Student Loan Consolidation Lowdown

Sallie Mae’s Teach for Virginia and Care for Virginia student-loan programs will repay 10 percent of eligible students’ original loan balances for the 2006-07 year. This incentive is thanks to a partnership with the state, wherein nursing or teaching students at any Virginia college or university who take out the federally-backed Sallie Mae loans are eligible. Timesdispatch.com reports:

In addition this year, it will waive all origination fees — at another 2 percent savings — and, depending on the lender, students can earn an additional loan credit of up to 3.3 percent or an interest rate reduction up to 1.25 percentage points.

Read more:State expands loan perks for nursing, education students

Loans have become an integral part of a student’s life today. You just have to borrow to pay part or all of your educational expenses. But this doesn’t mean that you have to take up the first lender you come across. Just like any other type of loan, you can compare rates and options available before you select a lender for your Federal Stafford, PLUS and other education loans. This will not only help you take the loan on your terms, it will also help you save thousands of dollars. There are a few things you need to consider before you decide a lender is right for you:

Loan limits: Find out the limit of the loans offered by various lenders. In the case of Federal Stafford loans, your seniority determines your loan limit. So if you are a Freshman or Sophomore, your limit will be lower than that of the higher classes. In the case of private loans, they vary from lender to lender. So check all possible avenues before deciding on one lender.

APR: Acronym for Annual Percentage Rate, this is the annual cost of your loan. In addition to interest, APR includes fees and other charges. Your APR is calculated on the basis of your loan amount, time period that it will take to repay the loan, and other factors. The lower the APR, the more attractive the loan.

Repayment: If you are prompt in repaying your loans, quite a few lenders are known to offer incentives like reductions on interest rates. Check what incentives are on offer with various lenders. Also find out if your lender will allow you to defer payment while in school. Another thing you need to know is how long the lender will allow you to string out your payments. There are a few more things you need to check. I will discuss these points next time.

A Bush administration panel recently withdrew a proposal to eliminate 75 percent of federal student loans programs and grow the main federal grant program by 45 percent. The proposal would have allowed federally backed loans only for low-income students. Banknet360.com reports:

The panel, headed my Charles Miller, chairman of the Commission on the Future of Higher Education, is due to report next month on ways to make college more affordable.

Read more: Bush Panel Retracts Student Loan Proposal

Better check your student loan status before you decide to live life on your terms. Ironic isn’t it: in what can be termed the freest country in the world, people don’t have the right to lead a life that most people in other countries would take for granted. It is extremely painful if you cannot take up the job of your choice only because it doesn’t pay enough to enable you to repay your student loan. But that does not mean you need to despair. The government and lenders have still left us a few straws that we can clutch at and drag ourselves out.

Ever heard of forbearance: a temporary suspension of loan payments that most lenders allow when times are tough. So, if you really had your heart set on that social service job in Ethiopia, which will give satisfaction and not much pay, just intimate your lenders. They may be able to work something out for you. You could use this method even when you plan to get married, buy a house or even plan a baby — anything that would put a strain on your finances. Another method is to extend your payment term. This will help you lower your monthly payments.

But if you do want to repay your money without breaks, then here is one repayment option that will help you manage your monthly payments — pay electronically. This way, you can always ensure that you pay on time! There are a number of benefits associated with electronic payments, in which the lender takes the money directly from your bank account. Payments are never late, so the borrower never has to worry about late fees. This also builds good credit, showing lenders that payments are consistently paid on time.

Agreed, college education is a great investment and it is no secret that college graduates can expect to make $1 million more in their lifetime than someone with just a high school diploma. However, what do you do about repayment. College graduates are increasingly realizing that it’s taking longer to pay for their investment. Contracostatimes.com reports:

"A college degree is a good investment and becoming increasingly necessary," said Luke Swarthout, higher-education associate with the State Public Interest Research Groups, a consumer organization. "But more of the cost of college has been pushed onto the shoulders of students. For a whole set of borrowers, this debt could affect their choices after college."

Read more: Loan burden grows for grads

It’s just one month since the Department of Education raised the interest rates on federal student loans and the decision is already having a far-reaching impact. Most educators, students and parents agree that repayment is going to be even more difficult now, a very uphill task which could affect the students considerably. Timescommunity.com reports:

"It’s possible the new rates could prohibit someone from attending college," said Dr. Jeff Diamond, director of guidance at Fauquier High School. "These kinds of changes make an impact on students’ choices."

Read more: The own up on loan ups: What the rising student loan rates really mean

Since most student loan firms and education experts have been screaming this fact from rooftops there is no need for me to add my voice to this cacophony. But in all this noise, one fact has been forgotten or overlooked by most of these experts. Agreed that the cost of higher education has gone through the roof and is still rising. But there is one aspect that many of us have ignored — the fact that more education leads to better jobs and consequently more money.

I know that many people will disagree with me on this issue. They believe that they have a raw deal and that despite paying through their nose for college and earning professional degrees, they are still not earning well enough. Agreed the situation is nowhere as good as we would like it to be. But let’s face facts — not everyone’s complaining. There is a growing number of people who have actually benefited from their education and are now earning very good paychecks. So, there probably is a silver streak in that dark cloud of student loans. We just need to look for it.

While credit card companies are busy wooing students, forcing them to pay their tuition with plastic, it would be a good idea if you checked with your University before deciding on this mode of payment. In what could be described as a trend, Purdue University recently decided that it wasn’t going to allow that payment option any time soon. Purdueexponent.com reports:

According to its credit card payment Web site, the University of Missouri-Columbia has endured $2 million in additional annual fees. The university, which is home to about 28,000 students, changed its payment policy in December 2005. The larger institution now requires students to pay the 2.75 percent transaction service charge, which is added by a third-party vendor.

Read more: Purdue denies credit card payments

As a student you need to worry about one thing — debt, especially credit card debt. Being in debt has become a way of life for a majority of Americans, and we begin young — you’re just out of high school and if you want to study any further, you need loans and have to begin thinking of repayment. And there are other expenses as well like tuition, food, rent, and other incidental expenses. Only a student knows how difficult it can be to make ends meet.

One thing that you will notice once you enter college is how credit card companies solicit you and make you take their cards. Reason? For one, young people don’t usually have a credit history. College credit cards are a good and often necessary option for many students, but you can easily fall into a debt trap if you are not careful. All it could take is a few beers extra or buying something that you really wanted. What can you do to keep your debt within limits? CNN.com reports:

Just say no to cash advances. A common trap that many students fall into is getting a cash advance from their credit card just so they don’t have to call Mom and Dad to ask for money.

Read more: Credit card tips for college kids

In reel life, all college students have to worry about is getting through college, finding themselves a soul mate and having a good time. In real life, they are a depressed lot, their enthusiasm dimmed and subsisting on cost-efficient fast food so that they can save up some money to pay off their debts. Painful? The truth always is. The realities of college life quickly quash many graduates’ sense of idealism. The harsh truth is that bearing the burden of student loans can be overwhelming.

Of course, the number of agencies that provide aid is growing rapidly. But this growth is somehow unable to prevent an increasing dependence on borrowing money, according to the College Board. Graduates are soon saddled with debt during a financially fragile period of their lives. In fact, a recent survey titled “The College Debt Crunch” revealed that 42 percent of responding college graduates with student loans live paycheck-to-paycheck. And the saddest bit: 34 percent even claimed to have sold possessions to make ends meet.