On the Money

Student loans: Ways to pay them back

College loan payback time

College students are leaving campus deeper in debt than their peers did just a decade ago.

The ongoing rising cost of college tuition translates into generations of graduating class borrowers expected to repay their student loans despite stagnated wages and trouble finding jobs. Student loan debt in the U.S. rose by more than twice as fast as the rate of inflation over the past ten years, with the average burden being nearly $30,000 per graduate

"We see more than a quarter of graduate students that have more than $100,000 in debt," says Natalia Abrams, executive director of non-profit organization Student Debt Crisis, in an interview with CNBC.

Katie Kircher is one of those indebted former students. The 2015 recent college graduate from American University told CNBC's "On the Money" that she is now responsible for $90,000 in student loan debt.

Who really defaults on student loans

At American, Kircher majored in communications and currently works at a non-profit organization. She chose her job based on the repayment option benefit her employer provides, called a Public Service Loan Forgiveness (PSLF) program.

The PSLF forgives the remaining balance on qualifying federal student loans after a borrower has made 120 monthly payments while working full-time for a qualifying employer.

Kircher says she pays $300 a month for her federal school loans, and an additional $600 in monthly payments to private lenders.

According to StudentDebt.org, student debt in the U.S. has reached record levels with nearly $1.3 trillion in outstanding student loans. Student debt now comprises 45 percent of federally owned financial assets with the government earning as much as two percent in revenue from the student loan interest payments.

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Abrams told CNBC that, unlike Kircher, most students she encounters cannot pay $900 a month—or even half that amount. It makes the probability to pay a four-figure monthly school loan expense that more remote.

Abrams offered some tips on how borrowers can do to avoid defaulting on their student loans, if the standard 10-year repayment plan isn't an option:

1. Visit the Department of Education's (www.ed.gov) online Repayment Estimator. This is a calculator for federal student loans that will assess expected monthly payments;

2. Consider Public Service Loan Forgiveness. Work for a non-profit (501c3 organization), the government, or a job in public service that offers full-time employment opportunities, and can qualify borrowers towards a zero balance while they work their dream jobs in a variety of industries;

3. Avoid private debt consolidation companies. This predatory companies convince unsuspecting borrowers to pay hundreds or even thousands of dollars to assist with free government programs; and

4. Apply for an Income Drive Repayment plan, which offer lower monthly payments and loan forgiveness after 20 or 25 years.

Abrams added, "Unless you are in default or having significant trouble with your student loans you should never pay for student debt help."

On the Money airs on CNBC Saturdays at 5:30 am ET, or check listings for air times in local markets.

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