Ways To Help Get Out Of Student Loan Debt

College can be a wonderful experience for American students but it can also be one that leads to a lifetime of debt. Over $100 billion worth of student loans were taken out in 2011. The total level of outstanding debt also crossed the $1 trillion mark recently for the first time ever. The level of student debt in the nation is now officially greater than credit card debt according to the Federal Reserve Bank of New York. In the last 35 years, the cost of college tuition has increased by over 900% and in 2010; the average student had collected $25,000 worth of debt by the time they graduated. It seems as if student debt is inevitable so how do you cope with it?

Saving Grace
Student loans have grace periods though the actual length varies depending on the loan. This is the length of time you have before you must begin the interest repayments. Federal Stafford Loans offer a 6 month grace period whereas Perkins Loans give you 9 months. The grace periods offered by private loans vary so do your research before signing on the dotted line. Use this free time to look at the best and most affordable loan repayment options.

Check Your Options
Typically, federal student loans involve a minimum monthly repayment of $50. The length of the loan is usually up to 10 years. Clearly, the faster you repay, the less interest you end up paying. In the event that your annual salary in your first post-graduation job is higher than your total debt, you should certainly repay your loan within 10 years. Be wary when looking to extend your loan term. If you decide to repay in 20 years instead of 10, your monthly payment will only reduce by approximately 33% while the amount you repay in total will increase by over 100%.

Be Wary With Consolidation
The principle behind consolidating loans is a sound one: All your loans are combined into one larger loan which should result in you paying less total interest. It is especially useful if you can’t afford the repayments on federal student loans and are not eligible for postponement. Yet keeping your loans separate can also make sense if you can afford to repay them all. Various financial experts are adamant that repaying various loans simultaneously can help you accelerate overall payment. Those with extra money should immediately look to repay the loan with the highest interest rate to save hundreds, if not thousands of dollars over the life of the loan.

Say ‘No’ To Defaulting
There are various websites that espouse the benefits of defaulting on your student loans if you are in serious financial trouble. It may seem to be the easy way out but will cost you in the long run. Remember, you can’t use bankruptcy to get rid of your student loans. In addition, if you default on your loan, the federal government can get their money back by taking your tax refunds and up to 15% of your disposable pay without the need for any court order. Your Social Security check could also be used to repay the cash. Even the 15% that is ‘garnished’ from your pay is a larger amount than what you would be repaying on the loan. Therefore, no financial benefit is derived from defaulting.

When student loans are causing financial distress, only prudent saving, spending and payments will see you through.

Jason Kay is a blogger for CheapoChecks.com, the cheap check search engine.