Many federal student loans placed in in-school deferment will accrue interest during school and capitalize upon graduation:

Loan types that do not require payment of interest when deferring student loans include:

Subsidized Federal Stafford Loans

Subsidized Direct

Subsidized FFEL Consolidation Loans

Direct Subsidized Loans

Federal Perkins Loans

Consolidation Loans

Loan types that do require payment of interest when deferring student loans include:

Direct PLUS Loans

FFEL PLUS Loans

Direct Unsubsidized Loans

Unsubsidized Direct Consolidation Loans

Unsubsidized Federal Stafford Loans

Unsubsidized FFEL Consolidation Loans

So if you are still in college, try to aim for the loans that do not accrue interest during your schooling. Also, I just read in Entrepreneur Magazine about a program called ScholarMe, a platform that lets kids apply for all sources of college financing through one set of online questions. Finally, if you run through some of our prior blogs, you’ll see we have posted several times on various alternatives to incurring high student loan debt.

If you are already stuck with high student loan debt, the federal government will not usually settle a student loan. But if you are in default on federal student loans, the rules are different, the debt collector will often settle with waiver of things like interest or collection costs, and sometimes a portion of the principal. But you have to pay all at once.

For private loans, we are seeing large principal and interest reductions, and lengthy payment plans without the continuing accrual of interest.

Getting behind in your student loans and eventually settling does hurt your credit and that of your co-borrower, but sometimes it may be the only way out of these loans. If you’d like in on a little known secret: student loans nowadays are designed to last a lifetime! Arm yourself with as much information as you can, don’t trust your servicers (they don’t represent you and often do not seek the best outcome for you), and take your life back from your student loans. (the link has a free e-book we’ve written about options you may not have known about).