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Options abound to pay loans

| 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 gmarksjarvis@tribune.com.

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