Students

How You Can Ease the Burden of Student Loan Debt

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When it comes to having massive amounts of debt, student loans are one of the biggest culprits, especially now that student loan debt has surpassed credit card debt in America. So what can you do if you find that you’re sitting under a mountain of student loan debt?

Here are a few suggestions to help you dig your way out:

1. Get a clear understanding of your student loan “big picture”

The most important number, of course, is the total debt that you owe. Beyond that, though, you need to understand which type of loans you actually have. There are generally three main types of student loans:

Direct Government Loans: These are ones you borrow from the Federal government itself, and they tend to have lower interest rates than private loans. They also are sometimes subsidized, which means that government pays your interest as long as you remain in school or in a grace period.

Government-Backed Loans: Since June 30, 2010, these loans are no longer being issued. But many borrowers still carry these. Like private loans, these loans are borrowed from a private company, however unlike private loans they are backed by the federal government. Which means if you default the government will reimburse the lender. (Because of that guarantee, these loans have lower interest rates than private loans)

Private Loans: Loans borrowed from any private lender without government backing.

To find out which of these types of student loans you have, try using the National Student Loan Database, which has information on all loans. You should be able to log-in and find your loans, with information about what type of loans they are.

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Free Credit Check & Monitoring2. See what federal programs might be able to help you

If you have federal student loans (and most student loan borrowers do), then you need to be aware of some crucial government programs that can help you out. One is called the Public Service Loan Forgiveness Program, and anyone who works in a qualifying government or non-profit job is eligible to apply. Under this program, if you make payments for 10 years you can have the remainder of your student loan balance forgiven. Yes, that’s right — you only need to make payments for 10 years and then it’s gone, no matter what.

Another program that helps many student loan borrowers is called the Income Based Repayment program. What this does is allows you to pay lower monthly payments based upon your net income. Usually, if you are accepted into the Income-Based Repayment plan, your payments will not be higher than 15% of your disposable income each month.

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3. Make a plan to pay off your entire student loan debt

The absolute key to paying off your student loans is to make a realistic and concrete plan for how you will pay them off, month by month. In order to do this, first decide how much money you can allocate each month to your student loan payments. This number will be different for each person, but it’s important that you settle on a number that makes sense for you.

If you pick a number that’s too low, then it will take you longer to pay off your loans. But if you pick a number that is too high, you won’t be able to stick with your plan. So think about it carefully, and use your budget to determine what makes sense.

Once you have that number, decide how you need to divvy up the money to pay each of your student loan payments per month. Of course, you have to pay the minimum payments, but beyond that you should usually pay any extra money toward the loan with the highest interest payment. (There are some simple web apps that can help you do this)

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4. Don’t ignore the problem, even if you can’t pay

The worst thing you can possibly do with regard to your student loans is simply ignore them and not make any payments. You need to understand what happens if you don’t pay your student loans. Why? Because if your lender doesn’t receive any payments from you, as specified in the terms of your loan, they will first declare you delinquent and then after about 270 days they’ll consider you to be in default on the loans.

Once you’re in default, a lot of things happen — none of which are good for you. For one thing, your loans become due and payable immediately. So instead of owing a monthly amount, you owe the entire balance. And your credit score will take a big hit, not to mention you could have your federal and state tax refunds withheld.

For another thing, if you have federal loans in default, the government can sometimes garnish your wages because of your student loan status. And nobody wants to have their wages garnished.

Hopefully with all the tips provided here you’ll never get to the point where you can’t pay your student loans. If you stay diligent, inform yourself, and keep making payments every month, you will become debt free — and probably faster than you realize. Good luck!

Image: Andrew Allingham, via Flickr

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  • http://N/A Kelly

    Depends on your loan servicer, too. When I was having trouble making payments and kept contacting my loan servicer, I was sending my information into a black hole. I never heard from anyone until I started getting dinged on my credit for being in default. I regret ever getting involved in student loans. I currently have a 6% interest rate with the government. What a mess I will have for the rest of my life with this.

  • http://wh.gov/XDhX TZ

    I too have a horrible relationship with one of my loan providers Sallie Mae. They call me and offer me ways to lessen my student loans but refuse to send me anything in writing. They call me upwards of 10 times a day and every time I tell them to send me the offers they are offering me over the phone in writing they say they cannot. I have even asked for supervisors and they still tell me they can’t send me any information on the over the phone offers until after I sign up for them and schedule the payments out. I have upwards of 150k in student loan debt because of 13.9% interest rates. I will never be able to pay them off in my lifetime. That’s why I setup a petition to the government to allow for them to be discharged in bankruptcy (http://wh.gov/XDhX). I feel like it was unfair to ask an 18 year old to sign papers that they didn’t understand. Also I was promised the world by my school and did not get anything they promised. I ended up having to go back to school to get the skills my 1st college promised me. Luckily my work paid for my 2nd degree. Unfortunately I still can’t afford the 1500$ a month payments my loan vendors are asking from me. I’m slowly drowning in these loans with no way out. Kids need to be educated in high school on how student loans work and how interest rated work. That is part of my petition, students need to take a class in high school or their first class in college on what student loans are, how interest works, and the consequences. If this would have been taught to me I wouldn’t be in the situation I am in now.

