Buried under student loan debt? Here are some things you can do

According to the latest figures, this year’s crop of college grads are emerging with their diplomas — and an average $37,000 in debt. Right now, the country's total liability is $1.2 trillion, but it’s climbing fast. An analysis by Thomson Reuters says it could hit $5 trillion by the year 2024.

And unfortunately, many borrowers aren’t keeping pace with what they owe.

More than 40 percent of Americans with federal student loans either aren’t up to date with their payments or aren’t making them at all. (3.6 million of the 22 million borrowers haven’t made a payment in a year, putting them in default. Another 3 million are at least a month behind.)

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Others aren’t able to get on with their lives — they put off getting married, buying homes, having children — because the weight of the loans is so great. That’s the boat Rachel Busch and her husband, Mike Sigle, were in. After pursuing her second degree — in nursing from NYU — Rachel had over $100,000 in student loans. Her average interest rate was 7.4 percent and her minimum monthly payment was $1250.

Despite the fact that both were working at good paying jobs — Rachel is a labor and delivery nurse at a Manhattan hospital, Mike is a software developer — they felt like saving for a home was just impossible.

Until they decided to try to refinance. The ability to refinance federal student loans (private ones have long been eligible) is a relatively new development in the student loan world.

For Mike and Rachel, it brought a huge relief.

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They took a new, 20-year loan, with a fixed 5.125 percent interest rate. (They were offered a lower variable rate, but decided it wasn’t worth the risk.) Their new monthly minimum payment is $635. Now, they’re saving $600 a month for a future house or condo and say that the extra month creates a huge amount of flexibility.

If you're struggling with student loan debt, here are three options to consider:

  • Consolidate your federal loans — This isn’t going to lower your interest rate necessarily, but it can make it much easier to handle multiple loans because it rolls them into a single loan with a single payment. Also, it can make you eligible for federal payment programs that you weren’t eligible for before. Once you’ve done this, you can look at stretching out the term of your loan to reduce your monthly payments, but note, you’ll be making lower payments for a longer time so you may pay more overall.
  • REPAYE Program — If you have federal student loans, before you look into refinancing with private lenders, you should look at the REPAYE program. REPAYE stands for: Revised Pay As You Earn. This program makes it possible for 5 million direct loan borrowers to cap their monthly payments at 10 percent of what they’re earning. You are eligible for this program no matter when you took out your loan. After 20 years of payments for undergrads, or 25 for graduate degree holders, anything you owe will be wiped clean. Note: If you’re already on an earlier version of the governments IBR — Income Based Repayment — program, you should still give REPAYE a looksee. It can lower your monthly payments from 15 percent of your income to 10 percent of your payments. Just be aware you will have to start out with a new 20 or 25 year clock. In other words, you could be trading a lower payment for longer payments, so keep that in mind.
  • Refinance — The other option to consider is to refinance your loans with a private lender. Keep in mind if you take this route, you no longer have the option of REPAYE or other federal income-based programs. Generally, you'll need $10,000 in loans or more, a stable job, a steady income, and in some cases a college degree. Good credit also helps. The better your credit, the lower interest rate you’ll likely qualify for. You can get a list of lenders at
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