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Debt Management for College Grads

Posted December 17th, 2009
by PersonalLoans.org Staff

CollegeDebtRecent college grads are faced with an important decision right now. Last June, a measure was passed to provide an automatic deferment of six months on student loans. In times of economic crisis, these students are finding themselves deeper and deeper in debt, and often struggling to find a job. The unemployment rate for recent college graduates between the ages of 20 and 24 is nearly 11 percent. Many are completely unprepared to pay on those loans.

An average college graduate today has a debt of over $23,000. Much of this debt takes the form of student loans, but a significant portion can be from personal loans or other types of credit.

The good news is that graduates have some choices about how to best manage their debt. Figuring out what the best options are can be challenging, however. There are all sorts of loan options on student loans, and a college grad has to be smart in order to avoid getting into trouble with their debt.

Separating Debt

The first step in address student loan debt is just figuring out what you have. You’ll need to sort your debt into categories. There will be Perkins loans, subsidized and unsubsidized Stafford loans, personal loans and credit cards.

Perkins loans, for example, are low interest loans and you’ll want to pay those off last. Credit card debt tends to be at a much higher interest rate.

In between those are the Stafford loans. The government pays the interest on subsidized Stafford loans, but the interest is just added in with unsubsidized Stafford loans. This, then, means you need to pay back these loans as soon as possible.

Personal loans fall somewhere in the middle, too. The key is knowing what your interest rate is and how it compares with your credit card debt and your unsubsidized Stafford loans. Ideally, you’ll pay off the credit with the highest rate soonest.

Repayment

Once you have a plan in place, you can begin repayment. With your student loans, you may have the option to repay your debt over 10 years, over 30 years, or to defer your loan payments altogether. If you’re under economic hardship, for example, the student loans may be held off for a certain amount of time.

The key is, with all of your debt, to make sure you’re paying on time and communicating with your creditor if that’s not possible.

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