College loans? 7 smart steps to tackle student debt

Have crazy student loan debt? You’re not alone.

Here are seven steps you can take to help get a handle on your college loans before they make you regret ever getting that degree in the first place.

College loans Get 7 steps to tackle student debt

7 steps to tackle student debt

There are more than 36 million people saddled with federal student debt, but the job market makes repaying education loans harder than it has been in decades.

Consumer Reports magazine identified seven steps you can take to help get a handle on your college loan debt.

1) Find out how much you owe and to what lenders. Upon graduation — or sooner — line up all your student loans and determine the loan servicers, balances, interest rates, repayment options, and grace periods.

2) Choose a repayment option.  Analyze your current financial situation and your income potential for the next few years. You’ll save money and get out of debt faster by paying off your highest-interest loans as quickly as possible, which you can do by making the largest payments you can afford each month and applying extra to the principal. If your total debt exceeds your first-year income after graduation, you probably won’t be able to afford payments under the standard 10-year plan.

3) Consider loan consolidation. A borrower can combine his or her college loans into one payment, which is more of a convenience than a cost savings. However, private student loans usually can’t be consolidated with federal student loans.

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4) Explore options if you can’t afford payments. Don’t reduce or skip payments without permission or you might be reported delinquent or default, which can affect your credit score. You can request a deferment or forbearance for federal loans, but most private ones don’t offer the latter and their forbearance terms are limited.

5) Consider jobs or volunteer programs that qualify for deferment or forgiveness. Certain public sector jobs, nonprofit-sector careers such as teaching, police and fire services, working in public-interest law or public health, or joining the military may qualify you for cancellation of federal loans.

6) Think twice about going back to school to avoid unemployment. College enrollment increases during recessions, but incurring more student debt may not pay off.

7) Contact your lender immediately if you can’t pay. Skipping out on a student loan won’t solve the problem. Defaulting will add late fees and collection costs to the outstanding balance. Parents or grandparents who want to help recent graduates should consider helping to pay back loans instead of giving cash.

College loans: How to avoid borrowing

If you or your child is heading to college and you must borrow money to pay for the cost, Consumer Reports says avoid using private loans, except as a last resort — even if their current interest rates are lower than federal loans.

Here are some alternate ways that can help minimize expenses:

  • Opt for a two-year community college before transferring to a four-year institution, or attend an in-state public university.
  • To determine your eligibility for need-based assistance that doesn’t need to be repaid, fill out the Free Application for Federal Student Aid as soon as possible after January first.
  • Don’t take out loans to cover nonessentials such as room furnishing and entertainment; consider working part-time to cover incidentals.
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For the full report on student debt, check out the May 2012 issue of Consumer Reports, online at

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