Avoid Student Loan Pitfalls
Ahhhhh, college, when your whole life is ahead of you and the world is your oyster, right? Hopefully, that is the case. However, it can also be the time where you can make choices that will leave you paying well into your golden years if you arenít careful. Americans now owe more than $1 trillion on student loans- more than the $800 billion they owe on credit cards.
The average college graduate leaves school with more than $25,250 in student loan debt, according to college survey data by The Project on Student Debt. Sadly, 20% of student loan debt is held by seniors in their 60s, 70s, and 80s when they went back to school or cosigned on their childrenís loans.
Further, student loans are very difficult to discharge in bankruptcy and the debt is never forgiven if left unresolved. Tax returns and other federal benefits can be garnished until defaulted federal loans are fully paid. In short, if you borrow it, youíre probably going to pay it back, one way or the other. While student loans can be very beneficial to help you finance an otherwise unaffordable education, they are something to be taken very seriously. Here are some tips to help you steer clear of trouble:
Get as much free money as you can:
Before turning to loans, exhaust all scholarships and grants first. Keep in close contact with your schoolís financial aid office. If another student leaves school thus freeing up a scholarship, you may become eligible for it. Be sure to let them know youíre interested so youíll be on the waiting list.
Borrow as little as you can:
Complete all financial aid paperwork such as the FAFSA (www.FAFSA.gov). However, donít be tempted to borrow the maximum amount that youíll qualify for if you can get by without it. Thatís only saddling you with more debt plus interest that youíll have to pay back later. Itís easy to assume that borrowing now will be fine since youíll be making plenty of money later. But, ďlaterĒ may include expenses such as a mortgage, daycare, and other family expenses.
It isnít easy but working to cover your living expenses will keep you from borrowing more money that youíll have to pay back later. If you can just borrow enough for books and tuition and work to cover the rest, youíll thank me later.
Get your degree:
Itís a terrible feeling to be paying back student loans for a degree you never obtained. The only way that student loans make sense is if you get the degree that makes your investment worth it. Persevere and get your degree!
Do an internship while youíre in school:
While a degree is still valuable, real world experience adds a lot of value, too. Get both, if you can. Volunteer or do an internship in your career field to learn the ropes while youíre in school. The experience and contacts you gain just may help you land a job after graduation.
Weigh the cost of your education against your career choice:
While in most cases, I think a college education is almost always the right answer, there may be some cases where you have to weigh the cost. If youíre choosing to rack up hundreds of thousands of dollars in student loans for a private college education for a low paying career such as the ministry or social work you really have to ask yourself if that is a good investment. Instead, could you choose a less expensive school? Is there a way to minimize the cost or borrow less money?
If you find yourself unable to pay, communicate with your lender:
The truth is that student loan companies have many options available for rehabilitation of defaulted loans and repayment. Theyíre very easy to work with. However, you have to talk to them. If you donít, you wonít like the results. Student loans are one of the only debts that will never go away if you donít pay them.
Many college financial aid offices have staffs that are very concerned about students getting overextended on student loans and are advising students about the dangers. However, some arenít. I had one student in a recent class tell me that she wasnít aware that she had the option to take less than the maximum she qualifies for. She just signs on the dotted line each time and the money appears like magic in her account.
The hard part will come later, six months after she graduates when her many years of repayment begin. Instead of relying on the government or the financial aid office to protect you, itís best to be your own advocate. Look out for yourself and borrow as little as possible. Then pay it back as soon as you can so you wonít find yourself paying your student loan payments out of your Social Security check.
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Copyright © 2012 by Jennifer Wallis. All rights reserved.
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