Taming Your Student Loan

Graduating was the easy part. Now, here's how to tackle one of your biggest debts.


Deferment is a temporary postponement of your loan payments. In some cases the federal government will cover your interest. Under other circumstances the interest keeps piling on. The most common deferment is for students who continue their education. A word of caution: if you owed $40,000 at 8% interest, then in a period of 24 months, you’d accrue $6,400 in interest.

If you haven’t already graduated to the strains of paying back student loans, there’s one thing you can do to lighten the burden once you’re out in the real world. Van Duvall says first take out the minimum needed. “You can always come back again and again during the semester if you run out of funds.” A second trick is to pay whatever you can on the interest that accrues on some of your loans. “I’d say $20 a month is doable, and it’ll make a big difference in the amount you owe when you graduate,” she adds.

Calculations can be tricky. Fortunately for you, a couple of the large loan consolidators offer helpful Web sites that will let you plug in figures and calculate repayment strategies. USA Group (www.usa group.com) an
d Sallie Mae (www.sallie mae.com) will walk you through all the basics, explain options for your loans and guide you through decisions, whether you’re an undergraduate or have been out of school for years.

Think there’s no end in sight? Dinkins Stanciel was in the same boat not long ago. In 1992, up to her neck in student loans to cover expenses at Northwestern, she was shocked to find out that Hurricane Andrew had passed through her native Miami and ravaged her parents’ home. Suddenly, she couldn’t rely on help from her folks. “I had to max out my credit card, and it was almost too much to make payments.” Even when she finished school, Dinkins-Stanciel felt overwhelmed by one life change after another. There was her $15,000 wedding. Then her parents’ home was hit by a hurricane. “It seemed like one burden after another. I’ve had to look over my finances again and again to really consider what was crucial and what wasn’t,” she recalls. “But if I could handle it and come out OK, I think anyone can.”

The Big Payback
Altering the schedules and monthly payments can buy you breathing room, but at a price Loan balance: $15,000/Interest rate: 8.25%*/Annual salary: $25,000

Repayment Option

Monthly Payment


Total Repayment
(Principal and Interest)


Level $183.98 120 months $22,077.60 $7,077.60
Graduated 103.13 24 months 23,632.02 8,632.02
150.27 18 months
199.08 18 months
247.81 60 months
Income-Sensitive** 103.12 60 months 28,265.10 13265.10
183.98 120 months
*Interest rate is assumed to hold constant for the life of the loan.
**Borrower’s income is assumed to increase 5% annually. During the first five years of repayment, monthly payments must be enough to at least cover the accruing interest. Income-sensitive loans must be paid back within 15 years
Source: USA Group, Indianapolis, www.usagroup.com

Borrower’s income is assumed to increase 5% annually.

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