Don't default and other tips from student loan experts

The average U.S. college graduate leaves school with $30,000 in debt and, often, an uncertain plan for how to pay back the sum.

Of course, some students finish with no debt. Others wind up owing over $100,000 for their degree. You’ve likely heard the horror stories of people’s efforts to pay off their debt.

Perhaps you’ve heard of some success stories. But what are the tried-and-true methods for handling college debt?

Two experts joined MPR News host Angela Davis to explain the student debt crisis and advice for college-goers:

• Brittany Tweed, director of financial aid for Anoka-Ramsey Community College in Coon Rapids and president of the Minnesota Association of Financial Aid Administrators

• Shannon Doyle, program manager for Partnerships and Financial Education at Lutheran Social Service of Minnesota, as well as a certified financial counselor and certified student loan repayment counselor

“Students often have a fear of financial aid. It’s the unknown,” Tweed said, and some parents struggle to understand how their students’ loans work.

Here’s some of Tweed and Doyle’s advice:

1) Remember that colleges are businesses: “They are selling you on choosing their college,” Doyle said. So, no matter how nice folks are in the admissions office, their employer ultimately wants your tuition money.

2) Focus on your degree: Put less emphasis on a college’s prestige or reputation and more on what you’ll learn from your specific track of study.

3) Don’t default on your loans: It’s detrimental to your credit score and can make for difficulties when trying to get a car or even rent an apartment.

4) Communicate with your loan servicer to avoid default: Private student loans can go into default quickly, sometimes after just a single missed payment before the borrower must work with a collection agency or negotiate a settlement. Federal loans take longer to default, and defaulting means the borrower will go into a loan rehabilitation or consolidation program. But the government has great debt collection authority — it can even garnish Social Security for retired borrowers.

5) Pay off your loans with the highest interest rates first: Otherwise, they’ll just become more costly over time.

6) Be sure of the details if you enter an income-based repayment plan: While these can be an effective option, they don’t always consider the loan’s entire interest. And while some forgive loans after 20 years, that forgiveness can be considered taxable income under current law.

7) If parents are co-signing a loan, ask if there’s a release clause: Some loans will allow parents to remove themselves from the loan after a set number of on-time payments.

8) A community college might be the best place to start school: Credits at these schools are less costly and many institutions are making it easier to transfer their community college credits. The experts say community college is an especially good option for completing general courses.

9) Consider your future earnings when choosing a college: For example, a $70,000-per-year college might not be wise if you’re entering a competitive, lower-wage field.

For more tips, listen to the entire student loan discussion on the audio player above.