Wednesday, 22 January 2020

The U.S. student loan crisis is growing, thanks to staggering debt combined with sluggish salary gains for grads compared to their predecessors.

Reyna Gobel is an expert on student loans and the author of "Graduation Debt" and other books about paying for college. She says to ask for ways to keep costs down early and often. “There are lots of people who can help you. High schoolers need to talk to their school counselors about both college costs and career exploration," she says. “Career centers, student money management, and financial offices are vital points of contact while in college."

 Sixty-nine percent of graduates from public and private colleges in 2014 held debt. From 2004 to 2014: The share of graduates with debt rose from 65 percent
to 69 percent. The amount of debt rose more than 2X the rate of inflation (source: Institute for College Access & Success)

The class of 2015 has the highest average debt in history--$35,051. (source: Marketwatch)

Payments three months late can affect your credit score (source: Nerd Wallet)

7 top tips

1. REVIEW YOUR AWARD LETTER. Exactly how much are you getting, and will it be available throughout your college career? Not all grants are renewable.

2. START WITH FEDERAL STUDENT LOANS. These have the lowest interest rates, and best options for when you can't make payments.

3. COMPARE LENDERS If you need private loans, compare terms from at least three companies.

4. GET A TUITION DISCOUNT May private colleges offer need-based discounts to desirable students. It can never hurt to ask for one, or to negotiate a better discount if you need it.

5. DO THE TWO-STEP Start at an affordable community college, then transfer to a four-year school.

6. DO THE THREE-STEP Some colleges offer accelerated learning, where you can get a four-year-degree in three years, and also save on housing/food costs.

7. ENLIST EMPLOYER HELP A survey of 4,500 companies showed that 76 percent offer some level of tuition reimbursement to employees.

Can't afford to pay?

  • Deferments: temporarily halt payments of the loan principal and interest when you're enrolled in school at least half time, a graduate fellow, undergoing economic hardship, or on active military or Peace Corps duty. 
  • Forbearances: Allows you to stop payments up to a year (but interest still accrues) if you're in a medical or dental residency, have an illness, qualify for teacher loan forgiveness, or are performing in a national service position. 
  • Repayment plans: Visit to learn about repayment plans based on your income. 

Can this loan be forgiven?

If you work in public service, teaching, child/family services, Head Start, or are active military service in areas of hostility, your student loan may qualify and you might not have to pay all or part of it back. Check your terms for loan cancellation or discharge due to illness, hardship, disability, and bankruptcy.

REYNA SAYS: “Never choose a career because of money. It's much better to work on budgeting and limiting borrowing. Especially before graduation, choosing the wrong major will only cause you to go back to school when you realize you hate your job." “Upon graduation, have servicers explain all repayment options. Call back if one customer representative isn't very helpful and get a different one."

Additional information from Lynnette Khalfani Cox, 

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Student Banking Guide