    • JB

      I totally understand TZ… Sorry this is still happening. I was a Sallie Mae victim years ago. See my post below. You are not alone and hope it works out for you. Most folks I know have had to take out a second mortgage on their homes to payoff their student loans!

    • c gulickson

      Did you get a reply about your petition? I am in a very similar situation and it is simply overwheming…..aaahhhhhhhhhhhhhhh
      The fees are just unreal ….I saw you have a link for the petition i will check it out …Good luck to us

    • bob

      I feel for you. I owe $48,000. Cannot afford to pay to pay on the loan. Sallie Mae is RUDE. When my wife was 7 months pregnant she picked up the phone and it was Sallie Mae on the line. She told them I was only making $10.00 a hour and she was 7 months pregnant. The lady told her that she needed to go get a job right now! I called the supervisor when I arrived home told her what the person said and and she told me she was listening to the phone call and the person said nothing wrong. Sallie Mae can Kiss my A$$. Signing your petition right now, Thank you!

    • Stacey

      The FIRST class for any degree should be on loan and money management. I know so many folks with this problem. Maybe a little money smarts would have prevented the whole banking crisis that we are all trying to live through right now.

  • LF

    This stories are so sad. I had a lot of student loan debt but I did receive student loan counseling. I thought you had to when you get a guranteed student loan. Did you not receive that and have to sign off on it. I think this issue goes a bit deeper as I think the cost of schools are outragious. I realize that you have to pay to get something but som are a bit much even state schools. Also the fact they fee you to death. Why was I paying a fee for statues for a campus I would never see. I could careless about a statue and if someone wants one then they should pay for it not the students. Also, the price of textbooks is a ripoff as well.

    Back to your story. You may be able to refinance you loan through Sallie Mae. Most of the documents are on the website you need to refinance or do an income sensitive or redistributed loan. Good luck!

  • Lilly

    Many State Universities are expensive because state governments are not funding them at appropriate amounts to keep costs at a reasonable level for average families.

  • Heather

    The fixed interest rate is making it difficult. I respect the fact I need to pay it back. I am thankful I had the opportunity to get the loans but my loans are currently 6.8 and 7.35%. I even paid $200-300 month as I was able while I was in school, thinking that would decrease the payments in the end. I still ended up with hefty capitalization interest charges. I have a morgage size debt to pay and all I seem to pay monthly is the interest. It’s killing my ability to pay this debt. It would be nice if we could refinance to a lower interest rate every few years.
    I’m afraid this debt will fall to my kids because I will never be able to pay in my lifetime.
    (and they have their own loans too!-better interest rate though- 3.5%)

  • Sheldon

    I don’t understand why students – who will eventually become taxpayers to support this entitlement country that is trillions in debt – are so under the gun to repay these loans! Again, these students are the future taxpayers who will fund all of the entitlement programs for all the other non-taxpayers. They have a heavy burden to repay loans on top of paying taxes!!! That is ridiculous!! What are the recipients of the all the “free stuff” being asked to pay back??? NOTHING – NADA – NOT ONE PENNEY!! These people are living on the taxpayers’ dime – womb-to-tomb – and they are not being hounded to “pay back” one penney! Their credit scores are not being dinged!! They live stress-free and tax-free and loan-free!!! None of this makes any sense – it’s ludicrous that 47% of the population gets free food, free rent, free phones, etc. while the poor students GET NOTHING FREE!! Remember – without this educated workforce – the freeloaders would not enjoy all of their free benefits. SO WHY DO THE FREELOADERS CONTINUE TO GET ALL THE FREE STUFF – YET STUDENTS – WHO ARE FUTURE TAXPAYERS – ARE HOUNDED TO REPAY LOANS????

  • JB

    I too was a victim of Sallie Mae. Before the interest rate hikes, I was constantly called and sent literature on consolidating my student loans to be locked into my current interest rate. I had a few loans with interest rates of 3-4 percent. I finally submitted the paperwork to consolidate and Sallie Mae locked me into a rate of 9 percent! What a ripoff! The same thing happened to other folks I know. I could not afford the increase in payments so I had to defer and obtain hardship derferements which only add more and more interest. My final payoff is now 4 times as much as my initial loans! I may never pay off this loan.

  • ms

    I’ve been making payments on my student loan and have not had the balance go down. I was delinquent. However, I did make arrangement to become current if I make 9mo of regular payments. Instead they sent me another offer after a year to make another six months of regular payments and pay a higher interest rate to have my credit score become current. I felt this was wrong, but unfortunately there is no way to know if this is legit.

  • TJ

    I can relate to every comment made. I am over 100k in debt, because I co-signed for my daughters loans. AND SHE NEVER FINISHED SCHOOL!!. And when I looked into it further, she signed my name to most of the loans. Now she is not paying or even communicating with them or ME! But what amazed me as we’ll was, the RIDICULOUS rates they’re charging. A 12-13% rate over the life of the loan doubles what you must pay back. To Have a 18 y.o sign these forms without first educating them is horrible. How do these people sleep at night?
    TZ, I WILL BE SIGNING YOUR PETITION!

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