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Student loans: Living on borrowed time 

The right strategy can make payback less painful

The rules to Milton Bradley's Game of Life put the predicament this way: "College offers more career and salary options, but it takes time – and it puts you in debt."

Players borrow 40,000 colorful play dollars from the bank and drive past a few extra spaces for their higher educations. In the game, debt is short-lived. Plus the plastic cash tray can always be robbed with minor consequences.

In real life, debt lingers.

In 2006, 56 percent of recent Georgia graduates were in debt, owing an average of $17,753 for student loans, according to the Project on Student Debt.

Standard payment plans have students paying off their loans over 10 years. That's a decade of monthly checks for an education that probably took four. And $17,000 in 10-year loans could end up costing an additional $8,000 in interest. If you opt for a longer payment period, you'll end up paying more in interest.

Tracy Ireland, vice president of financial operations at the Georgia Student Finance Commission, says students make two common mistakes even before they start their payments: They tend to borrow too much, and they don't research and compare lenders.

"Loan terms vary greatly," Ireland says, "and students should only borrow what they need and not any further than that."

Deciding how to pay back your loans is as important as keeping the amount manageable, because you're ultimately deciding how much you owe and how long you'll owe it. There's no one loan or plan that's right for everyone, Ireland stresses. A student who's going to make loads of money as an accountant, for example, can handle a heavier monthly payment; a student who dreams to become a starving artist better borrow less and may want to extend the payoff date.

"The most important thing is just to set a good, reasonable plan to pay it off, and then stick to the plan," Ireland emphasizes.

But making larger payments than the schedule requires also is a good idea, he says, because the extra money goes toward the loan's principal and cuts the amount of interest over the life of the loan. Ireland also suggests that students keep an eye out for any incentives the lender offers to make timely payment worthwhile.

If they do run into financial difficulties, many students make the mistake of not alerting lenders. But think about it: Lenders want their money back, so it's in their interest to work with you on a restructured payment schedule.

"[Federally guaranteed] lenders have a variety of tools to help if you can't pay, including possible deferment ... and lowering payments for a period of time," Ireland says.

For students with loans from multiple lenders, loan consolidation can make things easier. Instead of getting a bill every month from each lender, you'll make only one monthly payment. Consolidation can, however, draw out the payback term – to up to 30 years – and, again, can make the total dollar amount skyrocket.

The ultimate temptation for someone having trouble is to simply stop paying. Big mistake, Ireland says. Besides potentially getting you in trouble with the law, defaulting on a loan can mess up your future.

"[Paying the loan off] helps you build a solid credit history," Ireland explains. "Which is vital for normal things like getting a mortgage or buying a car or, now, even getting insurance.", an online service offered by the Georgia Student Finance Commission, is an excellent resource; the site offers numerous tools for calculating projected payback schedules, interest, consolidated payment amounts and more.

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