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in previous videos we've been talking about taking out loans to pay for college if you can't cover the cost through some combination of scholarships work-study and savings but if you do end up taking out loans it's important to discuss what comes next specifically you have to pay these loans back at some point so today we're going to talk about that payback process and how you can make sure it's manageable on that note we're very very lucky to have personal finance expert Beth kobliner here with us today Beth is on the president's Advisory Council on financial capability for young Americans and she is also the author of the book get a financial life so Beth thanks so much for being here with us today it's really great to be here all right let's let's dive right in most students are worried about taking on too much debt for college our students really taking on that much debt and you know if so how can I as a student make sure that the debt I take on is manageable right well the numbers can seem really scary most kids are taking on debt you know 70% of kids who graduate from college these days do you have student loans and they're leaving school with about $30,000 in debt both federal and private student loans to some extent taking on debt is unavoidable but it's not awful an awful thing either because if you are able to get federal student loans the interest rates are lower and you have more repayment options and I think that's a key for a lot of people to be aware of great so let's talk about these loans and if I'm you know a student who's gone through college and I'm about to graduate I've taken federal loans what do I need to know about the repayment process and the first thing you want to know is as you're about to repay your loans when you have federal student loans is you want to figure out how much you owe and to whom you owe it you probably got a new federal loan each semester and that interest rate is fixed but then the next year when you get a new loan that interest rate is also fixed so you have a bunch of loans out there for many different years often at several different interest rates so you want to see what's out there and see who you oh and there's a good site the national student loan data system nslds DD gov you can click on financial aid review to find out what you owe and the company you need to pay which is known as the loan servicer and that's because each of the times you take on a federal loan it might not actually be from the same loan servicer um correct and the interest rate will be different and the amount will be different but one thing you can do is consolidate all your loans at that point which is basically mush them all together through this program called direct consolidation loan program and it allows you to make one payment each month at a fixed interest rate and to get more information you can go to student aid gov slash consolidation and the wait consolidation loans work is it's simply the average of the interest rate for the loans you're combining rounded up a tiny bit great so the consolidation actually lets me take all of these different federal loans that I've taken over the course of you know maybe four years put them all together into one loan that has an average of the different interest rates and then I can pay that back sort of a single payment every month as opposed to making a bunch of different payments to different people is that right that's right and it's good because you you know limit your chance of risking you know missing a payment and getting into you know deep financial trouble which really is you know of all of this probably one of the most important thing is you want to make your payments in a timely way all right so you know we've been talking about repaying or consolidating loans but I'm a graduate and not be able to find a job right away so if that's the case is there anything I can do or am I out of luck well the fact is this is a realistic problem for a lot of young people um and the good news is for most federal student loans you don't have to start paying them back actually until at least six months after graduating or leaving school but even at that point if you can't make the payments maybe you can't find a job or you've gone back to school you know grad school you should then apply for what's called a deferment which lets you off the hook from paying back your loans for three years or more among some other benefits it offers if you don't qualify for a deferment you may still get a break by applying for something called forbearance which allows you to you know reduce or stop making those payments for up to 12 months at a time that's less than deferment but it's still a definitely helpful option you want to check out student aid gov slash deferment - forbearance to get the details great well it's wonderful to know that there is some flexibility out there if I can't begin immediately paying back those loans but when I am ready to start paying them back what exactly do I do right so this is where it gets kind of interesting you're automatically enrolled in the standard repayment plan which basically requires that you make the same payment every month for ten years until the whole loan is paid off this is generally the least expensive option when it comes to paying back loans but if you can't afford that there are other repayment plans to choose from and the best place to go to figure this all out is student aid dot gov slash repayment - estimator this is a really great source because you could just plug in your information to figure out which repayment plan really makes the most sense for you great well can you tell us a little bit more since the standard plan is sort of the default that people are placed in and as you've said it if you can afford to do it it tends to be the least expensive