Student Loan Dodgers

Leaving college with a mound of debt and trying to pay it back on an entry-level salary can leave a lot to be desired. If making ends meet isn’t a good enough reason to manage your borrowing in college, try this one on for size: the reality of loan repayment may prevent you from going into the field of your choice.

A study conducted by Public Interest Research Groups show that 37 percent of public university grads and 55 percent of private school grads face an unmanageable debt load, meaning that student loans would take more than 20 percent of their expected after-graduation salaries. As a consequence, these graduates may not be able to enter their chosen professions because they cannot afford to pay their loans back on the salaries they can reasonably expect to receive.

The problem is partially attributable to the high cost of college education and the limitations on financial aid. These factors often combine to force students to borrow to complete their degrees. Additionally, incoming students do little research on their chosen professions while in school to determine whether they can make a living in the fields of study they’re choosing.

Before declaring a major, students should fully research the employment potential of the fields they are considering, and should also research which fields are expected to be in demand over time. The Bureau of Labor Statistics makes 10-year employment predictions. Students can consult the BLS Web site for more information on employment projections. In addition to employment projections, the BLS also makes wage projections for hundreds of occupations.

Students should be leery of overly optimistic salary projections. Salary is often dependent upon region, so a student’s preferred location should also factor into the research.

If a low-wage occupation is still appealing, try to study at a public college or university. The overall costs here are often substantially lower than those at a private college. Examine 2-and-2 programs or 3-and-1 programs that combine community college and university studies. Attempt to finish a degree as quickly as possible to take advantage of lower tuition rates, and try to limit borrowing to Federally backed loan programs. With new loan regulations, your loans may be dischargeable after 10 years of service in certain public sector occupations, like social work, law enforcement, education, and rural or underserved health care delivery.

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.

Private student loan lenders have taken a lot of heat lately from Congress and borrowers alike. The truth, however, is that consumers overwhelmingly turn to private student loans when it comes to college education. Most private student loan lenders advise their borrowers to exhaust all other forms of financial aid before borrowing private loans, yet some students and their families turn to private funding sources first.

The interest rates on private student loans are generally higher than what you can find through the Federal government. Then why do people turn to private lenders? People choose private student loans for a few reasons.

First, the Federal government imposes lifetime borrowing caps on students and parents alike. The caps haven’t been adjusted in many years, and don’t reasonably reflect the amount of money it takes to complete an undergraduate degree. When students and their families do exhaust their Federal student loan options and personal savings, they have little choice but to look at borrowing from retirement funds, home equity, or private sources.

Second, private loan lenders offer more flexible borrowing plans than the Federal government does. Aside from being able to borrow more, private loan lenders can also include borrowing incentives that make their student loans more competitive, or give their private loans more attractive terms for a given borrower’s situation.

Third, in the past, private student loans have been relatively easy to get. This is changing, as private lenders tighten up on their lending standards. Part of the reason for the crunch is that private lenders are now finding it more difficult to sell student loans to other lenders. This inability to sell loans in bundles is considered fallout from the sub-prime mortgage problems we’re also seeing.

If you are considering a private student loan, do your research. Shop around for the best deals you can find, and carefully examine the terms and incentives a private lender is offering. A quarter-point reduction in interest may not seem like much, but over the course of a loan’s lifetime, it could add up to thousands of dollars.

If you’ve resolved to get your financial house in order in 2008, a good place to start is by consolidating your student loans If you have college loans that were issued before July 1, 2006, they’re variable interest rate student loans. This variability can destabilize your finances.

A smart move includes consolidating all of your student loans into one payment with a federal student loan consolidation. This will simplify your finances by reducing the number of payments you make each month, and will likely reduce the amount of money you pay each month. Your student loan consolidation will have a fixed interest rate, which means you’ll always know the amount of your monthly payment. If your finances are limited, you can also stretch out the repayment terms of your student loans to get a lower monthly payment.

Reducing the number of payments you make and the amount you pay each month, along with paying a fixed interest rate will help stabilize your finances and will improve your credit rating. As your finances improve, you can also increase the amount of money you pay each month. This will accelerate your student loan payoff and save interest in the end.

On the other hand, student loan debt is tax deductible, so there’s no pressing reason to pay off your student loans early. You can deduct student loan interest whether you itemize your deductions or not. Likewise, there are other tax credits you’re eligible for if you’re still enrolled in school.

If you haven’t already consolidated your student loans, make this one of your financial goals for 2008.

Students who are applying for college admission often do not consider the true cost of a college education. A student applicant’s primary concern is gaining admission to their college of choice. The cost of education does not factor in to a student’s college decisions until much later in the process.

When students do turn their attention to costs, they focus on the cost of tuition above all other expenses. This is a mistake because the other expenses – like fees, books, living expenses, and transportation costs – can increase the cost of a college education substantially.

Universities are under pressure to keep the cost of tuition down. Instead of passing along the increased costs of education in the form of tuition raises, some colleges and universities have imposed per-credit, per-class, and per-semester fees that can add as much as 40 to 50 percent to the cost of tuition. In most cases, the fees are mandatory and cannot be avoided.

To offset the out-of-pocket costs of tuition and fees, student applicants should look for grants and scholarships regularly. Most university libraries have grant and scholarship resources available to help students find unrestricted money that can be applied directly to a student’s tuition account. Scholarships and grants are the “gold standard” of financial aid. These monies do not have to be repaid. In many cases, the scholarships are not renewable, meaning that they’re a one-time-only award, and recipients will need to look for new scholarship sources each semester or year.

