December 6, 2011
Strategies for paying off student loans
(Liz Weston, LA Times) – Dear Liz: I graduated from college last summer and was lucky enough to get full-time employment. However, I have a great deal of college debt, including private and federal loans. Are there government programs that help pay back college loan debt? Do you have any suggestions? I cringe at the thought of paying double what I owe over the life of the loan because of interest and want to get this debt under control in the next few years instead of 15.
Answer: Your eagerness to pay off your student loan debt is admirable and is particularly appropriate when it comes to your private student loans. Unlike federal student loans, private loans have variable interest rates, limited repayment options, no forgiveness possibilities and fewer consumer protections. Using private student loans to pay for education is a lot like using credit cards, except that credit card debt can be erased in Bankruptcy Court. Private student loans typically can’t be discharged that way.
You needn’t be quite so anxious about paying back your federal student loans. The interest rates on these loans are relatively low and fixed, plus you have a number of repayment and forgiveness options. Often the best approach is to consolidate your federal loans into the longest payback period offered. That will reduce your required payments on the federal loans, freeing up more money to pay down your private loans. Once your private loans are paid off, you can apply the payments you were making on those toward your federal loans and speed your way out of debt. More…Posted by: psilberman