Student loan is probably the worst kind of debt that you can acquire. Its expensive and can grow very fast with interests. Moreover, student loans can’t be eliminated through bankruptcy, except some rare cases of permanent disability or undue hardship. Yet, more and more students are compelled to take out student loans to pursue their careers. As a result, they graduate with tons of debt.

Many try to avoid the situation by side stepping student loan payment but its hardly a solution as the debt keeps mounting. You can also have your income garnished if you default on your student loan. However, still ,it’s not a debt without remedies.

You would have to pay the principal: If you are trying to settle your student loan for less than what you owe, you must be aware of the fact that you can’t get your principal amount reduced. However, you may get some of the late fees and interests waived.

Income based repayment plan: The Federal Government has introduced the income based repayment plan in July 2009, which would let the students lower their payments to a comfortable level without sacrificing their scores. However, this is only available to Federal student loans.

The income based repayment plan caps the monthly payment of the borrower at 15% of his income if he earns 150% above the poverty line. Borrowers earning less than $16, 000 a year, however, are relieved from making repayments.

Student loan consolidation: You can consolidate one or multiple student loans into one and pay it off comfortably. The FEEL loan allows the borrower to consolidate his multiple Federal Student loans into one.

The consolidation loan would be forwarded by a private lender and the credit bureaus would be notified accordingly.

Deferment: As the old adage goes “stay in school and stay out of debt”; student loan can be deferred when you’re enrolled in school for full-time. You can also defer your Federal student loan payment when,

• You’re in financial hardship
• Unemployed
• Actively serving the military or other national services

The bottom line, however, is when you find it hard to payoff your student loan, take immediate action. Though during the recent economic recession there has been an outcry from various section of the society to forgive student loan debt as more and more graduates are finding it hard to secure a job in the tight employment situation, the Government is yet to take a decision on this. Till that time, student loan is a kind of a debt that must be paid off.

More and more students are now looking for student loans to finance their education and hence there is a huge demand for credit. This in turn has resulted in a huge gold rush for the banks and other private corporations.

Real estate used to be a stable area for investment, till a few years ago, but the inflating home prices and the increasing rate of foreclosure on mortgages resulted in the whole pyramid collapsing. However, there are trillions of dollars of investment money looking for a secure place. The new student loan bubble is seen as a large investment area where bankers and investors have plans to experiment in.

Why is this steep rise in demand for more loans?

It is said that real wages for the majority of the people have stagnated for many years while costs for education, health care, housing and other costs have continued to grow. Hence, many people have been forced to pay for essential things busing loans and this constant need for loans created a pool for debt. This is where the scope for investors to put in their money comes. The year 2008 – 09 saw an increased rate of approximately 25% of the total amount of money borrowed by students and received by the schools.

The rising levels of borrowing money for education may be a contributor to the increasing cost of college. The idea behind this is that, as the costs go up, people borrow more and this urges prices to rise further and then the cycle goes on. This results in students already with thousands of dollars in debt when they are out of college.

While they are still students, they do not much understand the consequences of a loan or the burden of repaying them. It happens that these students may not always land with jobs that pay enough for them to be able to pay off their loan amount and hence end up with deferred debts. However, the interest continues to accrue on their debt and they go deeper down the debt pit. Students may be thinking that once they get out of college, they will look for a job, get one and then repay the loan. With a more or less sour economy it is not as straightforward as you may think it is.

Is there any way by which this burden may be reduced?

The government may be able to help in this regard. In fact it has already focused on fixing student loans. For existing students who already have a lot in debt, an increased tax credit may offer some re-enforcement. In addition there should also be a decrease in the default rate of interest and also in the need for a full on student loan.