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YOUR MONEY: Managing hefty student loans

Q: I am a widow, stretched to my paycheck's limits. After cobbling together unsubsidized and subsidized Stafford loans with private loans cosigned by my father, I was able to get my only daughter through a private college. But she graduated with ...

Q: I am a widow, stretched to my paycheck's limits. After cobbling together unsubsidized and subsidized Stafford loans with private loans cosigned by my father, I was able to get my only daughter through a private college. But she graduated with what amounts to a small mortgage. She hasn't yet found any real work--only bartending and teaching dance part-time. I don't know how she'll repay these loans. Any advice?

A: Look into consolidating the Stafford loans. Mark Kantrowitz, publisher of FinAid.org and FastWeb.com, said consolidate the loans so your daughter has one servicer. The only lender still offering consolidation loans is the U.S. Department of Education at www.loanconsolidation.ed.gov or call 800-557-7392. Once she has consolidated, he said, there are two main options that seem appropriate:

-- Economic hardship deferment works well for a temporary problem when a borrower has no ability to make any payments. This suspends payments on the federal loans for up to 3 years during which the federal government will pay the interest on any subsidized Stafford loans (including the portion of a consolidation loan that repaid subsidized Stafford loans).

-- Income-based repayment can work well when the borrower has a partial hardship but can afford to make small payments. This will base the monthly payment on a percentage of her discretionary income. If the borrower's adjusted gross income is less than 150 percent of the poverty line, her monthly payment will be zero. For most borrowers, income-based repayment will reduce the monthly payment to less than 10 percent of adjusted gross income.

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