Many people across the nation can relate to the individual struggling to pay back his or her student loans.
Due to not properly approaching the loan process or simply not understanding the long-term ramifications of accruing student loans over time, many people end up with large debts that result in years and years of financial distress.
Whether you are headed off to college this fall for the first time or you are in college presently, whether or not you require student loans will go a long way in determining your financial outlook for the years following graduation.
Here are some factors to keep in mind:
1. Making the wrong choice in the first place – While that Ivy League or other prestigious degree may look good, there are many other suitable educational alternatives out there. Both the student and their parents (when applicable) should look at what it will cost to get into their school of choice. In cases where significant student loans must be undertaken, students should consider other options. Just like shopping for a home or car, students also need to shop for good collegiate options in today’s challenging economy.
2. Borrowing too much money – Just like you should not max out a credit card, seeking too much money for a student loan is a big no-no. The problem becomes that you have surpassed a manageable level at which you can pay off. Both the student and any significant others (parents, spouse, etc.) should always sit down and figure out how much is too much.
3. Being M.I.A. when it comes to government options – Another potential blunder is being missing in action when it comes to looking into and opting for all that Federal Direct student loans can offer. In many instances, the student will instead opt for a loan from a private lender offering limited terms, missing out on the incentives such as low fixed interest rates and borrower protections.
4. Not turning to work study money – Many students help pay off their college tuition expenses by working while going to school. It can be as simple as working in a department such as in the library, athletic office, or cafeteria. While working in such a venue, students are compensated for their efforts, meaning their college tuition costs can be reduced. Even though some students may feel they do not have time to be working and going to classes at the same time, the financial savings of such a move can take some of the pressure off.
5. Lack of communication with the financial aid office – There is a reason there are financial aid offices in the first place–to help students. Paperwork that you fill out with the office reviews your family’s income for the prior tax year, something that can lead to more assistance. In cases where you or a parent became unemployed in that time, you could be eligible for more assistance.
While there are other financial assistance blunders out there just waiting to happen, these five should be jotted down and remembered so you avoid coming out on the short end of the financial stick.
And what is the short end of the financial stick?
Staggering Amount of Nationwide Student Loan Debt
If you look at the state of how much money is currently owed in student loans nationwide, your head will likely spin for sometime.
Reports indicate that there is more than $1 trillion in student loans outstanding across America, ranging from dropouts to graduate students and those in between.
According to a Department of Education report of 2007-08 graduates, about 66 percent of those who go on to attain bachelor’s degrees borrow funds from either the government or private lenders in order to make it through college. The Department of Education goes on to point out that the figure is likely higher than 66 percent figure given the fact that the report does not include borrowing from family members.
To keep those numbers in perspective, turn back the clock to 1992-93 graduates, where 45 percent of them borrowed money. Those numbers also include borrowing from family members, along with the government and private loans.
The Federal Reserve Bank of New York stated that for all reported borrowers, the typical debt just a year ago when it came to student loans was more than $23,000, with 10 percent of individuals owing more than $54,000, and some 3 percent down for more than $100,000.
Meantime, average debt for bachelor degree recipients who went in on loans goes anywhere from under $10,000 at some of the elite schools nationwide, the same schools that sport a sizable number of wealthy students and large endowments, to close to $50,000 at a number of private colleges that have less affluent students and even smaller amounts of financial aid available.
As the student loan debt continues to grow, many students, past and those having just graduated, look for forgiveness.
A bill in Congress has garnered support, but had still not passed as of the end of July.
While the Student Loan Forgiveness Act of 2012 may offer relief for some, it is certainly not for everyone. Keep in mind that it only applies for those with federal student loans.
Introduced to the House by Representative Hansen Clarke (D-Mich.), the legislation would lessen the debt of students who have already repaid a major portion of their loans over the past decade.
The act, which presently has more than a million signatures on the petition website signon.org, looks to stimulate the economy by adding to the amount of available income students—otherwise theoretically debt-bound—would have to invest and spend.
For now, however, student loan debt nationwide increases, as many incoming students look to educate themselves on the finer points of not getting into debt in the first place.