Federally-backed student loans are the next most desirable type of student aid. Subsidized student loans are meant for students whose family income levels fall within certain Federal guidelines. With these college loans, the Federal government pays the interest that accumulates on these student loans while the student is in school, reducing the overall amount of money a student must repay.

Unsubsidized Federal student loans are the next most desirable type of student aid. Unsubsidized student loans are available to all students, but are subject to lifetime lending caps, which may or may not cover the student’s college expenses. With unsubsidized student loans, the borrower pays the entire interest accumulation on the student loan, but payments are deferred until the student leaves the university.

Private student loans are the most widely available and flexible options, but they should be reserved for covering those costs that cannot be covered with scholarships or federal student loans. Student borrowers should shop for the best possible deals with private student loans. Often, the interest rates and borrowing terms on private student loans can mean tens of thousands of dollars in savings (or added costs!), so comparison shopping for student loans is definitely in order!

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Private student loans have gotten a bad rap lately. Legislators have focused on some extreme cases of borrowers who have gotten in over their heads, but for the most part, private student loans can come through where Federal student loans and grants leave off.

Grants are always the best route to go. They’re free money that you don’t ever have to repay. If you’re eligible for grants, get as many of them as you can. Grants may be one-time or renewable. Regardless, if you find them, go for them.

Federal student loans are also desirable, but they’re loans. You have to pay back the money, unless you meet the requirements for student loan forgiveness. Federal student loans are good, better if they’re subsidized, but not a bad deal in the long run. The disadvantage of Federal student loans is that they have lifetime lending caps. Once you’ve borrowed the maximum, you’re done with Federal student loans. The lending caps haven’t been adjusted in a very long time, so if you have to borrow your way through college, you may bump up against your limits quickly.

In addition, Federal student loans only cover “eligible expenses.” They can’t be used for living expenses, so again, if you’re borrowing your way through school, you can’t rely exclusively on student loans.

Private student loans can help you bridge the gap between your grants, what the Feds will lend you, and what your college education actually costs. (Funny enough, it’s always more expensive to go to college for a year than what the brochures tell you.) Private student loans don’t operate like Federal student loans do. There are no caps on interest rates, but then again, there are no caps on lending either.

The best approach to financing your college education will come from balancing your “financial aid portfolio” with grants and Federal student loans. Use college loans to make up the difference. If you shop carefully, you can find private student loans that offer great borrower benefits and good terms. Private lenders are also free to offer programs that you won’t find with lenders in the Federal college loan programs.

In short, don’t write off private lenders based on the horror stories you may have heard. Balance your financial aid, and use private student loans to cover what your aid package can’t or won’t.

If your student loan debts are entering repayment, now is a good time to consider a student loan consolidation. A student loan consolidation can reduce the number of payments you make each month to one. Simplicity is always preferable to complexity, especially when it comes to finances.

In addition to reducing the number of payments, you may also reduce the amount of money you pay each month, which can be a blessing on an entry-level salary. A student loan consolidation can reduce your overall interest rate, saving you cash on your payments, and cash over the lifetime of the loan. A consolidation loan will also allow you to elongate your repayment period. If your salary is small, or your other obligations consume a good portion of your income, being able to stretch out your repayment period can make a big difference.

On the flip side, consolidating college loans won’t reduce your overall debt. The amounts you borrowed are still there, and they still have to be paid back. A longer loan payback period means that you’ll be paying interest over a longer period of time. You’ll likely end up paying more in interest if you stretch out your repayment plan than you would if you stuck with your original terms.

Ideally, you can adopt a longer payback period and as you begin to make more money, apply extra payments to your student loans to keep your overall balance in check. It may mean doing without a vacation or a brand new car for a few years, but paying off your student loans can be a great feeling and will do wonders for your credit report.

Student borrowers who develop a repayment strategy stand a better chance of getting out of debt and staying out of debt than those who don’t. As you accumulate debt in college, developing a financial strategy is one of the best things you can do for yourself.

Repaying $30,000, $40,000 or even more student loan debt can seem like a daunting task, It can be done, however, and student borrowers can learn some invaluable lifetime lessons while they repay their student loans.

While you’re in college, try to minimize the amount of borrowing you do. This may mean cutting a lot of corners on your expenses. Living expenses are the hardest to budget for, since they’re the least predictable. Develop healthy spending (and savings) habits while you’re in college. Avoid “deficit spending” on credit cards and budget religiously.

Once you’re out of college and have joined the world of work, employ additional strategies to reduce the overall amount of your student loan repayment. Consider student loan consolidation, making additional payments, and taking advantage of any incentive that lowers your monthly interest rate, like automatic payment plans, and on-time payment plan incentives.

Once you begin working, you’ll be tempted to take on additional debt. Don’t! Determine exactly what you’re willing to borrow for and what you’re not. Big ticket items, like houses and cars probably qualify. These loans are usually fixed interest rate loans and take into account your ability to repay them with regard to the rest of your debt. Don’t borrow for vacations, holiday gift-giving, luxury items like boats or second houses until you’ve paid off your student loans.

Get into the habit of making cash payments for everything. Also develop a savings plan that will help you make a cushion in case you lose your job, or encounter unexpected expenses.