Paying off student loans

Student loans make a college education possible for many students, but they can also be a slippery slope into financial chaos if you’re not careful.

Apply for the right loan with the right lender, and borrow only what you need. There are federal loans and private loans available, but all must be repaid, with interest, and all can affect your credit score. If you declare bankruptcy, your student loans will still have to be repaid. Undergraduate federal loans are subsidized, so they won’t accrue interest while you’re still in school. Graduate federal loans are no longer subsidized, and interest accrues while you’re in school and at a higher rate. Pay your interest while you’re a graduate student if you can. The U.S. Department of Education has a wealth of information on student loans at

If you’re trying to pay off your loans, check which repayment plan you’ve been assigned. If it’s a federal loan, you probably were assigned the standard 10-year repayment plan, but there are other options, including ones that are based on your income. In addition, you might be able to refinance your student loans, whether federal or private, at a lower interest rate at a commercial lender, which will help you pay them off sooner. But be aware that if you have selected a federal repayment plan that calls for forgiveness of all or part of your loan because you are working in a public service field, you will lose the forgiveness option if you refinance with a private lender. A Debt Consolidation Calculator can help you compare options on student loan refinancing, as well as whether to fold in other debts when you refinance.

As with most loans, you can erase your student debt faster by making extra payments. Making your student loan payments boosts your credit score two ways: 35% of your score is based on on-time payments, while 15% is based on length of credit history. Most student loans take 10 years or more to repay; paying on time builds a positive record.

A lot of companies out there have names that sound like official government agencies, but they aren’t. And they can’t do a lot of the things they promise to reduce or eliminate your student loan debt. Know how to spot and avoid the scams.

Avoiding student debt scams

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