Managing Student Loans

Paying off school loans is a tricky prospect for those students who aren’t fortunate enough to have family help. The problem worsens if your training is in teaching or social services, those jobs where much of the reward isn’t paid in dollars. If you just can’t make the numbers work on your student loans don’t worry because help is out there.

The first thing to do is take stock of how much student loan debt you have. Are your loans public or private? If the money was distributed through the government via Direct Loans you have more options than with a private lender such as Sallie Mae. With the latter you will certainly not receive forgiveness, absent death or impairment, but may be eligible for a hardship deferment or loan consolidation depending on your circumstances.

According to the site Student Loan Borrower Assistance after ten years of government work the balance of one’s student loans can often be forgiven. You should take into account how much you currently owe and what your projected loan balance would be after this period; loan calculators are available on the websites of most lenders to assist you. If you are making income contingent payments and would have a healthy balance remaining then you might think about special opportunities in the public sector. A few ideas you might think about with your service background include teaching in a rural school or filling a critical-need civil service position. Americacorps and the Peace Corps may count towards your ten years of government work while granting you forbearance. Teach for America pays a living wage and a 5000 dollar per year credit towards your student loan. The armed forces have a loan forgiveness program upon completion of service; no government loan will require monthly payment during your active duty period either.

If you can demonstrate an inability to pay the agreed-upon amount of your loans the lender will have an incentive to work with you. This is known as a hardship deferment. It is important that you contact the lender before they begin to see you as an adversary! The interest rate caps have been raised recently and it is not unheard of for a student loan to skyrocket to as much as 30 percent. Lenders have a wide range of tools in their arsenal including garnishing wages, liens on property, and confiscating your tax returns.

If you have a Direct Loan or a Federal Family Education Loan the Higher Education Act will provide you a means to lower your interest rates.  Consolidating your debt can be extremely helpful as lower interest rates will assist you in paying off the principal sooner. Most private lenders have a vested interest in buying your high-interest student loan debt for a reduced rate. Keep the lines of communication open and you might find help in unexpected places. The default rate on student loans is historically the lowest of any investment other than treasury bonds and the yield is much higher; with that risk/reward ratio there will always be a market for your debt. There may be other ways to reduce your loan amount based on your career choice and skill set. The choices out there are vast but by going to school you’ve shown you’re dedicated to improving your lot. The rest should be a piece of cake.

Student Loan Borrower Assistance. (2011). Retrieved February 17, 2011 from