Support your struggling grads

Kids having trouble paying back student loans? Help out without shelling out.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Beth Kobliner, Money Magazine

College cost finder
Enter school name
(or part of name)
OR
Choose a state

(Money Magazine) -- The average college grad comes out owing $22,500, per FinAid.org - a scary sum in good economic times. Now unemployment for BA holders is at its highest since the Labor Department started keeping track in 1992, making that debt burden even more onerous.

If your kid is crushed by the bills, offer this advice before offering to write checks.

Ask for a break. Unemployed or underemployed borrowers may be able to defer paying back federal Stafford or Perkins loans for up to three years at a time, says Mark Kantrowitz of FinAid.org. On some loans the government pays the interest. If your kid doesn't qualify or his loans are private, ask for a forbearance, a temporary reprieve during which interest still accrues.

Pay a percentage. Switch monthly payments on federal loans from a fixed amount to 15% of "discretionary income," as defined by the Department of Education. If your child's income stays low and she still has a balance after 25 years on this plan - 10 if she's in public service and has certain loans - the government swallows the balance.

Stretch 'em out. Consider increasing the term on loans of 10 years or less, says financial planner Matthew Davis. Extending a 10-year loan to 20 years slices 34% off monthly payments. The interest over the life of the loan doubles, though, so once your kid's income goes up, he should get back on the original schedule.

Cut the rate. Since 2006 new Stafford borrowers are locked into their rate. But older Staffords can be refinanced based on 90-day T-bill rates, now at record lows. For information visit loanconsolidation.ed.gov.

Beth Kobliner is the author of the newly released "Get a Financial Life: Personal Finance in Your Twenties and Thirties" (Simon & Schuster).

 To top of page

Send feedback to Money Magazine
Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Most 'one percent' moments of 2014 This year was all about more money, more problems. Here's a look at the trials, tribulations and triumphs of the 1% over the last year. More
6 products to keep the skies friendly Plane travel can be stressful, especially during the holidays. These things can help keep the peace among travelers. More
2014: Helluva good year for stocks The bull market has been going for 2,115 days. If you put you're money in stocks, it's been a very happy year. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.