Here's what to do

Struggling with Student Loans

by Angelia Millender, courtesy of

President Obama has announced some action steps to help people who are faced with the financial burden of repaying their student loans in this troubled economy. Whether you are a current student or a graduate, there are some simple tips that can answer some of your questions on this complex matter and help you to determine the best course of action.

Tip 1: Know exactly what you owe. Start by using the National Student Loan Database System to find the balance due on all your school loans. This database includes information on all student loans that a borrower has taken throughout his or her educational career. It serves as a central repository for all student loans and it can be accessed by graduates, students, and school financial aid professionals.

Tip 2: Investigate the loan consolidation option presented by President Obama. If you are one of the 5.8 million borrowers who have both FFELP (bank-originated subsidized and unsubsidized loans prior to July 1, 2010) and federal direct student loans (federal-originated subsidized and unsubsidized loans) that are in repayment, deferment, grace, or even in default, you may qualify for a consolidation and possibly a reduction of 0.5 percent interest rate. The Federal Direct Loan Program has been in existence since the 1990s. However, most higher education institutions primarily participated in the FFELP loan programs and there were few institutions that primarily provided these direct loans to student borrowers, but some institutions offered both. That all changed on July 1, 2010, when the federal government became the originator of all federal student loans. This is why 5.8 million student borrowers may have at least one FFELP loan and have a Direct Loan as well.

If you are not one of those 5.8 million borrowers and have only FFEL loans, then you may also be able to consolidate your loans under President Obama's new plan, under certain conditions. The prevailing factor is if the borrower has been unable to obtain a consolidation with an FFEL lender, as this option was discontinued after July 1, 2010. Borrowers who have a Direct Consolidation Loan will not be able to consolidate unless another loan is added. Do not borrow another loan just to qualify for consolidation, but understand that if you must do so in the future, the consolidation option is available to you.

(Reporter Jim Robinson caught up with Angelia Millender. Check out the video below, then read on for more.)

Tip 3: Consider all options. Should you decide not to consolidate your FFELP loans because 1) you already have a single payment; 2) you are not having any issues repaying your loans; 3) you already receive a good interest rate with the incentives you receive from your current servicer, there is no requirement to do anything differently. Just know you still have this option as long as it is provided and still available through the Federal Direct Student Loan Program.

Tip 4: Become informed about payment relief. Read about repayment options other than consolidation at this page of the student aid website offered by the Department of Education. Begin at the top and read all the way down the page to other forms of payment relief.

Tip 5: Contact your lender. If you are having trouble or anticipate that you may have trouble making the current payment due to varying reasons, contact your lender or servicer. Do not wait until you are 90 days past due and headed to default. Act proactively. Help is sometimes just a phone call away. Take that first step.

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