Buried in student loans? Here's how to pay them off

(CBS News) 

For the first time, student loan debt has outpaced credit card debt in this country. And it's likely to top $1 trillion this year.

With so many college students and graduate students entering the real world in massive debt, what's the first thing they should do once they're out of school, enter the workforce and want to pay it down?

According to CBS News Business and Economics Correspondent Rebecca Jarvis,"You want to make a list of all the loans, everything that you owe. Make sure you know what the loan terms are, how long do you have to pay off the loan, and also what percentage rate you are getting charged on a month-to-month basis in order to maintain that loan "

Video: Manage Student Loan Debt

Jarvis suggests the second thing you want to do is pull together your paperwork and consolidate those loans, because you're going to get better terms, and consolidating enables you to pay just one.

Student loan delinquency is growing at a rate of between 7 percent and 15 percent, so when you start paying these loans down, what options do you have?

Fortunately, there are multiple options, but the fastest way to go is the standard option.

"With the standard option, you're going to pay a minimum of $50 per month, over the course of ten years. This will end up being the least expensive option. So if you can afford it, it's the best idea for you," Jarvis explains. "The extended repayment is also a $50 minimum, but then you have a little more flexibility -- 12 to 30 years to pay it off. The graduated repayment will let you pay a smaller amount on a monthly basis, $25 minimum, and also over a 12 to 30 year period. And lastly, the income-based repayment is a $5 a month minimum. It's the least expensive on a month-to-month basis option, but it becomes the most expensive over a lifetime of a loan because it can last up to 25 years."

Are there repercussions if you're late on a payment? Is it similar to being late on a credit card payment, which affects your credit report?

Jarvis points out that it can actually be worse because, not only are you going to face the issues with your credit report, but it can also be an issue if you're defaulting on that student loan, since you can have your wages garnished.

"You can have your Social Security checks withheld in the future," she adds. "You can have your tax refunds withheld, and obviously, the implications for your credit score are very significant. The thing with student loans is, if you file for bankruptcy, you still owe those student loans."

What if you just can't get a job to pay it back?

"It is very important, before you start missing your payments, to go back to your lender and tell them you're struggling," Jarvis says. "There are a couple of options for those who can't pay them back, (including) deferment ... and the best thing you can do, if you're facing any type of financial hardship, whether it's medical bills, a loss of a job, you go back to the lender, you explain it to them. Much better to do that early as opposed to when you're actually really facing problems with the loan."

Are there any other ways to save money on your student loans?

Jarvis suggests that students start paying off their loans while they are still in college. And if you're paying off those student loans, make sure you're taking the deduction on your taxes. It's also important to repay the highest cost loans first. To make things easier, you can also set up auto-pay.

[YusileyS]

I agree with many of the commenters of this article. Ms. Jarvis doesn't express anything outstanding or new to the whole loan business of education. I may not have the typical $60,000 debt of student loans as others. However, I am the main breadwinner of a family of four, two of which are disabled, so paying off my $13,000 student loan is down right near impossible for me... especially with substitute teacher salary. I have one loan company that will never be paid off due to it's ridiculous monthly interest fees...on top of the forbearance fees. The other loan company is awesome. It has a very low yearly interest fees which is now only $115 (that's after 5 yrs had past)and when you start paying it it doesn't have any new fees. It stays the same, except of course it decreases with each pay. You have to accept only the loans in which the government will pay off the interest. That way you don't have to. I had to pick out both the one I don't pay off the interest and the one in which I do, due to family issues. Luckily I picked a good forgiving career and most loan companies will give permanent teachers a break, after working in the school system for three to five years, depending on the loan company. Unfortunately, I'm a temporary teacher and only worked for a single year. *sighs*

I wish they would give bailouts to everyone who ends up with an occupation that earns a annual salary of $30,000 or less and has loans that are too high to pay off in a four yr timing. After all, if multi-trillion dollar debts from high-end corporations can get bailouts ...why can't honest, hard working citizens? By law aren't corporations a person so therefore as persons don't the rest of us deserve a bailout too? Hell... my bailout isn't even a 1% to the bailouts these rich, high-end corporations had gotten.



Now in response to edgemont1 last statement in his comment... It's well worth it when it is a profession that demands a degree. >_> No school will give a permanent position to a non-college degree individual. Yea there are occupations that pay more but are they respectable? There are just somethings in life that have more value than money. No one will take the words and wisdom of a stripper as seriously as that of a master degree teacher... even though the stripper earns five times more than a teacher.

[puzzler125]

Well. Okay. I did the math. Let's say I'm a 25 year old college graduate making an extra, will round it down for easy math, $15,000 per year. Let's say I work for oh 30 years. Do the math! $15,000 per year times 30 years? End of story.

[sl0615]

I'm about to finish graduate school with tens of thousands of dollars in loans, and many of my friends will have closer to $200,000 in loans. Having so much student loan debt will affect my life for years and impact major life decisions, such as buying a house and having kids. I created a forum at www.repaymystudentloans.com to provide a supportive community for people dealing with the stresses of having student loan debt.

[edgemont1]

What a bunch of bull. This article says a whole lot of nothing and maintains the status quo. Ms. Jarvis hardly looks like she has to worry about student loans. We student loan recipients need to get together and form a class action lawsuit. It's so wrong that we do not have any credit rights. How preposterous to scare people and threaten to take away social security or disability. How sad to scare people with credit scores, jobs and anything else. My recommendation is to forget school if you have to take out a loan. If I was to do this all over again. I would have not gone to school. The stress of these loans is causing enough worry and emotional harm that it's simply not worth an extra 15-20 thousand dollars in pay. The average high school graduate makes 33000 and the average college graduate makes 52,000 --- do the math is it really worth it. If the difference was more like 50,000 than it might be a different story.