By now you have most likely read something in the news regarding the student loan debt crisis. If you are considering students loans or have already enrolled, READ ON….
BEFORE YOU EVEN CONSIDER A LOAN:
Scholarships and grants are available from both private and public sources. Be sure to apply for as many as possible. Visit FAFSA to apply for federal and state grants through FAFSA, also visit Fastweb’s scholarship database.
Also, keep in mind that top dollar schools are not the only option. There are many fantastic community colleges you can attend or earn some of your credits at a lower cost – you can always transfer to your dream school.
DO YOUR HOMEWORK, COMPARE LOAN FEATURES!
Be sure to thoughtfully consider before signing any student loan promissory notes.
- What is the interest rate?
- How often will the interest rate change?
- When do repayments begin?
BE WARY OF BORROWING MORE THAN YOU REALLY NEED!
Most lenders consider tuition and the cost of education expenses (books, school supplies, lab fees, etc.) to calculate the loan amount. Often they will offer you much more than you really need. Consider a work-study program or a part-time job to offset expenses before borrowing money that may accrue interest while you are in school. Find an inexpensive apartment and live off-campus with roommates…or (gulp) save even more money by living at home with the folks.
The Consumer Financial Protection Bureau and the Department of Education have teamed up to create this “Financial Aid Shopping Sheet” making the costs and risks of student loans clear upfront outlining total estimated student loan debt, monthly loan payments after graduation and additional costs not covered by federal aid. Use this form prior to enrolling in any loans.
ALREADY HAVE STUDENT LOAN DEBT?
Find out how much you owe, review your financial aid history and learn about recent policy changes regarding federal loans through the National Student Loan Data System .
HAVING A DIFFICULT TIME KEEPING UP WITH PAYMENTS?
The most commonly cited characteristics associated with default are:
• Lack of Program Completion
• Low Income and Unemployment
• Type of Institution
• Race and Ethnicity
• Lack of High School Diploma
• Lack of Information about Borrowing
(Source: The Student Loan Default Trap)
Before defaulting on your students loans always contact your lender and try to work out a plan. There are options such as deferment or forbearance and various repayment plans (standard repayment, graduated repayment, extended repayment, income contingent repayment and income based repayment).
Again, be sure to thoroughly research any options before signing. There is currently a whole lot of buzz surrounding IBR (income based repayment) – allowing a borrower to repay federal loans based on what’s affordable rather than what is owed with monthly payments capped at 15 percent of your adjusted income. As wonderful as this sounds there are some downfalls and catches to this new program For instance, due to your income, you may qualify for payments so low that your monthly interest is not covered. In effect, your total debt may actually rise.
Having trouble making sense of all this information? Access the Financial Awareness Counseling Tool – using your loan history work through interactive tutorials covering managing a budget, avoiding default and other topics, then receive feedback.
IS FORGIVENESS AN OPTION?
In some cases loans may be forgiven including disability, teacher loan forgiveness, and public service forgiveness. Again, do your homework. Don’t assume this is an option as there are conditions to forgiveness plans. Be sure you qualify before you put all of your eggs in this basket. And, no, unfortunately a poor job market for recent graduates or dissatisfaction with your alma mater are not grounds for forgiveness.
HAVING A DISPUTE WITH YOUR LENDER?
the Federal Student Aid Ombudsman may be able to help! E-mail: email@example.com
STILL NOT SURE WHAT TO DO?
Visit www.studentaid.ed.gov or call 1-800-4-FED-AID. You can learn more about the various student loan repayment options and find advice on paying loans off quickly using the Consumer Finance Protection Bureau’s Student Debt Repayment Assistant.