How do I Deal with Student Loan Debt?

B. Miller

Student loan debt can be intimidating for any borrower approaching graduation. You will generally need to begin making payments on student loan debt within a few months of graduation from college; this applies to both federal and private student loans. You usually have a few methods to postpone making payments on student loans, either through a deferment or forbearance, but the only way to really deal with student loan debt is to pay it. Student loans generally cannot be discharged in bankruptcy except under extreme circumstances, so it is in your best interest to create a monthly budget and factor in your student loan payments.

Student loan repayments usually start shortly after graduation.
Student loan repayments usually start shortly after graduation.

Some lenders offer income-sensitive repayment plans, which can be a helpful way to deal with student loan debt. These may feature reduced monthly payments for several years, or even interest-only payments for the first few years after graduation. While these repayment plans can be helpful early in the repayment process, they can extend the life of the loan and increase the amount of interest that you pay overall.

A student loan application form.
A student loan application form.

Deferment pauses your monthly payment for a specified period of time, but has certain requirements that must be met. For example, you must be deployed in the military, be enrolled in school, or be suffering extreme economic hardship to qualify for a deferment. The benefit to a deferment is that interest stops accruing while loans are deferred. A forbearance, which also postpones payment, does not feature the same eligibility requirements, and may be applied for more than once, but interest does continue to accrue while the loan payments are stopped.

Before you apply for a deferment or forbearance, you might want to first consider a consolidation loan. This type of loan can combine all your student loans into one, frequently at a low interest rate. You will then only have to make one monthly payment. Federal and private loans may not be able to be consolidated together, but all private loans can be grouped, and all federal loans usually can be grouped. A parent co-signer on a consolidation loan may make the interest rate even lower.

Do not deal with your student loan debt by placing it on a credit card, and do not stop making payments if you are having trouble. The loans will then be in default status, which can ruin your credit; in addition, lenders may have the ability to garnish your wages to take payments for student loans. If you find you are having trouble making payments, you should contact your lender to learn about your options.

Consolidating student loans can result in a lower interest rate.
Consolidating student loans can result in a lower interest rate.

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