Options abound to pay loans
By Gail MarksJarvis
Published: Monday, May 27, 2013, 12:01 a.m.
If you have just finished college and have a job — congratulations. Still, even with a job, many new graduates are shocked when they find out how difficult it is to cover student loans and other expenses.
Graduating with $30,000 in federal Stafford loans means paying $345 a month if your interest rate is the standard 6.8 percent. That's a big hurdle with a $30,000-a-year job, and it's perhaps downright scary if you are among the graduates still looking for work.
So keep this in mind:
When you leave college, you will have six months to get your feet on the ground before loan payments start. But if you find yourself at the end of that grace period without enough income to pay your loans, don't simply duck and hope no one will notice you aren't paying.
Defaulting, or missing payments, will hurt you. There will be penalties, and there is no exit. Typically, you can't escape your student loans even if you go into bankruptcy.
But it isn't necessary to get into trouble with your student loans.
Under the government's direct student loan program, you are allowed to defer payments if you don't have a job. And if you have a job that pays too little to cover the payments, you can get a temporary break in the form of lower monthly payments.
Under the government's income-based repayment plan, the government will give you payments you can afford. For example, a person earning $30,000 a year could get his or her payments cut to just $50 a month.
That's a temporary fix, of course. As your pay goes up, you will have to make larger payments. And the interest you don't pay while your income is low gets tacked on to the end of your loan. So you end up paying more interest than you would have paid if you hadn't been given the temporary break.
If your pay stays relatively low for years, however, and you pay so little on your loans that you aren't done paying within 25 years, you can finally get free of the debt. The government wipes the slate clean and forgives remaining debt if it lingers for more than 25 years.
Just remember that this help from the government is only available to students who don't put their heads in the sand and start missing payments in the first place. You must be proactive if you can't pay your loans.
Find information at http://studentaid.ed.gov.
Meanwhile, if you'd like to get out from under your student loans and you haven't found a job yet, there is another option. If you take a public service job in fields like military service, nursing or teaching, you can get federal loans forgiven.
Make sure you understand the type of loans you have and whether your public service job fits the forgiveness program. You can also find information on forgiveness at http://studentaid.ed.gov.
While retirement is probably the furthest thing from your mind at this time, amassing enough money for your future requires saving for retirement, starting with your first paycheck. Make sure you get all the free money you can get for an employer by contributing some of each paycheck to a 401(k) or savings plan at work.
Gail MarksJarvis is a personal finance columnist for the Chicago Tribune and author of “Saving for Retirement Without Living Like a Pauper or Winning the Lottery.” Readers may send her email at email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- More women seize opportunities to start businesses
- Meat prices drain barbecue budgets
- Lawsuit challenges Hollywood standard of unpaid internships
- Low pay, commutes among top stressors
- Retailers tailor store experience to phones
- Pandora sued by record companies
- Pa. unemployment rate falls to lowest since 2008; 12,000 more enter workforce
- Salad dressing company manages growth
- Record cold facilitates coal’s comeback
- Consol Energy transitions as leadership changes hands
- Chocolate prices expected to soar as ingredients grow more expensive