Archive for the ‘Student Loans’ Category

Seventy-five billion
dollars.  That the amount borrowed
by college students last year according to new numbers from the US. Department
of Education.   Federal student loan disbursements grew by a
whopping 25% over the previous year.

This isn’t even counting the market for private student loans,
although that bubble has burst in the midst of the credit crunch.  And let’s not take into account the problems
that college students have with credit card debt, a whole other topic. 

There is growing concern that young people graduating from
college now (especially in this weak job market) are at a distinct disadvantage
from previous generations because of the steep payments they are forced to make
early in their careers.  College grads
are delaying financial decisions like buying a car or home and even putting off
major life events like marriage and children because they simply don’t have the
discretionary income.

Defaulting on student loans can put young adults in an even
more precarious predicament, as having a battered credit rating hurts their
chances for securing an apartment or job now that so many businesses use credit
records in the screening process.

While the Feds and state governments already subsidize and guarantee student
loans, this debt burden is forcing them to come up with additional relief
measures like automatic loan forgiveness and income-based
repayment.

With tuition inflation
outpacing the overall rate of inflation, there’s little hope on the horizon for
things to get any better in the short term.  
College in increasingly seen as the only path to a secure future and
because of that, students will pay whatever it takes to get a degree.   And as long as loans are readily available,
most will gamble on earning enough to pay them back later.

According to the Project on Student Debt, 67% of students graduating from four-year colleges and universities had student loan debt in 2008. That's up 27% from 2004.  The average debt levels for graduating seniors with student loans was $23,200.

This can be a crippling level of debt for young workers trying to get a foothold in an economy that is slowly moving towards a jobless recovery.  Couple that with credit card debt (a topic for another time) and the need to pay for rent, transportation, Internet access and food and it's easy to see why student loan bills seem to never get repaid.

Some relief has arrived in the form of the new Income Based Repayment Plan.

Enacted as part of the College Cost Reduction and Access Act of 2007 and put into place on July 1, 2009 it provides for lower payments and forgiveness of loan balances after 25 years of payment. 

By capping student loan payments at a percentage of the borrower's discretionary income (based on borrower's income and family size) it helps recent graduates get established without an unbearable debt load.  The monthly payment amount is adjusted annually, based on changes in annual income and family size.

This program is intended for those who are experiencing financial difficulty, have low income compared with their debt, or who are pursuing a career in public service.  (Those noble individuals can have their loan balances expunged after 10 years.)

Note that this program is only available for federal student loans and not private loans.  To learn more about the IBR visit IBRinfo.

Student loan debt is one of the major factors in young people getting in over their head with debt.  One way to help offset the cost of college is with Upromise.  With Upromise you can earn money for college and reduce the amount of loans needed to make it through.

You can get Upromise cash back on online purchases, eating out, grocery and drugstore coupons and by using a Upromise credit card.

Once you join Upromise, nearly everything you buy or do
can mean more money for college in your Upromise account. The more you do, the more you can
get back.  You’ll be able to watch your Upromise account accumulate daily
with all your eligible purchases.

Better yet, family and friends can contribute by joining Upromise and linking their activity to your account.  It’s an easy way to get free money for things you and your family already do.