Student loans are big on interest rates, and as many as 90% of student loan borrowers may owe more than $1,000 on their loans, according to a report from the Consumer Financial Protection Bureau.
The bureau says a majority of borrowers on defaulted loans will eventually default.
Here are five things you can do to help avoid a default and avoid a bad payday.
Don’t borrow too much, but be careful about borrowing too little.
The average monthly payment on a defaulted student loan is $3,000, and for a 30-year fixed-rate loan, that number is $1.5 million.
If you borrow more than that and you default, your monthly payment could rise significantly, which can make a big difference.
The Bureau says borrowers with less than $100,000 in annual income can pay a maximum of $10 per month.
A borrower with more than those limits could potentially owe more.
Don´t be afraid to speak with a loan counselor.
Many lenders provide a hotline that allows borrowers to speak to a professional, including an attorney, if they are unsure about the loan they´re taking out.
But you should avoid contacting the lender directly, according a report by the Bureau of Consumer Financial Services.
Instead, you can contact your lender’s financial institution to see if they can help you find a loan that fits your needs and financial situation.
Make sure you get your loans on time.
A defaulted loan can be the biggest financial hardship for a borrower, especially if you borrow a lot and pay it back quickly.
For instance, if you earn less than 60% of the median wage for a worker age 25 to 54, you might owe $10 to $30 a month in interest on your loan, according the bureau.
If your monthly payments are $200 or less, the loan may be forgiven.
Donât buy credit cards.
Credit cards are great, but many borrowers will eventually lose them, and they may not have the cash to pay their debts.
But a new survey by the Pew Charitable Trusts shows that some people with student loans are more likely to pay off their debt in full than others.
The survey shows that people with outstanding loans are three times more likely than those with fewer debtors to use a credit card to pay back their loans.
That means that people who borrow large amounts, or who use credit cards to pay for other things, are more at risk for default.
Donate money to charity.
If it doesnât come out of your pocket, the bureau says you can put a check in the mail to the American Red Cross to help those who can least afford it.
In many cases, it will cover some of your out-of-pocket payments.
You can also apply for a tax deduction to help pay your student loan debt, and the bureau has information on how to do so.
You should check your income and assets to see how much you owe, as well as your financial situation, before making a decision about how much to give.