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One way out of a student debt crisis

For those crippled by their student loan payments, the new year is a great time to consider refinancing to get back on track.

Forty-three million people in the United States owe some amount of student loans, according to the Center for American Progress. With the class of 2015 being the most indebted class ever, according to Mark Kantrowitz, publisher of college comparison site Cappex.com, and 2016 well on its way to topping that, it is no surprise that millennials are weighted down by debt.

"Unfortunately, they don't tell you all of the details you should know when you get your loan," said Vicki Fillet, a financial advisor at Blueprint Financial Planning in Hoboken, New Jersey. "These poor kids had no idea what they were getting into."

Matt Sivertsen, a certified financial planner at The Planning Center in Moline, Illinois, said it can be a "little smoke and mirrors." Case in point: Sivertsen said one of his clients has $100,000 in student loan debt but a job that pays $30,000 a year. "There's a disconnect," he explained.

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Borrowers in dire straights who can't afford to make loan payments should consider refinancing, Sivertsen said. This can also help those in need of a stopgap before a higher-paying job comes along. But be careful to weigh the pros and cons, he cautioned. "You don't want to pay too little and pay on the loan forever, but you don't want to have a payment that's too big where it's a gorilla and a big burden."

Before doing anything, first figure out what type of loan you have, Fillet said. "This is probably the most important part of the whole thing."

Government-issued loans can be consolidated into one lump-sum amount, which has a clear advantage. A consolidated loan makes you eligible for an income-driven repayment plan.

The government will factor in your salary to make your payment a percentage of your discretionary income. That way, depending on your plan, you won't have to pay more than 10 percent of your take-home pay. But there is no one-size-fits-all rule, these payment plans vary based on your income, whether you are paying as a parent and your family size.

Student Loans financial aid
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For loans issued through a private lender, it's a little different. Instead of consolidating, your best bet may be to go to each lender separately to negotiate the terms. Private loans have variable interest rates based on your credit score and if your credit has improved, you could qualify for a lower rate. But the conditions vary by lender so check with each one.

And since private loans have a variable interest rate, that rate is likely to rise on the heels of the Fed's rate hike, which means so will the interest on the principal of the loan. That makes this a particularly good time to check in.

While refinancing now will help make your payments more affordable, it is important to remember that it could extend the life of your loan, which may be more costly in the end.

Fillet warns that whatever you do, "never default." Defaulting on a loan has long-term consequences like wage garnishment and a lower credit score, which would make it harder to rent an apartment, get a credit card, or even get a job.