|
Dealing with student debt |
|
|
|
|
|
|
Written by Meg Richards, asap
|
|
Tuesday, 17 April 2007 |
|
|
|
|
The smarter you look on paper, the deeper your debt. Most college graduates owe about $20,000 in student loans, and if you’ve got letters after your name that number may be in the six digits.
If it feels like things are tougher than they used to be for student debtors, that’s because they are, says Lynnette Khalfani, author of “Zero Debt for College Grads.” In the last decade, tuition prices have gone up 9 percent, compared to a 3 percent inflation rate, and the average student’s debt has more than doubled.
The skyrocketing cost of higher education has produced a “generation that has financial burdens that are absolutely unprecedented,” Khalfani says. “Never before in the history of America have we put so much financial stress on so many people at such a young age.”
If your brain is full but your bank account is empty, don’t despair. Student loan repayments can be worked into almost any budget. Khalfani’s book outlines some surprising ways to minimize payments and eliminate debt. Tips for getting started:
———
Don’t take on more debt than you can handle: If you are still in college, or are contemplating grad school, borrow as little as possible. To put student debt in perspective, Khalfani suggests using your expected first-year salary as a gauge; a 2 to 1 ratio is prudent. For example, if your starting salary will be $30,000, you don’t want to take on more than $60,000 in loans.
———
Assess the damage: If you’re confused about your college debt, or don’t even remember how many loans you took out and who you owe, you need to visit the National Student Loan Data System, www.nslds.com. It will give you an itemized list of all the federal loans you took out, their amount, status, outstanding principal and interest owed. To access your information, you’ll need to get a four-digit PIN from the Department of Education www.pin.ed.gov.
Whether your loans are federal or private matters big at payback time. The key difference is that federal loans are subsidized, while private loans are not. This means while you’re in school, the government is paying the interest on your loans. With private loans, the interest accrues and gets capitalized and added to your outstanding balance.
———
Know your alternatives: Many professionals, including police officers, lawyers, teachers, nurses, doctors and others in the health care field, qualify for forgiveness or outright cancellation of federal loans. People who volunteer at organizations like Vista or the Peace Corps or who help impoverished people and those in under-served communities can also have tuition loans written off.
In addition, the government’s Federal Student Loan Repayment Program can be a huge windfall for indebted grads, Khalfani says. Administered by the Office of Personnel Management, www.opm.gov, this program allows any federal agency you work for to put up to $10,000 toward your student loans each year, up to a maximum of $60,000.
Working in the private sector? You still have options. One little-known way to get rid of college debt is to have your boss pay it off for you, Khalfani says. Some employers will do this if you sign a contract promising to remain with the company for a given period of time. Bring it up the next time you’re up for a raise or performance appraisal.
———
Negotiate your rates: Contrary to popular belief, Khalfani says, Congress doesn’t “set” the rates for federal student loans. Instead, the feds impose a “maximum” interest rate that lenders can charge, then lenders set their own rates based on what the market will bear. That means you might be able to get a better deal. Ask for lower rates based on:
— Having payments automatically deducted from your checking or savings account.
— Making a set number of on-time payments. No late payments for two to four years will often qualify you for a lower rate, and some lenders will give you a break sooner.
— Good grades, or any other incentive programs offered by your lender. (It never hurts to ask!)
———
Stay out of default:
Student loans are one of the most serious forms of debt you can have if you become delinquent, Khalfani says. Unlike credit cards, this debt never falls off your credit report. Even if you declare bankruptcy, you will probably still have to pay your school loans under federal law.
That said, there may be times in your life when you can’t afford to make payments — a job loss, accident, illness, pregnancy or even high credit card debt can derail your financial plan. When this happens, you can request forbearance or deferment, or negotiate a lower payment — some plans allow payments as low as $5 a month.
To claim an economic hardship and request reduced student payments, you’ll need to file a statement of financial status with the Department of Education. You can find it online here: www.ed.gov/offices/OSFAP/DCS/forms/fs.pic.pdf.
Online calculators from FinAid www.finaid.org/calculators can help you figure out how much principal and interest you’ll pay over time under various programs. With so many options, there is no reason for anybody to go into default.
———
Pay off early if you can: Because student loans are considered “good” debts, and often have favorable rates, most financial planners will tell you there are smarter things you can do with your money than pay them off early. But it might make you feel better.
“There’s a lot of psychic pain and angst people feel when it comes to these loans,” Khalfani said. “It’s like a burden hanging over your head. Ideally, I like to see people pay things off sooner rather than later.”
———
asap columnist Meg Richards is an AP business writer based in Washington, D.C. | Only registered users can write comments.
Please login or register. |
|
|  | "Humankind cannot gain anything without first giving something in return. To obtain, something of equal value must be lost. That is Alchemy's first law of Equivalent Exchange. In those days, we really believed that to be the world's one, and only truth." | |
|  | We're not that bright, even though in our own little world, we're geniuses. We like 80s hair bands and one-hit wonders, but among us we have respectable tastes, too. Metallica, Iron Maiden, U2. Pursuit of all things trivial is a lifestyle, not just a game. We like some sports, love other sports, and can find something to say about anything. We watch TV and movies and we've read a book or two, even a few classics (Yes, Classic Comics count!)
We call it insight, you call it what you will. | |
|  | Felix Wong is an outdoor enthusiast living in Fort Collins. A mechanical engineer by day, he is especially passionate about bicycling, running, and backpacking. | |
|  | Hola Amigos! I'm Sandra. I like to believe that people are 70 percent good and 30 percent dumb. I'm stickin to that story. Reading this blog might make you want to be good, but probably just dumb. | |
|  | Donovan Henderson is editor of NEXTnc. | |
|  | Here at Nextnc we have some characters. Get a sneak peak behind the curtain and find out what amusing antics our staffers get themselves into on a weekly basis. | |
|  | What is up FoCo?
I am a recent college graduate of Minnesota State University Moorhead. After recieving my B.A. in English and Mass Communications this past August I moved down to Colorado.
I enjoy long walks on the beach, candlelight dinners, and heavy metal. My hobbies include reading and writing, music, movies, and getting drunk. Some of my favorite contemporary authors include Bret Easton Ellis, Chuck Palahniuk, and Kurt Vonnegut. My top movies are anything directed by Kubrick. I enjoy listening to anything that rocks.
Right now I am just trying to get to know Colorado and FoCo better. Mostly in order to find the best drink specials on each day that ends in Y. So if you know where I can get a cheap drunk on, let me know!
--Drew | |
|  | Life's little morsels of inspiration, observation and encouragement seen through the eyes of the Nextnc reporter.
| |
|  | Ms. Giles currently lives in Colorado where she stars in her own private reality show. She writes aphoristic accounts of her life, taken completely out of context, and embellished with characters and situations disguised to resemble something close to interesting. | |
|  | over and out | |
| | My name is Michelle Turley and I'm 28 years old. I live in Severance with my hubbie, Brandon. We have 2 dogs and a cat. We enjoy camping, four-wheeling, and just being in the mountains. I like to cook, clean (go figure), flea market, and play poker. I have so much to say about poker... | |
|
|
