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College Loan Debt - Important facts about college loan debt - Explore all options, Don’t borrow more than you can pay back

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Sometimes student loans are the only way for a student to be able to attend college, but there are other times when the college loan debt is just too much. Probably the biggest problem when it comes to student loans is that there is little to no planning before the loans are taken out. About half of all college students have college loans, and most of those loans are about $10,000. Of course it is very easy to just assume you will have a good job after graduation and that you will be able to pay those loans off, but without a concrete plan, those loans can seem just like dust in the wind.

Explore all options

Before signing up for any college loans, it is very important to explore all of your options. Did you know that some organizations will give scholarships for just about anything? Ask around at school or look into trade organizations that support the industry you are going into. Any of these may be able to give you a scholarship if you only ask. Some colleges and universities even give out their own scholarships just so they can get more students to attend there.

Don’t borrow more than you can pay back

This step in the planning process is quite a bit more difficult because it depends entirely on how much money you will be making after you graduate. Financial experts recommend that students don’t borrow any more than what would allow their payments to be 10 percent of what their expected monthly income after they graduate from college. This will require some research into the chosen field before any loans are taken out. For example, a student who expects to earn $2500 per month after graduation should only take out student loans that will result in $250 worth of payments each month, and no more. Ask your lender what the expected payments will be on the loans after you graduate, and use this number to gauge how much is okay to borrow.

Paying college loan debt after graduation

The moment the student graduates from college, it is time to start thinking about all of that school loan debt, even if most of those loans do not require any payments until the student has been out of school for six months. If there is a lot of college loan debt, graduation is not a bad time to begin thinking about debt consolidation. If most of the loans are government-based (and hopefully they are), then there are plenty of programs that will allow students to consolidate all of their school loans into one monthly payment. Of course one of the things to think about when considering consolidation of all those student loans is the interest rate. Other than convenience, the only real benefit from debt consolidation is to save some money on interest, but in some cases, the interest rate may be higher than when the student took out the loan in the first place.

Another thing to consider is what repayment method will work best in a given situation. The majority of students use standard repayment, which involves equal monthly payments over 10 years. However, some students will find a greater benefit from graduated repayment, which means the amount of the monthly payment increases as time goes on. Hopefully the income is also going up, so this may be a good option for students with a very low starting income. The third option is income-contingent repayment, which often stretches the payments beyond 10 years. The amount of the monthly payments is then tied to how much income the student is earning.

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