On Friday afternoon, President Obama signed a bill that reforms a silent but growing problem in the United States: the federal government’s student loan system. On July 1, the interest rate on subsidized Stafford loans (federal student loan which guarantees repayment to the lender if the borrower defaults) doubled to 6.8%. The bipartisan bill signed last week will cut the interest rate down to 3.86% for undergraduates.
According to “Student Debt and the Class of 2011,” students that graduated with loans (roughly two-thirds of seniors graduating) had an average debt of $26,600. The tough employment environment these students face upon graduation doesn’t help either: student debt collectors have the ability to garnish wages, tax returns, Social Security payments and disability checks. With tuition costs showing no signs of lowering, frugal living and scholarships can only go so far.
Fortunately, students can prepare themselves way ahead of time to handle the debt load. Being conscious of how your student loan payments work before, during and after classes is essential to stop your debt from growing. Consider the following resources when applying for or paying off student loans.
The Project on Student Debt is dedicated to increasing the understanding of student loans, because borrowing has become the “primary way to pay for higher education.” The site offers a wealth of resources on the topic, including the previously mentioned “Student Debt and the Class of 2011” report which breaks down the debt carried by borrowers based on state, high and low debt schools and an easy-to-read summary of private (non-federal) loans and why they can be so costly.
Site for the Consumer Financial Protection Bureau, ConsumerFinance.gov states they work to educate, enforce and study to create smarter consumers, crack down on abusive financial institutions and improve financial practices. The site itself has easy-to-access pages for managing your student debt, mortgage payments, or even placing a complaint to agencies that may be harmful or breaking the law. It also has a blog with informative updates on student loans and more.
Part of the Student Loan Alliance, StudentLoanHelp.org is as educational as it is helpful. Its easy-to-comprehend paying for college page breaks down which financial aid has to be paid back and doesn’t, lays out a “financial aid timeline” for high school seniors aspiring for higher education and has a section devoted to borrower rights and responsibilities. It also has a free online assessment to help organize debt payments and links to counseling agencies to manage student debts.
Recent estimates show the student loan market getting close to $1.2 trillion, and the only way future college students can avoid adding to this huge amount is to educate themselves on how student loans work. So avoid reading lists like “Top 20 Party Schools” and take time to prepare for your financial success after campus life.