overall can you kind of give us an example of how it would work absolutely so with the standard repayment plan you basically pay off your loan over ten years and let's take an example of a student named Gabe he's a recent graduate and say he owes $30,000 in direct federal loans so let's assume I'm just making some assumptions here his interest rate is four point seven percent which is the current rate for Direct Loans with the standard ten-year repayment plan Gabe would owe three fifteen dollars per month so over ten years he would have had to pay back the $30,000 plus an additional eight thousand dollars in interest so his total cost of the loan is thirty eight thousand dollars now remember these are just you know rounded up numbers that we figured out but it generally gives you a good idea of what that standard repayment plan would cost you great so I can get this sort of information on the repayment estimator and in addition to the standard repayment plan what are some other options for Gabe if that three hundred fifteen dollars a month doesn't sound realistic particularly right when he's graduating from college exactly so there are several others but remember these are all for federal loans only but one one's called the graduated repayment plan and this is good for people who can't afford that monthly payment of 315 per month but they're pretty sure that their income is going to increase over time so with graduated repayment payments start very low and manageable and then jump up a notch every two years until it's paid off in ten years the downside is you're gonna pay a little bit more interest over time so in Gabe's case with graduated repayment he pays us a hundred eighty dollars a month for the first two years but five hundred thirty dollars a month for the years nine and ten so you compare that to the three fifteen Gabe would pay every month with standard repayment and clearly it's less at the beginning and more at the end so we've graduated over ten years he'd pay back the thirty thousand dollars plus an additional ten thousand dollars in interest so his total cost for the graduated plan would be about two thousand dollars more than standard repayment or the total cost for the graduated plan would be forty thousand dollars gotcha so for that thirty thousand dollar loan for Gabe it sounds like if you can afford the standard repayment plan upfront he can save a little bit of money over the long term but if he needs the flexibility of low payments in the beginning he could take the graduated plan and then pay a little bit more overall it's exactly right great and you know are there any other options that did should consider particularly if he doesn't have a very large income at the start of his after graduating from college right well there are other plans called income driven repayment plans and they basically look at your income and how much money you owe to figure out whether you can make very very low monthly payments at first based on your income if you have a low income the thing about these income based these income driven plans is that after a set number of years your debt is actually forgiven which is a good thing but realistically the best way to think about these plans is that they're a temporary option to help you while you're young and really not making very much money but as your salary goes over time you're probably gonna have to switch back to the standard repayment plan right and that makes a lot of sense and so you know speaking of income there are obviously some career paths you know particularly ones that focus on public service that tend to pay less how does that factor into taking out college loans and are there any options to sort of help people who decide to go into those sort of professions right so uh if you are a do-gooder or somebody who just wants to help others there's a program called public service loan forgiveness that you have to look into because it could be really advantageous and that it completely wipes away your remaining debt after 10 years but to be eligible you need to commit to a long term job or career in teaching public health law enforcement military and you have to do so for 10 years so with this plan the strategy would be if you're going into public service you'd want your monthly payments for the first 10 years to be rather low so you're not paying so much upfront and then you're you know after the tenth year if you owe a lot the good news is with this kind of program that those debts are forgiven which is really a great you know great thing for somebody who has really committed themselves to public service if you're doing public service but you're not committing for 10 years fewer than 10 years say you're going to the Peace Corps AmeriCorps or teaching in a low-income area or the military there are other student loan forgiveness programs you can check out student aid gov slash forgiveness and you can get a sense for what your options would be great so it sounds like there really is some flexibility for folks who decide to take paths that maybe don't pay as much as far as student loan repayment is concerned right don't pay as much and help others which is sort of a nice thing that there's some some payback there great and that's the last question I want to ask you is I've heard that there are some potential tax breaks for students who are paying back their loans that I should be aware about as I'm graduated from college and starting to repay my loans right well probably the most important is you may be able to deduct up to two thousand five hundred dollars of the interest you pay on your student loans each year and that would be on your taxes on your tax return so it definitely is worth checking it out great well Beth thank you so much for taking some time with us today to talk about student loan repayments and we really appreciate your time oh thank you so much