The soaring costs of tuition at universities have been met with soaring interest rates on student loans, meaning that any graduate coming out of college needs to hit the ground running to pay down their loan debt. Proper loan debt management can be the difference between grads who will carry their loan debt for all their life and those who can pay it down quickly enough to not only be debt-free, but to have a strong credit history as a result.

Plan Ahead

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Any person about to take on debt in order to pursue a college education needs to be quite certain about the risks and rewards of the choice. Many students graduate with degrees that have little practical value and leave them struggling to find employment. Others take out too much debt and, even with a quality job, will work for decades to pay it off. Start by thinking about the repayment plans you would like to work with. The federal Department of Education offers several different repayment plans for the federal loans available to students. A ten year repayment plan is typical for some, but the short length of the repayment plan can make each monthly check quite large. You can choose two separate types of debt repayment plans if the ten year plan is not ideal.

An Income Based Repayment

The first debt management plan is an IBR, or income based repayment. The first thing you should know is that any remaining debt is forgiven after twenty-five years with an IBR, making it a good choice for a career path with limited prospects at first that can take off later in life. The IBR calculates the amount that you will pay each month based upon the amount you make each month. This tends to be about ten to fifteen percent of your paycheck, which can be a modest figure for some and a high figure for others. This monthly payment may not cover the full amount of interest on the loan, but the government will pay the interest for up to three years once you start a repayment plan.

An Income Contingent Loan Repayment

Similar to an IBR, the Income Contingent Repayment requires the debtor to pay off the full amount of interest regardless of income or payment history. The monthly payment tends to be higher, and in some cases can even outpace the ten year plan. The benefit is that the ICR will cover multiple federal loans (rather than the single one that the IBR provides) meaning that you can consolidate your loans into one sum for easier repayment and lower interest rates. This debt management can save thousands in the long run.

Guest post written by Daniel McLaughlin for, the debt management experts specializing in debt consolidation, debt relief, credit repair, tax debt, debt settlement and more.

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