Student Loan Dodgers

Luke Livingston has found a novel way to repay his student loans. The Clark University graduate started a Web site in December that will trade ad space for Livingston’s student loan payment. Sponsormyloans.com will provide one month’s worth of advertising space to sponsor’s willing to pick up the $200 monthly tab for Livingston’s student loan debts. After a bit of publicity, Livingston’s student loan payment was sponsored for the month of January, and he’s hoping to carry his luck forward.

The site is not a “sympathy site” since Livingston trades ad space for cash. Not just any old ad will do, however. Livingston won’t accept obscene, offensive or “adult” oriented images on the ad space that surrounds his site. Advertisers are guaranteed an exclusive ad deal which includes all of the ad space on the site, and can change the ads as many times as they like during the month. Livingston has limited purchases to a minimum of one month and a maximum of three months per sponsor.

Livingston has a degree in communications, and works full-time, but says in his blog that he’s currently not making enough money to pay off his student loans. If his site is fully sponsored, however, he can pay off his college loans in about seven years. So far, Livingston’s site has been featured in Young Money magazine and on TheStreet.com. Livingston is hoping for more publicity and more advertising revenue from his site.

An interesting note, however. Livingston says that he can pay his student loans off in seven years, if the interest rates don’t change. It sounds to me like he could benefit from student loan consolidation.

Yet another large student loan lender has decided to reduce its federal student loan program options. The Student Loan Corp, which is 80% owned by Citigroup Inc, announced on April 16^th, 2008 that it would suspend lending federal student loans to certain schools and withdraw from the Federal Consolidation Loan market, effective May 1, 2008. The company is blaming higher costs for funding by the “continued disruption in the capital markets” and new federal law changes on the subsidies for the reduction in their student loan portfolio.

The Student Loan Corp. hopes the changes to only be temporary and hopes to return into the student loan consolidation market as the market improves and changes in congress take place.

So far over 43 lenders have dropped completely out of the federal student loan lending market or have suspended student loan consolidation lending until further notice. Some of the largest lenders include; Sallie Mae (SLM), Nelnet, NextStudent and CIT Group.

I’m sure it’s only a matter of time before my schools financial aid office is effected by all this craziness going on in the student loan industry.

If you’re approaching graduation and you have student loans from several different semesters, consider student loan consolidation, if you can still find lenders offering consolidation on student loans. For federal student loans, there’s no better way to save money than to consolidate your college loans. When you consolidate a student loan, all of your smaller student loan amounts are combined into one larger consolidated loan, often with a lower interest rate, and smaller payments than the original student loans.

Additionally, with a consolidated loan, you make one payment each month at a fixed interest rate instead of several whose interest rates may vary, and you can stretch out the repayment terms of your college loans to better suit your after-graduation finances.

The notable exception to student loan consolidations are for students who have Perkins Loans. These student loans are eligible for complete forgiveness if the borrowers enter certain fields after graduation and remain employed in them for five years. If the borrower pursues work in an eligible field for less than five years, he or she can still receive partial forgiveness for their remaining debt. Additionally, Perkins loans have a fixed 5-percent interest rate which may be lower than the rate available for consolidated loans.

After graduation, you normally have some period of time - about six months - before you’re required to start making payments on your student loans. Check with your lender(s) to verify the deferment period on each of your student loans. This grace period is meant to give you time to find a job and settle into your new life before you need to start repaying your student loan debts. Many graduates use this period of time to “ignore” their student loans. This is a mistake! Your college loans are waiting for you, so you should use the grace period to make plans for them.

The student loan consolidation process can take 60-90 days. Use your grace period to research and set up a student loan consolidation package for yourself. You’ll avoid having to make two or three months of unconsolidated loan payments while you complete the student loan consolidation process.

While you’re consolidating your student loans, look for some sound financial planning advice to help you manage your expenses, and build savings for yourself. Financial planning services are available for people of all income levels and can help keep you on track toward your financial goals. Your bank or credit union may be able to provide you with some financial planning resources.

Don’t look at your grace period as simply a “payment-free” time. Use your grace period to set up repayment plans and the financial management tools you’ll need throughout your life.