5 Things to Know About Repaying Student Loans

(MoneyWatch)  During this holiday season, millions of former college students aren't in a jolly mood. Many are struggling to repay their student loans and a growing number of them are now stuck with a defaulted student loan.

The latest figures for federal student loans show that 11.8% of borrowers, who began repaying their student debt two years ago, have defaulted. A student loan is considered in default if you haven't made a payment in 270 days.

To avoid this financial nightmare, here are five things you need to know about paying back student loans:

Explore your options. If you're struggling with your student loans, I hope they are federal loans rather than private ones. You've got more options with federal loans, which is why borrowers should turn to them first.

Consider deferring. Unemployed or experiencing other financial difficulties? It's possible to postpone repaying federal student loans for up to three years. If you're heading back to school at least half time you can also put your payments on hold. The interest on a deferred loan, however, will keep growing unless the government paid the interest on your college loan when you were a student.

Change your repayment schedule. With a traditional student loan, you repay your debt in 10 years. Some strapped borrowers are stretching out their loans for up to 30 years, but that will generate significantly greater interest payments over that time.

Consider an income-based repayment. If your income is low, you could qualify for an income-based repayment method. With this plan, your payments could even drop to zero. Here is a calculator from FinAid.org that lets you calculate the impact of using the income-based repayment method.

Keep current. Two great websites to educate yourself on the latest student loan developments are Student Loan Borrower Assistance and The Project On Student Debt.

Lynn O'Shaughnessy is the author of The College Solution, an Amazon bestseller, and she also writes a college blog for TheCollegeSolutionBlog.com.

Student loan image by gfpeck. CC 2.0.