cause you to pay more fees in the long run if you don't read the fine print.

Understand the amount and type of student debt that you owe. Find out how much your payments on each loan will be and how much you will have to pay altogether each month. The average student's postgraduate debt now exceeds $24,000 according to studies by the Project on Student Debt. To gain a deeper comprehension of these stats visit:

After you know the amount and type of debt you owe, request the extended payment option, if possible. This will allow you to make smaller payments right after school when you are making less money. Later, if the reduced payment schedule ends, hopefully you'll be making more money. Though extended payment plans will cause more interest to accrue, the interest is tax-deductible within certain limits. Be sure to understand how to deduct what you've paid in interest each year.

Another repayment option is to use an income-based repayment plan that limits the payment amount to a specific percentage (depending on the lender) of your discretionary income each month. This will allow you to keep current on your payments more easily and also save or invest some money as well.

If you've tried lowering your payments and the other repayment options are not working for you and you simply unable cannot make payments, request a forebearance or deferral on your loans. This will temporarily suspend your payments for a time that you and the lender will discuss. During a forebearance or deferral period you can pay off other higher-interest debts or help you through a period of unemployment, a common problem for graduates.

As much as you may not want to, be prepared to put off other major life goals such as marriage or buying a house. If you have amassed a six-figure amount of student loan debt, you may need to spend a year or two focusing on reducing your balance before accomplishing other expensive objectives.

Tips & Warnings

  • Before applying to ANY loans, fill out a FAFSA to see if you qualify for grants, federal loans and work study at your school. Visit: for more information and to fill out the form.
  • Visit your school's financial aid office for help on paying tuition and filling out the FAFSA if you are unsure about how to do it.
  • Search for scholarships in your community, at your school or online. Scholarships do not need to be paid back and often many are not used each year simply because people do not apply.

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