What’s your number?

 

Figure 1 Courtesy of http://www.forgivemystudentloans.com/

Students are bogged down with ten, twenty or even more than one hundred thousand dollars ($100,000) in debt from college loans on an individual basis.  The national student loan debt has officially surpassed the nations’ credit card debt, according to Consumer Financial Protection Bureau – “student debt hits a trillion”.

We are in a crisis! If we thought subprime mortgage lending was an issue, take a closer look at the detriment that the mountainous student loans have relayed onto our nation’s young and brightest, we may as well call that subprime student loans. Not to mention, according to a recent New York Times article, “In an attempt to recover money on the defaulted loans, the Education Department paid more than $1.4 billion last fiscal year to collection agencies and other groups to hunt down defaulters.”

Let’s take off the rose-colored glasses. We know there is a circle that we all partake in – called life. “I don’t have a job, because I didn’t go to school, I didn’t go to school because I don’t have any money, I don’t have any money because I don’t have a job” – I’m sure we’ve all heard that for-profit[i] Institute commercial at one point or another. It has been proven that there is a direct correlation between a college education and higher earning potential.

You’re getting ready to go to college…

Whether you are a high school senior or a working individual- Be Realistic! Ensure that affordability is a factor in your decision making. Take advantage of free money first, with federal grants based on financial need such as PELL, or TAP, by submitting a FAFSA application. If you have the means to afford school out-of-pocket, then do so. The federal government has education credits which reimburse your dollar-for-dollar school expenses on your tax return. Please discuss this with your tax adviser for more details. Often enough, even after grants, scholarships, and tax credits, tuition is still not affordable and you need a loan. Be sure to take what you need, not what you want, and “Know Before You Owe”.

College seniors and post-graduates…

I’m sure you wished you saw this blog four to five years ago and now you’ve become a number. You are $20,000, $30,000, maybe even $100,000 in student loan debt and you feel like you are indentured to the provider. SPOILER ALERT – There is absolutely nothing that can clear you of this debt, not even bankruptcy nor death.  There are many repayment options such as standard repayment, extended repayment, graduated repayment, income contingent repayment, and income based repayment[ii]. But whatever you do, repeat after me … “Do NOT default on school loans”. I repeat, “Do NOT default on school loans”.  Defaulting ruins your credit score beyond belief, your wages can be garnished, and professional licenses can be ceased. Why is that important? Imagine not being able to get an apartment, house, car, credit card, be able to get or keep a job, start a business, or best yet turn on utilities in the shack you built from scrap because you’ve ruined your credit by defaulting on your student loans.

Take corrective action by utilizing repayment calculators and creating an action plan. Don’t let the decisions of your past hinder your livelihood of your future. So I ask you this, what is your number?

-Coretta T. Nicholas

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[i] For-profit Institutions are private profit seeking business; different from that of state colleges or universities.

[ii] Repayment plans noted are based on Federal loans only options may vary on private lending. Please visit Direct Loans for definitions and more information.

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Tagged with: bankruptcy, college, credit, debt, default, education, FAFSA, federal, graduate, grant, loan, repayment, school, student, tax credit
Posted in Student Loans