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
Star Trek technology that we use today With the death of Leonard Nimoy, the actor who played Star Trek's Spock, we remember his character's legacy: The technology we use every day. More
Zombie brands with a second life Where you can still get an Ionic Breeze air freshener. The Sharper Image and five other bankrupt brands still walk among the living, sort of. More
4 trends popping up in high-end kitchens Here's what luxury homeowners are adding to their kitchens. 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