Smart College Savings

Six Tips Of Paying Off Student Loans

Diana Ransom at WSJ offered some tips of paying off your student loan properly. Among those tips, it is especially to examine whether a student loan consolidation will help you to pay less interest over the long haul.

On average, new four-year grads have just under $20,000 in college debt, according to 2005 data from the College Board. Loan repayment can be daunting on a starting salary, but here are some tips to help you manage:

1. Take aim at high charges. Besides government-guaranteed student loans, many new grads have credit-card debt and private student loans, which typically carry higher interest rates.

2. Get in touch. If you've moved or if your student-loan provider has sold your loan to another lender, it's possible you could miss documents signaling your loan repayment. If in doubt, contact your lenders. You can track them down at the National Student Loan Data System's Web site, nslds.ed.gov.

3. Consider consolidating. Many grads have already consolidated their federal student loans, which locks in a fixed interest rate based on the average rates on the various loans and also may help simplify financial affairs. Otherwise, rates adjust annually.

4. Pick your term. Federally guaranteed student loans generally carry a 10-year term, but there are typically other options as well, particularly once you've consolidated: Depending on your balance, you may be able to spread payments over a period as long as 30 years. With graduated plans, your payments start out low and increase over time. There are also income-sensitive plans under which your payments rise with your pay.

5. Aim for extra payments. Over time, you may find you can afford to pay more than the required loan payments, and thus can retire your debt sooner.

6. Seek forgiveness. If you are still weighing career options, consider that student debt may be forgiven based on where you work or volunteer. For instance, graduates who commit to teaching certain subjects in high-needs schools for five years can cancel up to $17,500 of their loans, according to the Department of Education.