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Here are two things you need to know about student loan debt:

1. There's no magic wand that makes it easily disappear.

2. The more desperate you are, the fewer options you may have for relief.

The rising default rate on federal student loans reflects these realities. The U.S. Department of Education in September said 8.8% of borrowers had defaulted in their first two years of repayment, up from 7% the previous year.

That's just the tip of the iceberg. When the window is expanded beyond the first few years of repayment, the default rate soars. One in five federal student loans that entered repayment in 1995 has gone into default, according to a review by the Chronicle of Higher Education.

Still, most people have better options to deal with their education debt than to simply stop paying it. A smart repayment approach can get you out of debt faster or at least make your loans more manageable as you build the rest of your financial life.

Liz Weston

Liz Weston

Here's what you need to know to start planning your escape from student loan debt:

Understand the trade-offs

Federal student loans offer a variety of repayment options. If the payments on the standard 10-year repayment schedule are too high, you may be able to get extended plans that lower payments by stretching your loan term out to as many as 30 years. Or you can ask for graduated payments that start smaller and get bigger over time. Or you can take advantage of repayment plans based on your income.

The longer you take to pay back the loan, the more interest you'll pay. Switching from a 10-year to a 20-year plan, for example, will cut your monthly payment by about one-third but will more than double the total interest you'll pay, said financial aid expert Mark Kantrowitz, the publisher of FinAid and Fastweb.

If you have a manageable amount of federal student loan debt and can afford to make the bigger payments, you should do so. But consider opting for lower payments, even though you may pay more interest, if:

  • You really can't afford a larger payment right now.
  • You otherwise couldn't save for retirement.
  • You have private student loan debt in addition to federal loans.

Focus on your private student loans first

Unlike federal student loans, private student loans have variable rates. Even if the rates are low now, they likely won't stay that way for long, Kantrowitz said.

Private student loans also have fewer consumer protections and repayment options than federal loans, plus no forgiveness options -- more reasons to dispatch this debt as fast as you can. Consider paying the minimum possible on your federal loans so you can throw more money at your private loans. Your lenders can help you compare your repayment options; if you're not sure who holds your loans, start your search here.

Consider income-based repayment plans

Federal student loans offer three repayment options that are tied to your earnings: income-contingent, income-sensitive and income-based. The income-based plan is the most generous and can even get your payments down to zero if you're poor. The plan caps payments at 15% of your so-called discretionary income, which is the difference between your adjusted gross income and 150% of the federal poverty line.

This cap will fall to 10% in 2014. (The cap will fall this year for certain borrowers, who will be notified this month by mail if they're eligible for lower payments. To qualify, the borrowers can't have taken out any loans before 2008 and must have taken out one new loan in 2012.)