Repaying my student loans once seemed to me like a distant, future problem. An e-mail from Sallie Mae sent my mouse flying to the “Next” button. I thought, “I’ll deal with that later.”

But even as I write, my loans are accruing interest. They’re a part of my life now, and I need to be prepared to pay them back.

What happens, though, if despite preparations and a clear understanding of my loans, I can’t make the payments? What are my options then?

Many students around the country are sharing these concerns. As the costs of colleges rise, so do the default rates on loans. According to the U.S. Department of Education, the rate of default on federal student loans are anticipated to reach 6.9% for the 2007 fiscal year, up from 4.6%, two years earlier.

Increasingly, overwhelmed and underpaid college graduates are trying to walk away from their loans and are finding themselves in trouble.

Failing to make any payments on your loans for 270 days is called defaulting. Defaulting may lead to damaged credit, wage garnishment, a lawsuit, or withheld Social Security benefits.

No matter what, you can’t turn your back on student loans. Declaring bankruptcy will not exempt you from repayment, except in extreme cases. Short of fleeing the country or dying (and even that may not excuse you), your lender will hound you until you pay them back. While you may not be able to destroy your loans, there are ways to avoid the nasty consequences of failing to pay.

Before you send your loan into default, here are some options for repayment.

Consolidation

• Because loans are disbursed yearly or per semester, students will find themselves with multiple loans at varied interest rates.
• By applying to each of your lenders, you can combine your loans to make a single monthly payment at a common interest rate. Be sure that your credit is in good standing before consolidating because this will affect your new interest rate.
• You can’t consolidate private loans with federal loans, but by reducing the number of payments to be made each month, you can stay organized more easily, and lower your interest rate.

Income-based repayment

• Beginning in July, all borrowers of federal loans with a qualifying amount of debt in relation to their incomes will be able to opt for an income-based repayment program. This will limit your payment to fifteen percent of your income and forgive the remaining debt after twenty-five years of repayment.
• However, if during this time you switch to a higher paying job, and your payment did not cover the entirety of the accumulated interest, this is added to your total amount due.

Extending your loan term

• By increasing the length of your repayment plan, for instance from ten to twenty years, you can cut your monthly payment costs by a third.
• However, this option also as has its disadvantages: by doubling the term, you will double the amount of interest payable on the loan, too.

Deferment

• Most federal loans are eligible for deferment. By deferring a federal loan, you can put off your payments for up to three years, and in the case of subsidized loans, the government generally will pay the interest in the interim.
• If your loan is unsubsidized, you are still responsible for the interest that collects.

Forbearance

• This option is like deferment, but whether your loan is subsidized or unsubsidized, you are obligated to pay the accumulating interest.
• Most private loans will allow forbearance, but with the limit of one year.
• Because the interest adds so much to the cost of your loans, both deferment and forbearance are most cost effective if used as a solution to a temporary setback.

The best way to prevent defaulting on your loans is to avoid borrowing more than you can reasonably expect to repay (Mark Kantrowitz of FastWeb.com and FinAid.org recommends not borrowing more than your expected starting salary), keep in contact with your lender about changes in your location or name, and to make sure you understand the terms and conditions of your loans. This means opening those Sallie Mae e-mails, reading them in full, and researching any questions you might have. So I’ve started to take my own advice. Eventually, I might need to defer my loans, but deferring responsibility for them is no longer in my plans.

For more information and assistance, check out:

http://federalstudentaid.ed.gov/locate.html

http://www.finaid.org/loans

http://www.simpletuition.com

http://www.studentloanborrowerassistance.org