Magazine article Black Enterprise

Tips for New College Grads: Here's Your Manual for Dealing with Student Loan Debt

Magazine article Black Enterprise

Tips for New College Grads: Here's Your Manual for Dealing with Student Loan Debt

Article excerpt

UNLESS YOU RECEIVED UNUSUALLY GENEROUS SUPPORT FROM MOM AND DAD, you're likely to face a large debt upon graduating. Those who borrowed money for college and graduated with a bachelor's degree in 2012 incurred, on average, $29,400 in student loan debt, up from $26,600 the year before, according to The Project on Student Debt.

If you're dealing with a long-term financial difficulty, Kantrowitz suggests increasing the term of the loan, which reduces monthly payments.

Steps to take

1 * Don't pull a disappearing act. Don't ignore your lender's efforts to communicate with you. Mark Kantrowitz, senior vice president and publisher of Edvisors Network, says not all calls and letters are an attempt to collect debt. Sometimes a lender may be attempting to present you with options.

2 * Explore your options. Speak up as soon as you think you're heading for trouble. "Before you give up and stop paying your loans, learn what options are available. If you default, you lose options," says Kantrowitz.

3 * Consider deferment or forbearance.

This option temporarily allows you to stop making payments and may be suitable if you're experiencing short-term financial difficulty.

Here are your options:

1 * Extended repayment increases the term of the loan, based on the amount owed. An increase in the term reduces the monthly payment, but you'll pay more interest over the life of the loan.

2 * Take advantage of interest deductions. Interest payments are tax deductible. "This allows you to deduct up to $2,500 in federal and private student loan interest each year as an above the line exclusion from income on your federal income tax return. That means you can take this deduction even if you don't itemize," says Kantrowitz.

3 * Graduated repayment starts with a low monthly payment based on your income and gradually increases every two years. …

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