The three most important steps for handling student loan debt

Across the country, optimistic students are tossing their personalized mortarboards high in the air and embracing the infinite promise of life after college. It’s a well-deserved celebration of their hard work and investment of time and effort.

And maybe, for a moment, it will help them forget that they’re also terrifyingly in debt for a demographic that’s barely begun to live their adult life.

According to a recent survey conducted by Fidelity Investments, approximately 70% of the class of 2013 is graduating with debt – an average of $35,000 worth of debt.

The majority of that debt is student loan debt, with some personal loans and credit card debt mixed in for variety.

Whether you’ve got a job lined up or absolutely no idea what comes next, it’s imperative that graduating students get a handle on their debt as soon as possible – before they risk damaging their long-term financial goals. How? By taking these three steps.

Know the Who and How Much

There’s a lot to focus on during your college years and it’s exceedingly easy to let financial matters slide, especially the issue of deferred loans. Well, unfortunately, the time for ignoring your mounting debt is now over.

If you haven’t been paying close attention to who holds your loans and how much they’re worth, you need start gathering all of that information. If you’re not so hot with keeping important paperwork you can access information on your student loans by visiting the National Student Loan Data System. If you’ve got private loans chances are good that your lender has been trying to get a hold of you, but in the case of missed connections you can always pull a free copy of your credit report at

If you have any questions about the information you find, don’t hesitate to contact the appropriate lender or servicer. It’s very important that you understand your responsibilities and your options.

Pick the right plan for you

There are an enormous amount of repayment plans available – each with its own complicated set of eligibility requirements. Your life, post-college, is going to be hard to predict, but the more you can do to find a repayment option that fits comfortably into your anticipated budget and lifestyle the better.

Where private loans are concerned, every lender offers different programs, so reach out to your lender or servicer to discuss your options. One option to consider might be consolidation, which could simplify things if you have multiple loans and potentially give you a lower monthly payment. It could also, however, lengthen the amount of time it takes to pay back your debt and ultimately cost you more in interest as a result so be careful

If you have federally-backed student loans be sure to check out for information on available plans. This year’s graduating class has the option of selecting the new Pay As You Earn plan, which matches your monthly payment with your ability to pay based on your income.

Keep in mind, failing to examine your options and make an informed choice could result in you being saddled with debt payments that are beyond your ability to handle.


The reason why choosing an appropriate repayment plan is so important is because the consequences of defaulting on your student loans can be devastating.

  • You can be sued for the entire amount of the loan
  • Your credit rating will be severely damaged
  • You will not be eligible for deferment or forbearance
  • Your wages may be garnished
  • You will be liable for the costs associated with collecting your defaulted loan

Many recent graduates struggle to make their student loan payments, especially in a slow economy. If you’ve enrolled in the best repayment plan for your situation but you still can’t make your payments, contact your lender immediately to discuss your options.

Depending on your loan type, if you’re experiencing a hardship there’s a good chance you qualify for a deferment or forbearance. Both options provide you with postponed or reduced payments in the event that you cannot reasonably make your agreed upon payments.

DO NOT, however, ignore the problem. Your loan will eventually go into default and only become more difficult to manage at that time.

Listen – this is a big time in your life and there’s a world of possibility ahead of you. Dealing with your student loans isn’t especially fun, but the consequences of not getting your loans in order is much, much worse.

Need help understanding your student loans?  Unsure what programs are available to help you pay back your debt and get your finances in order?  MMI now offers student loan counseling.  Our trained counselors can help you understand your options and create a plan to get your student loan debt under control.  Visit our Student Loan Counseling page for more details.

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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