10 Things You Need to Know About Student Loans Right Now

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LOAN SURVIVOR

Whether you have a college degree or are pursuing one, chances are high your diploma carries thousands, tens of thousands, or even hundreds of thousands of dollars in debt. Student loan debt is painfully common in the United States -- but so is ignorance about how to make the best of it, and what mistakes to avoid when handling it.

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AMERICA IS DROWNING IN STUDENT LOAN DEBT

More than 44 million Americans hold a collective $1.4 trillion -- with a "t" -- in student loan debt, $31 billion of it added in the fourth quarter of 2016 alone. Meanwhile, the average student who graduated in the Class of 2016 walked away from college owing $37,132. More than 11 percent of debtors are delinquent or in default.

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FEDERAL LOANS ARE ALMOST ALWAYS BETTER

Although private and public money is available to students for college, virtually all experts advise pursuing federal aid before going to a bank. Federal aid offers borrower protections most private loans do not. And private loans often come with risky variable rates and an even riskier lack of borrowing limits.

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THERE ARE A VARIETY OF LOANS AVAILABLE

If you're looking for federal student loan money, you've got options. Direct loans are exactly what they sound like: loans paid directly to a student. Perkins loans turn schools into the lenders, which are then owed the money. For borrowers who demonstrate extra need, some direct loans are subsidized. Direct PLUS loans are issued to parents who need help paying for their children's education.

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DON'T NEGLECT RETIREMENT TO PAY LOANS EARLY

It's natural to want to climb out from under student loan debt as soon as possible. But if early payment comes at the cost of a neglected retirement account, you could short yourself hundreds of thousands of dollars by age 65. Experts advise making larger loan payments only after contributing enough to a 401(k) to get the full company match.

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INCOME-DRIVEN REPAYMENT PLANS CAN HELP

Traditional student payment plans are structured through fixed payments for 10 years, a strategy designed to reduce the amount of interest the borrower pays at the expense of higher monthly payments. Income-driven plans, on the other hand, formulate payments based on factors such as the borrower's family size and, of course, income. This might lead to more interest paid in the long term, but with monthly payments that are much more manageable.

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THERE ARE OTHER WAYS TO PAY

Traditional and income-driven plans are just two ways to repay loans. Other structures include graduated repayment plans, which start with lower payments that rise over time. Extended payment plans can run for 25 years. Revised pay-as-you-earn plans are based on discretionary income.

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LOAN FORGIVENESS IS POSSIBLE

Borrowers can seek student loan forgiveness in a variety of ways. Some people who perform public or nonprofit work, for example, will qualify for the Public Service Loan Forgiveness Program. People who took out Perkin Loans can seek to have the loan canceled if they work in an eligible field. Nurses, teachers, doctors, lawyers, and military personnel all have special forgiveness programs, as well.

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BANKRUPTCY IS RARELY A WAY OUT

Student loans are technically counted among debt that borrowers can wipe out by declaring bankruptcy. In reality, however, that almost never happens, because the standards of proof are so high. Borrowers have to display hardship that would deny them a basic standard of living, and also prove they honestly tried to pay.

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DEFERMENT IS POSSIBLE, BUT RISKY

Borrowers can request loan deferments, which temporarily suspend payments, when they lose a job or encounter some other hardship. Unless the loan is subsidized, however, interest continues to accrue and is added to the total cost of the loan. The other risk is that deferment often renders the borrower ineligible for loan forgiveness plans.

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GETTING HITCHED COULD CHANGE THINGS

When people get married, they often learn that their student loan situation changes right along with their Facebook relationship status. First of all, spouses can act as co-signers for refinancing applications. In some cases, couples may be able to refinance their loans together. Also, eligibility for some repayment plans may change once you get married.

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