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Learn About Student Loans

Updated on September 7, 2012

Owing Too Much Student Loan Debt is Not Good

It may not be surprising to discover that, when it comes to borrowing for college and student loan debt the highest borrowers were from middle income families The college board found in its latest report that student loan debt was highest from families who had an income of more than 100,000. Of the students who graduated in 2007-2008, 17% had student loan debt greater than $30,000. Asians were the most likely to borrow from private lenders and the least likely to not use the federal school loans. About 66% of students who obtain a bachelors degree, have student loan debt. Even the majority of students who attended a community college, which costs less than other higher learner institutions, have student loan debt. 10% had student loan debt that was greater than $20,000.

Too much student loan debt can overwhelm the new graduate and make repaying the borrowed amount and insurmountable task. Experts say try not to borrow too much. However, a college education is important, and it is hard to pinpoint exactly how much is too much. Some statistsics have pointed to keeping student loan debt to under $27,000. It is also a good idea to have a strategy as to how the student loan debt will be repaid after college. Research prior to getting the college loan is also very important. The interest rates and costs of getting a loan can vary among private lenders. The choice you make you be thousands of dollars difference for the borrower. Federal loans are the safest, and offer the most protection when it comes to repaying the student loan debt.

The trend in borrowing for college has increased tremendously since the early 1990’s when about ⅓ of college students had student loan debt from college loans. With the higher cost of education today, more students than ever have student loan debt. When it comest to federal loans, there are many loan repayment choices availabelto help reduce the monthly payment for the student loan debt.

Student Loan Debt Can Be Overwhelming

How to Pay Back Your Student Loan Debt

For Federal student loans you can choose a payback schedule that fits your financial circumstances. Usually there is a 10-25 year payback period on your student loan debt.

There are different repayment choices including the standard repayment, the extended repayment, graduated repayment, income based repayment, income contingent repayment, and income sensitive repayment.  

  • The standard repayment allows you to pay a set amount each month until the student loan debt is entirely paid. You will have up to 10 years to repay the student loan debt.With a shorter payback period of 10 years, your monthly payments may be higher, but you will be paying less in interest over the life of the loan.

  • With the extended repayment, you can pay a set amount of money or a graduated payback amount in 25 years. FFEL students, and Direct Loan borrowers  must have a student loan debt greater than $30,000 for each loan, if they have more than one federal student loan.

  • The graduated repayment schedule starts out low and every 2 years increases. This loan is for up to 10 years. It works well for people who anticipate their income to increase.

  • Income Based Repayment is a newer type of payback as it became effective July 1, 2009. This loan creates a payment schedule based on your income and family size. This repayment plan has an additional incentive.  Those who work in public service  for 10 years, can have their remaining balance cancelled.

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  • Income Contingent Repayment is for Direct Loans only.  With this 25 year repayment schedule, you have flexibility should you encounter an economic hardship. Every year, the monthly payments are refigured based on your income, family size, and amount due on your Direct Loan. If you haven’t repaid the student loan debt after 25 years, the loan is discharged. Taxes may be due on the amount that is discharged. PLUS Loan borrowers are not eligible for this type of repayment plan.

  • Income-Sensitive Repayment Plan is for FFEL Loans only. This 10 year repayment arrangement is based on your yearly income, and the payments will increase based on your income going up or down.  

Sometimes student loan debt can be deferred or postponed for a certain period of time. Usually interest payments are also suspended during this time, if you have a subsidized federal educational loan. With a non subsidized Stafford loan, or a Federal Perking loan you must still pay the interest during the deferred period. Interest that is not paid will accumulate and be added back into the principal loan payment. A deferment is something that is granted by your the organization that is handling your loan. If you choose to not make the payments until you are granted the deferment, you will be considered delinquent in your payments and the loan could go into default.

Federal Student Loans Give Much Better Flexibility

There are different kinds of deferments including one for military duty, post active military service duty, economic difficulties, forbearance, repayment adjustments and other types of support to make repaying the loan easier.

  • A deferment for military duty becomes available to students how have the Direct, Perkins, and FFEL loans and are on military active duty. While the borrower is serving and for 180 days afterwards, the loan is deferred.

  • Anyone is in the National Guard and is called up to serve active duty and is enrolled even part time in an eligible school, or within 6 months of enrollment can get their federal loan deferred for one month and one year (13 months) after they have finished their active duty, or when they return to being a part or full time student.

  • Sometimes financial hardships make repaying the student loan debt difficult. Contact your loan servicer to find out how the federal government can assist you with this. A Direct, FFEL, or Federal Perkins government loan may be deferred for up to 3 years if the borrower is having financial difficulties that meet federal requirements.

  • Some student loan debt can be temporarily postpostponed or have a reduced schedule of payments over a period of time. This is called forbearance, when you do not be the eligibility of deferment. The difference between forbearance and deferment is that the interest will be added on whether it is a subsidized or unsubsidized loan. Forbearance can be granted for up to 1 year at a time for a maximum of 3 years.
  • With federal college loans, you can sometimes change payment plans if a different schedule would benefit your current monetary situation. You are permitted to change plans once a year with a Federal Family Education Loan Program. With a Federal Direct Loan Program you can switch anytime, provided the maximum payback period is longer than your current arrangement.

Federal college loans give much more flexibility to paying back the student loan debt. The interest rates are much lower than through private lenders. It is always suggested to utilize the federal loan system first before you seek to borrow elsewhere. Private student loans are useful when the federal loans are not enough to cover the cost of school (and they usually are not). Should you have difficulty paying back your private student loan debt, there is usually no flexibility and private lenders are under no obligation to assist you. It is important to go to school to gain knowledge, it is also important to be dollar wise too.

Options for Student Loan Debt


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    • Simone Smith profile image

      Simone Haruko Smith 6 years ago from San Francisco

      Federal student loans are definitely the "nicer" manifestations of the modern loan in existence today. Thanks for offering this overview!