Thirty thousand dollars. This isn’t a typo nor is it the amount of money I spent eating Ramen noodles as an undergrad and graduate student. This is the amount of loan debt the average student sees after college, according to a 2014 report from the Institute for College Access and Success. Now, before you allow anxiety to set in, let me at least offer you this bit of information: with the proper education and knowledge, you, YES YOU, can overcome the gripping claws of your student loans to go on to live a great life while working at that awesome job you nabbed after graduation.
We chatted with loan guru Kathryn Randolph, contributing editor for Fastweb.com and FinAid.org, about great ways to manage student debt. In other words, don’t fret. You got this!
Should there be more of a concerted effort to educate students about managing student debt at earlier age, maybe even beginning at the middle school level?
I definitely think that the earlier and the more students hear about student loan debt, the more they’re able to face it realistically when it comes time to pay for school as well as make the loan payments after graduation. So often, students are only considering how to pay for school before they enroll. To them, student loans are getting them into school, but they don’t have to face up to the repercussions of student borrowing until after they graduate. In a way, that can be very misleading, especially if students begin using student loans to pay for an off-campus apartment, go on spring break trips and supply their nightly take-out. They won’t have to actually pay for any of that until they graduate, and by then, sometimes the payments are so overwhelming that students give up on even making them. Which is another big mistake.
What are a few key characteristics you have noticed between students who are able to manage their debt effectively and students who are not?
Students who manage their debt effectively use their student loans for educational
purposes, i.e. tuition, room and board and textbooks. There are others, like I mentioned above, who abuse their students loans by using them to pay for items and experiences unnecessary to their education. There are also those students – more often than not these are graduate students – who start making interest payments while they’re in school in order to prevent those costs from accumulating. And finally, a key difference is knowing the reality of making the payments after graduation – finding a job as soon as possible out of college, looking at all of the different repayment options so as not to become overwhelmed and researching loan forgiveness careers and programs.
What are some effective ways students can manage their debt?
Students can spend their student loans wisely while they’re in school, pay interest on student loans in school, find the best repayment option based on their student loan debt amount and income and make extra payments to their student loans whenever possible – even if it’s just $50 extra.
What are some surprising facts about managing debt that students should know?
In 2014, students borrowed a grand total of $100 billion for higher education – that’s the most ever. As mentioned above, though the amount of students borrowing is decreasing, the amount that they’re borrowing is actually increasing. Given that, there is currently $98.1 billion in outstanding federal loans that have gone into default (going into default means that individuals have stopped making payments on these student loans). The average amount in default loans per borrower is $14,014. Going into default does not make a loan go away. In fact, it is very, very difficult to make student loan debt go away. A graduate must either die or become so severely disabled that he or she will never work again in order to get rid of a student loan, and the latter still requires an extensive appeals process.
What are the downsides of defaulting on a loan?
Defaulting on a loan is a very serious matter. Typically, a defaulted loan is turned over to a collection agency and a borrower may be responsible for court costs and attorney fees. A borrower could be sued for the entire amount of the loan. Wages can be garnished and Social Security benefits can be withheld. The defaulted loan will still be on a borrower’s credit history for seven years after they’ve managed to pay it off. It also makes getting further financial aid difficult. Essentially, defaulting on a student loan can create a long, difficult road ahead, and that’s why students should think very seriously about borrowing – and how much to borrow – in order to pay for school.
Any additional advice you would give to students about effective ways to manage their loans?
Repaying student loans is an arduous, unpleasant task, but it must be done. It takes a lot of patience and time. Just live month after month, payment after payment; and you will make progress. Don’t skip payments, and try to make extra payments where you can. And remember, your student loans helped to get you where you are today – so they weren’t always such a bad thing. Finally, it’s never too late (or early) to save for college. The more you save, the less you have to borrow for your education.
