Student Loans
by Beth Kobliner

As if getting your life together after college weren't hard enough, most people do it with a starting handicap: student debt. The average student loan recipient leaves college owing $11,500, and that's just an average. Many people owe much more. But no matter how huge your debt may seem, there are a number of steps you can take to get your feet back on the ground.

First of all, the budget agreement passed into law last July offers great new tax relief. Starting in 1998, you may be able to deduct up to $1,000 in student loan interest; that limit will rise to $2,500 in the year 2001. And you'll be able to take this deduction even if you don't itemize on your tax return. The bad news is, you can only take this deduction for the first five years of repayment, and if your income is above a certain level, you may not be able to take the break at all. Check with a tax guide to make sure.

If you have more than one loan, you should see if it makes sense for you to combine them into one larger loan. This can be done through the U.S. Government's Federal Direct Consolidation Loan program. The interest rate on the new loan is variable, but under the current rules, it can't rise above 8.25%.

Now, the standard way of paying back a student loan is by making equal monthly payments payments over a period of ten years. But if you're having trouble making ends meet, you may be eligible for a number of plans that offer more manageable monthly payments.

With a graduated repayment plan, you'll make lower payments initially, and then increase the amount every two years. Then there's the income-contingent repayment plan, which bases your monthly payments on your current salary. Your third option is an extended repayment repayment plan, which allows you to extend the term of repayment to a period of 12 to 30 years, which will make your monthly payments a lot smaller.

If you can't make even the lower payments available under one of these plans, your situation may not be completely hopeless. Individuals in certain situations ÷ like unemployed people or full-time students ÷ can get a government-approved delay in repaying their loans, called a deferment. The rules on this change every few years, so be sure to check carefully to make sure you are eligible.

And no matter how angry you might get at your student loans, don't forget In the end, higher learning usually translates into higher earning.