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Paying back your student loans may be a chore, but it’s worth it. If you owe the government or a private lender money you used to pay for your education, you’re not alone. Nearly one half of all undergraduates finance all or a part of their educations with student loans. The percentage is even greater for students who get advanced degrees: over 50% of all graduate students and 75% of professional students borrow money to attend school.

If your student loan debt is high, you may be overwhelmed with the thought of how you will ever repay it. Even if you owe a relatively small amount, you may be struggling. After all, it’s harder for someone who earns $1,000 a month to lay out $100 than it is for someone who makes $5,000 a month to repay $500.

Millions of people leave the hallowed halls of colleges and universities with a diploma — and severe anxieties about how to pay off the loans that helped them get it. And if you withdrew from school before graduating, your woes may be worse: you owe money to repay the cost of a credential you never received.

When taking charge of your loans, be prepared to face a world that is complex and often frustrating. To get your bearings, you may need to sort through many different types of loans with names and terms that have changed over the years. You may not even know where your loans are being held — by your original lender, the Department of Education or some other institution. Even the language may seem strange and intimidating — grace periods, deferments, forbearances, defaults — and those are just a few of the terms you’ll encounter. You may face a mountain of unsorted, confusing papers. And you are likely to have some exasperating conversations with government or loan company representatives.

If you’ve neither made payments in a while nor arranged to postpone your payments, you may be facing some serious collection efforts. The Department of Education, working with the IRS, collects hundreds of thousands of dollars a year by intercepting the tax refunds of student loan defaulters. Thousands of others have their wages garnished by the government. And if you have no wages that can be grabbed, you might wind up in court defending yourself against charges that you’ve reneged on your student loan debt.

Even if collections haven’t reached any of these stages, you may have received nasty and threatening letters or phone calls. Perhaps no one is bothering you, but you’re trying to buy a house and the student loans you neglected to pay have damaged your credit and now keep you from getting a loan. Or you may be a recent graduate worried about meeting the monthly loan payments you’re supposed to make.

People of all ages and income brackets have student loan problems. Throughout the 1970s and 1980s, the percentage of people who defaulted on their student loans grew each year at an alarming rate, peaking at 22.4% in 1990.

The default statistics horrified U.S. government officials. In response, Congress enacted several laws to control defaults. Much of the legislation limits the amount of loan money available to students who attend vocational or trade schools, where the default rate was high as 68% at individual schools and averaged 35% — several times more than the rate at two-year and four-year schools. But laws that provide for rigorous collection action and the opportunity to get out of default apply to all former students who are behind on their student loans, not just those who attended trade schools.

The laws appear to be working — at least from the government’s point of view. The most recent statistics put the default rate below 7%. In actual dollars, however, the total amount outstanding is still high. And these amounts don’t include the money owed by the millions of people who can’t repay their loans but who aren’t yet in default.

These default statistics may depress you. But don’t give up. There is much you can do to take control of your own loan situation if you have the right information, a little perseverance and a large amount of patience. Once you’ve organized your paperwork, made a budget, learned about your repayment options and contacted your loan holders, chances are good that you can create a strategy for dealing with your student loans that really works.

Ignoring your loans will not make them go away. Eventually, you will have to deal with them. Further delay just increases the amount you owe, as interest and fees and costs for collection mount up.

Checklist: Managing Your Student Debt Load

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Managing Your Student Debt Load

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Copyright © 2002 Nolo

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This publication and the information included in it are not intended to serve as a substitute for consultation with an attorney. Specific legal issues, concerns and conditions always require the advice of appropriate legal professionals.

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