Student loan debt reached $100 billion mark for first time in history

Washington D.C. — President Barack Obama is detailing a college loan plan that could help him shore up support among cash-strapped students and graduates.


The plan he was to announce Wednesday in Denver would allow millions of student loan recipients to lower their payments and consolidate their loans.


Young voters were an important bloc in Obama’s 2008 campaign, and 

Occupy,  Wall Street 

protesters have expressed concern about burdensome student loan debt.


Obama’s announcement comes the same day a new report is being released by the College Board. It shows average in-state tuition and fees at four-year public colleges have risen $631, or 8.3 percent, compared with a year ago.


Outside of mortgages, student loans are the No. 1 source of household debt.


Yet these numbers aren't nearly as scary as the ones released by the U.S Department of Education last month: 320,000 student borrowers who entered repayment in 2009 defaulted by the end of 2010 - an increase of 80,000 people over 2009, or about 10% of borrowers.


This is deeply concerning, because defaulting on a loan can ruin a grad's young financial life. It will add to the cost of the loan, affect his or her credit score and make it nearly impossible to secure additional loans to go back to school.


Defaulting also means that the IRS can intercept any tax refunds the student may receive, garnish up to 15% of his disposable income, and even take some federal benefits.


However, the good news is that defaulting is completely avoidable. A few weeks ago, I told you how to reduce college costs before you (or your child) set foot into the freshman dorm. That advice still applies. But for those of you for whom it came a little too late, what you need to do now is make sure you have a smart repayment plan in place.


You've had a six-month grace period, but it's quickly coming to a close. If you haven't thought about this yet - or if you have kids in college and want to know what's around the corner - here's what you need to know to act:


Get organized


Mark Kantrowitz, creator of finaid.org, told me that the payment students miss the most is the first payment - either because they've forgotten the date or because the reminders that are coming in the mail are going to their parents' house instead of their new address.


You need to pull the information on every single loan you've taken out, and make sure the due date for each one is on your calendar and in your smart phone. Then, take all this info and separate it into file folders according to loan.


On a cover page in the folder (or on the folder itself), write the loan number, the loan amount, who the lender is, and the username and password (and any security questions) for the account.


While you're doing this, make sure each lender has your most current address and contact info - including an updated email address if the school address you gave them has expired.

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