Student Loan Consolidation Lowdown

There is nothing scarier for a student. Imagine spending a big part of your youth pursuing higher education, taking ever-costlier loans to pay for this high-quality education. And then, the worst part: joining the ranks of the educated poor who are trying hard to repay their student loans and make ends meet. Scary? You bet. And yet, there is no way out of it.

As interest rates get hiked time and again, this is one story that will repeat itself unless some action is taken. People who are qualified, who have studied hard in the hope that their education will pay off and help them settle down, are waking up to reality. And a harsh reality it is. Many people in their 30s and 40s are forced to watch their budget minutely, juggle bill payments and live from one month to the next. They just don’t have enough money to save up for that retirement that they richly deserve, and many of them go without what we would consider basic necessities today: Dishwasher, cell phones, cable TV, new cars… the list is endless.

And here is the worst bit: Experts don’t see the situation getting any better in the near future. According to statistics, around 40 percent of students are graduating with ‘unmanageable’ debt loads. In lay terms, this means that their salaries will not be enough to help them pay back the loans.

Rising education costs, and a larger number of students relying on loans to help them complete their education has led to a very dangerous situation where the total student loan debt has grown enormously in the past decade.

Of course, a college degree many give a student a higher earning potential, but a costly education has its downsides as well. Burdened by student loans, many graduates are staying away from socially critical jobs like teaching and social work and are looking for well-paying jobs that will help them repay their loans in real time.

Some figures before I get to the point:

In 1976, tuition and fees put you back by a little over $900. In 2002, the figure stood at over $6,000 — that is nearly six times the original figure in less than 30 years. At private universities, the average jumped from $3,051 to $22,686. Other expenses such as room and board have gone up from an average of $2,275 in 1976 to $12,111 in 2002. I’m sure it’s pretty obvious what I’m driving at — if you feel weighed down by a huge debt burden, if your parents had to take a huge home equity loan to finance your education — you only have these huge figures to blame. Education has become big business today and there is no room for people who cannot pay. I’m sure paying for college definitely forms part of the accelerating indebtedness of average American families.

But the worst part about this indebtedness is that students cannot pursue careers of their choosing — they are forced to take up jobs in fields that would enable them to repay their debt faster. This piece on the burgeoning student debt and its ramifications is an eye-opener and I think anybody who is interested in finding a solution to this problem should read it. Alternet.org reports:

Many bemoan the fact that the liberal arts have faded as undergraduate majors, while business majors have nearly tripled, from about 8 percent before the Second World War to 22 percent now. This is not because students no longer care about poetry or philosophy. Rather, they have learned the lesson of the world in front of them and chosen according to its, and their, constraints.

Read more: Another Way Out Of College Debt

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

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.

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.

Nearly 70 percent students have taken some kind of student loan to finance their education. And if you form part of this group, you are probably wondering how you will repay your loan. And if you still planning to take a loan, here are a few things that could help you make the most of your student loan.

But before we proceed to that, let us look at some figures. I know I have a penchant for spouting figures and facts at any given occasion. I believe that they help keep things in perspective. What do you say? Anyways, getting back to our figures (there’s no escaping that!) FinAid claims that two-thirds of college students borrow to pay for school, with an average loan debt of nearly $20,000. Ten percent of parents borrow an average of $16,218 to finance the education of their children. These figures account only for undergraduate education. Graduate degrees can pack on an additional $27,000 to $114,000 in student debt.

Moreover, this year, two new rules were introduced: interest rates on new Stafford loans will now be locked at 6.8 percent. The other rule is that now if you have multiple loans with one lender, you do not have to perforce consolidate with the same lender. You can consolidate with any lender. If you haven’t managed to secure a loan yet, try again next year. If you have older student loans that you have not consolidated, make a note on the calendar to check rates before next year’s consolidation deadline. When you apply for a loan always, compare rates. Whether you’re looking at new loans or old ones, check to make sure you are getting the best deal. Check out some of the easy-to-use Web site calculators, such as the one in the Bills.com Savings Center.

If you are a student planning to go to college soon then here is a bit of advice. At this age, it is common to experiment. So, if you feel like doing drugs, it is probably your urge to experiment. But if you are serious about making it through college, then it is best to let go of this one urge.

It is just a small step from trying it a few times to becoming addicted and then you may end up having a run up with the law — something that could jeopardize your chances of getting a loan in college. According to recently released research, over 31,000 California college students forfeited their shot at federal financial aid because of a past drug conviction. Last year, 2,219 Californian students were denied federal financial aid because they admitted to a prior drug bust. While this is discriminatory, and possibly the restrictions will be loosened, you still probably need to be careful for the time being. The revised law renders students ineligible for one year following their first conviction for drug possession. Students convicted of selling drugs would lose eligibility for two years. Multiple convictions can lead to a permanent ban.

Here’s some really good news for public service attorneys in Kentucky. They may become eligible to save on their student loans from The Student Loan People with Best in Law benefits. Communitypress.com reports:

Attorneys who wish to apply for these benefits must have passed the bar exam, be eligible to practice law in Kentucky and be working full time. They may apply for forgiveness of up to 20 percent of the outstanding principal each year, not to exceed $10,000… For complete details about the Best in Law benefits or low-cost student loans, visit studentloanpeople.com or call 888-678-4625.

Read more: Public service attorneys may get student loan break

You would think that a student with huge loan debts would have repayment on top of his/her mind. However, as always, it has been proved again that things are not as they seem. At least that’s how it is in Canada and it is only safe to assume that students in America are no different. According to recent research, it has been found that keeping up with student-loan payments is not a priority for about one-quarter of Canadian students who borrow from the federal government to fund their education.

According to the Canada Student Loans program, about $2.6 billion in federal student loan is currently in default. This is not to say that the students don’t want to repay their loans, it only shows that they are late in their payments. But the problem with these loans is that you just cannot wish them away. They remain with you all through your life until you repay ever cent! Winnipegsun.com reports:

The federal government has the same recourse as any other lender when it comes to getting its money back. Measures include registering the debt with the credit bureau, putting a lien against property and withholding some government income-tax rebate payments.

Read more: Student loan default high

If you are a college student then you’ve probably been wooed by credit card companies with just about everything from free T-shirts to beach towels. Have you ever wondered why they love you so much? These companies can go to any extent to get you over to their side and use their cards. One of the biggest reasons is because you like to spend and don’t give a thought to tomorrow. That’s something that can wait until you get out of college… right? Well, the credit card companies bank on exactly this sentiment when they woo you. You are potentially lifelong customers who will spend, spend, and spend.

Some statistics to make you go cold in the feet — according to a study conducted by student lender Nellie Mae, the average college freshman carries over $1,500 worth of credit card debt. And by graduation, this amount more than doubles. And the worst part, even before you begin your professional life, your credit score is in ruins. So you spend the better part of your youth trying to repair the damage so you can buy yourself a home, a car… the list is endless. Not a fun scene to imagine.

Agreed you need them. I mean today we cannot do without credit cards, so the smart option available to you is to find the credit card that is best suited to your needs. You will get thousands of offers from issuing banks. Don’t get snowed under or tempted by the gifts. Be smart. Don’t go in for a credit card just because it announces zero percent interest for the first six months. It may sound like a good deal, but what students should keep an eye on when shopping for a new credit card is the annual percentage rate. These rates can reach as high as 18 percent! Next time, I will discuss more tips on how to choose your credit card.