We're told over and over again that student loans are good debt. The conventional wisdom says that, like a home loan, student loan debt will turn into an asset. But what happens when it doesn't turn out that way? What happens when you take on tens of thousands of dollars in loans that in many cases will take decades to pay off? What happens when people increasingly can't pay?

Sometimes, they stop paying or fall behind on their loans. The U.S. Department of Education recently reported that the national default rate on federal student loans rose slightly to 5.1 percent in 2004, the latest year available, from the previous year's record low of 4.5 percent. The default rate represents the percentage of borrowers who began repaying their loans between Oct. 1, 2003, and Sept. 30, 2004, and who defaulted before Sept. 30, 2005.

Although the default rate is low compared with the all-time high of 22.4 percent set 14 years ago, the latest increase is still a signal that shouldn't be ignored.

"Having over $100,000 in student loan debt is not fun," wrote one reader, a new attorney who joined me during a recent online discussion. "Do I regret going? No, but it certainly didn't pan out the way I thought it would. I am working like a fiend, not getting paid what most people think lawyers make, and struggling daily with money and budgeting. There are hundreds, from my class alone, who are in the same boat."

Sinking in debt, borrowers want to know their options. They look deflated when I tell them. Pay it as originally agreed over 10 years and live below your means, or stretch the payments for up to 30 years.

And no, bankruptcy is not an option. If you have a federal student loan, it can't be discharged in bankruptcy. If you have a private student loan, it's still not a viable option unless you can prove that paying it would result in "undue hardship," a test that is nearly impossible to meet.

There is some relief, even if temporary. Depending on the loan, there are several options such as a graduated repayment plan, where loan payments start out low and then increase, typically at two-year intervals.

Some loans have an income-contingent option. That gives you the flexibility to pay off your loan based on what you earn. Each year, your monthly payments are calculated based on your adjusted gross income, family size and the total amount of your loans.

If you are experiencing an economic hardship, you may be eligible for "deferment." Under this option you still have to pay the loan but you can postpone payments for a while. Interest on the loan or loans will not accrue during the deferral period. Another option is "forbearance," in which you can stop making payments for a set period of time. Unlike the deferment option, interest continues to accrue. But forbearance is easier to get.

- "I am a 30-year-old single female, who owns a condo, has no credit card debt, donates to charity, maxes out her 401(k) and has $10,000 in emergency savings and $2,000 in regular savings. I also have $49,000 remaining on my law school loans, which were over $140,000 when I graduated. Should I take $10,000 of my emergency savings and put it toward the loans?"

- "I'm about to receive $30,000 of the life insurance money that my father requested I use to pay off the student loans. I have $39,000 in loans with interest rates below 3.5 percent. Should I invest it and pull from what grows to continue to make the regular payments? Or should I just pay off a massive chunk of the student loans?"

- "Would it be more beneficial to take out a student loan to complete my master's degree, or to take the money from my Vanguard fund? I need around $5,000 for the semester. I'm 24 and have about $10,000."

As to the first woman's question, I would not totally deplete my emergency stash of cash, but I would take about half of it and put another dent in that debt.

I think all the questions, on some level, stem from the belief that student loan debt is good debt. It's not. Debt is bad, even when necessary. Conventional wisdom should follow this old Chinese proverb, "A good debt is not as good as no debt."

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