Congratulations to the members of the Class of 2012 on their
upcoming graduation. Unfortunately, many of them will be leaving
college with more than just a diploma -- they'll have student-loan
debt.
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According to the most recent data from the College Board, the
average debt per borrower who attended a public college was $22,000
in 2010. And the average debt per borrower who attended a private
college was $28,000.
Those of you with federal student loans won't have to start
paying them back immediately. You have a six-month grace period if
you have a Stafford Loan, and you have a nine-month grace period if
you have a Perkins Loan. Use this time wisely, though, to find out
what your loan payments will be each month and explore your options
if you can't make those payments.
Start with the
calculators at Student Aid on the Web
, the Department of Education's site for federal loans, to see what
your estimated loan payments will be under the standard repayment
program. If you don't think you'll be able to afford the monthly
payment under this plan, here are other repayment plans for which
you might qualify:
Consolidation.
Available through the Federal Direct Loan program, consolidation
lets you combine all your loans into one and extend repayment to as
long as 30 years for lower monthly payments but at a higher total
cost. For more information, visit the
Direct Consolidation Loans
site.
Extended repayment.
Borrowers with at least $30,000 in loans can stretch monthly
payments as far out as 25 years. This will lower your monthly
payment but increase your total cost because you'll be paying more
interest as a result of the longer repayment period. The Student
Aid on the Web site has a
calculator to show you what your estimated payments
would be
under this plan.
Graduated plan.
You make lower payments in the first few years and higher payments
later, over a ten-year period. You pay less interest initially but
more over the term of the loan. The Student Aid on the Web site has
a
calculator to show you what your estimated payments
would be
under this plan.
Income-based repayment.
If you have high debt relative to income, you qualify for reduced
monthly payments. Any remaining debt is forgiven after 25 years.
Visit
Student Aid on the Web
for more information about eligibility, monthly payment amounts for
a range of incomes and a calculator that will help you determine
whether you'll benefit from the program
Income-contingent repayment.
This plan is similar to income-based repayment but uses a less
generous formula to determine the monthly amount. Also, it's only
available to borrowers with Direct Loans. To calculate your
payments, use the
ICR plan calculator
.
Income-sensitive repayment.
Postponing Repayment
Another option to consider if you think you'll need help paying
off student loans is to get a job that will qualify you for a loan
forgiveness program. The
Public Service Loan Forgiveness Program
is available to borrowers with Federal Direct Loans who have a
public service job, such as law enforcement officer or public
school teacher. (People who have Staffords through the FFEL program
can usually consolidate them into the Federal Direct Loan program
to qualify for the loan forgiveness program.) After making 120
on-time payments while working full-time in that position, you may
qualify to have the balance of your loan forgiven. Serving in the
military or working for organizations such as Americorps or the
Peace Corps can also qualify you for loan forgiveness. Learn more
about these loan forgiveness opportunities at
FinAid.org
.
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