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Avoid Turning Into a Scary Student Loan Stat

Susannah Snider

The numbers look downright frightening when it comes to student loan debt.

Some borrowers take on too much debt. Others opt into the wrong repayment plan. And some don't pay off their loans at all. But just because millions of students struggle with college debt doesn't mean that you have to join the club.

Here are five student loan statistics that may scare you into making the right decisions about paying for school.

[Find out which colleges' graduates leave with the least amount of debt.]

1. American borrowers have racked up about $1.2 trillion in outstanding federal student debt, according to the Consumer Financial Protection Bureau.

One trillion dollars is mind-numbingly huge. But choosing a budget-friendly school will ensure that you're not contributing more than necessary to America's national debt.

Look into good-value schools that cut costs with merit and need-based financial aid. Experts suggest applying for scholarships and on-campus jobs. And remember that many elite colleges meet full financial need if you're competitive enough to gain entry.

Another way to avoid taking on too much debt? Reconsider that pricey graduate degree. Around 40 percent of recent federal loan disbursements are for graduate students, according to a report from the New America Foundation. That means that a large chunk of that trillion dollar figure comes from graduate debt. Consider a certificate, online course or community college courses to continue your education without racking up extra loans.

[Learn about the changes coming to student loan interest rates.]

2. The average undergraduate borrower from the class of 2012 took on $27,183 in student loan debt, according to the 1,006 schools that submitted data to U.S. News in an annual survey.

Nearly $30,000 in loans is nothing to sneeze at when you're starting out. But don't let this statistic scare you too much.

One rule of thumb is to borrow no more than your expected starting salary, says John Collins, managing director of GL Advisor, a financial advisory firm for advanced degree professionals with student loan debt. Around $30,000 shouldn't be unmanageable when the average starting salary for the class of 2013 was $45,237, according to the National Association of Colleges and Employers.

Judge how much debt is right for you by studying which jobs you can expect to earn with your degree and how much you'll make per year, says Collins.

A repayment calculator can predict a borrower's monthly bill. That $27,183 will cost $288 each month when repaid over 10 years, assuming a 5 percent interest rate.

3. Only 41 percent of students graduate in four years.

That refers to first-time, full-time students, according to data reported by 1,207 ranked colleges and universities in an annual U.S. News survey.

Not graduating on time is a triple whammy for student loan borrowers. Not only do they pay for another year -- or more -- of college, their costs climb each year as tuition and living expenses increase, and they enter the workforce later. Students who take six years to graduate at Temple University in Philadelphia have nearly twice the student debt of students who earn a diploma in four, says Neil Theobald, president of the university.

Look for schools with high graduation rates. Meet early and often with your academic adviser and career counselor to ensure that you're on the right academic and career path. And work fewer than 15 hours per week. Working longer hours can negatively affect students academically and financially. "It takes longer to graduate, you have a lower GPA and you take on more debt," Theobald says.

4. The three-year student loan default rate is 15 percent for recent graduates.

Defaulting on your federal student loan happens when you let nine months slide by without making a payment. It will make it tougher and costlier to take out a mortgage, get a car loan or qualify for a credit card, according to the nonprofit American Student Assistance, which writes a student loan blog for U.S. News. Plus, the federal government can seize your tax refund or wages.

Don't get buried under your student loan debt. Pick up the phone and dial your loan servicer, says Collins. You may be able to consolidate your loans to lower your monthly payment, tie your bill to your income with a plan such as Pay As You Earn, qualify for forgiveness or apply for deferment or forbearance.

[Find out how to pay off student loans within five years of graduation.]

5. Borrowers older than 60 owe $43 billion in student loan debt.

Some of these borrowers are likely older students or parents. But if you're worried about repaying loans in your golden years, think about fast-tracking your debt repayment schedule.

You'll pay down debt fastest if you repay the loan with the highest interest rate first. Or motivate yourself by wiping out your smallest loan right away, says Joe Mihalic, who wrote about repaying his $90,000 student debt on his blog No More Harvard Debt.

Remember to tell your servicer how you'd like to allocate extra payments, says the Consumer Financial Protection Bureau. You'll need to dictate whether you want the highest interest rate loan paid down first or have extra payments applied to the loan principal instead of, say, counted as early payments. The Consumer Financial Protection Bureau offers a sample letter on providing instructions to your lender.

Trying to fund your education? Get tips and more in the U.S. News Paying for College center.

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