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5 ways to be smarter about paying off your student loans

Paying off student loans is challenging now, and it may be about to get even worse.

The Department of Education hires debt collection companies that help borrowers stick to reasonable student loan repayment plans. Until last week, the department was incentivized to award these Federal Student Aid contracts to companies with the strongest records of helping borrowers and the lowest rates of loan defaults. The policy encouraged companies to work with borrowers instead of forcing them to default and discourages providers from issuing risky loans.

But last week, in what she characterized as an effort to "limit costs," Education Secretary Betsy DeVos revoked that policy, meaning the government is no longer required to consider factors such as default rate and customer service when awarding contracts to debt collection companies.

Americans are already struggling to manage student debt. U.S. citizens now hold a whopping $1.31 trillion in student loan debt. During the Obama administration, 8.7 million Americans defaulted on their student loans — a rate of approximately one default every 29 seconds.

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The government is now more likely to award Federal Student Aid contracts to companies that offer their services for the lowest price. Some have argued that these companies offer riskier loans and provide less support to individuals trying to navigate the student loan maze.

If you're one of the 44.2 million Americans with student loan debt, or you're considering borrowing money to finance a degree, there are a few key ways to ensure that you're managing your loans efficiently:

1. Know how to spot a scam

Learn how to avoid predatory student loan companies by spotting red flags, like upfront fees for simple services, aggressive advertising and grandiose student loan forgiveness claims.

2. When picking the right school, consider the cost

If you are nervous at the prospect of taking out loans, consider pursuing a degree at a non-profit institution that offers need-blind admissions and meets full need. Also, be sure to research how much students earn after graduating and consider any colleges offering tuition-free enrollment in your city or state.

3. If you need help, ask for it

Institutions like the Predatory Lending and Consumer Protection Clinic at Harvard Law School represent low-income individuals in cases related to predatory lending and other consumer challenges, including bankruptcy and debt collection defense.

If you're feeling overwhelmed by your loans or believe you've fallen victim to a scam, find yourself an advocate as soon as possible.

4. Get creative

People all over the country are finding clever ways to pay off monstrous piles of debt. Amanda Page repaid nearly $48,000 of student loan debt in 14 months by making "monster payments."

A teacher from Texas paid off $40,000 of student loans in 18 months by slashing costs and contributing 75% of his paycheck toward his loans. In order to conquer $107,000 in student-loan debt, Andrew Josuweit, CEO of Student Loan Hero, lowered his living expenses by moving from New York City to Austin.

Each made significant changes to their lifestyle, but emerged debt-free in under two years, as opposed to the decades it can take to repay education expenses.

5. Stay informed

Most important, do your research. Policies associated with student debt repayment and interest rates can and do change. Make sure you're up to date on any new provisions that could change the process of repaying your loans as quickly and inexpensively as possible.