Welcome to the Real World: Student Loans

So you finished school Ė congratulations! Of course, for most students out there who borrowed money for school, graduation also means it's time to start paying your tab. If you're worried about that great big total, take a deep breath and read on for our advice about tackling student loans.

Where to Start
If youíve taken out student loans, the law entitles you to an exit interview at your college, and thatís a meeting you shouldnít miss. Itís your chance to sit down with a financial aid advisor and find out about your repayment obligations and options.

Go Grace Period
Student loans generally come with a grace period of about six months after you leave school and before you have to start paying. Whether you graduate, quit school or take some time off, this time is yours.

Create a Plan
Knowing what you owe and when you need to start making payments is the first step to handling your debt well and keeping that credit score high. Storing your loan paperwork in one safe place is another key to staying on top of your loans.

Ways to Repay
Depending on what you can afford, there are lots of ways you can arrange to pay back your loans. If you can swing it, the standard payment plan gets you the lowest total loan cost. Here are the other options:

  • Graduated payment plan: Payments start small (like your salary), and then get bigger over time. It's convenient for now, but youíll be paying more interest over the long haul.
  • Income-based payment plans: Similar to the graduated plan, this plan means monthly payment amounts are tied directly to your income.
  • Extended repayment: Allows you to make smaller payments for a much longer period of time. Of course, the longer you owe money, the more interest you pay, and the total amount in the end goes up dramatically.
  • Consolidation: If a lender offers you a lower interest rate and allows you to combine all of your loan payments into one convenient payment, you can save a lot of money over the life of your loan.

Donít Default
Blowing off your loans is one of the worst financial missteps you can take. After six months of missed payments, you will likely be faced with collectors and a destroyed credit rating. So if youíre having trouble making payments, call your lender and find out your options (including deferment) right away.

Reducing Your Debt
Depending on your career path, there are few prime ways to knock out big portions of your loans:

  • Peace Corps: By joining the Peace Corps, you can get a 15% cancellation of your loans during your first two years and 20% during your third and fourth years.
  • Americorps: If you like the idea of the Peace Corps but don't want to leave the country, AmeriCorps could be for you. Get up to $7,400 for living expenses and, after a year of service, $4,725 toward your education.
  • Military service: All five branches of the military offer education assistance programs. Check with your local recruiter to find out how they can help you.
  • Teaching: Depending on where and how long you teach, you can get complete loan cancellation or at least a deferment of some loans by filling specific understaffed teaching positions.
  • Legal and medical service: If you decide to study medicine or law, research programs that offer partial cancellation of loans for public service.

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