Managing Student Loan Debt

Unfortunately, many people find it unavoidable to finish college without student loan debt, unless they are able to get a great deal of grants and scholarships. There is only so much free money to go around, so student loan services are a necessity for a large number of students. It is important for these students to have a plan to manage their student loan debt.

Borrowers must also have a student loan repayment program in the back of their mind, even when they are years away from the repayment period. Student loan services will often offer more than a person realistically needs, but students are not obligated to take all that they are offered. The most obvious way to manage student loan debt is not to take out more than one needs. Students and parents can determine how much is too much by using a student loan repayment calculator, which will tell them how much the monthly payments will be after graduation. Financial experts say that students should not enter a student loan repayment program where the monthly payments are more than 15 percent of their estimated monthly income. Luckily, student loan services can provide better repayment options, which ease the burden for students and parents who borrow.

Though people must still be very careful with how much student loan debt they take out, this is a relief. Lowered interest rates and favorable tax laws have made student loan debt easier to manage. From July 1, 2006 through June 30, 2007, the interest rate for a Stafford Loan is 6.8 percent and the rate for a Perkins Loan is 5 percent. PLUS loans for parents have an interest rate of 8.5 percent. A student loan repayment program should also be tax deductible. Students or parents can deduct up to $2,500 per year of loan interest payments.

Most student loan services also allow borrowers to adjust their student loan repayment program to suit individual needs and circumstances. A standard student loan repayment program involves making equal monthly payments over a ten-year period. An extended student loan repayment program may be available, where the borrower can extend the repayment period to upwards of 30 years. With graduated repayment, the payments gradually increase, usually every two years. With an income-contingent student loan repayment program the payment amount is contingent to income and often allows for a longer repayment period. Graduates should be careful if they use on of these student loan services, though.

Different payment options can increase the total amount of student loan debt by increasing interest paid over time. There are pluses and minuses involved with any student loan repayment program, so it is up to the student or parents to choose a debt management plan that works best for them. With the right plan, though, student loan debt should not be too heavy of a burden to carry.