A WEALTH OF KNOWLEDGE? | Credit Solutions

Student Loans Menace, But Grads Can Learn to Deal

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It?s a topic described by some analysts as yet another bubble, ready to burst and further complicate the already complicated-enough personal finance picture. We?re talking about student loan debt, and in a world of exploding college tuition costs and a job market that isn?t exactly keeping pace, the issue has recently morphed from a latent financial dilemma to an immediate political flash-fire. With the average student saddled with existent loan obligations approaching $25,000 and interest rates on undergraduate loans set to balloon to 6.8 percent this July, everyone acknowledge something must be done before that bubble turns into a full-blown economic embolism for 7 million Americans?nearly all of voting age.

Naturally, as with any problem of national significance, both political parties are engaged in the standard practices of gamesmanship and public relations wrangling, but for those facing the increasingly daunting challenge of paying down these debts and moving on with life, the question arises: What can I do about it myself?

There was a time, of course, when the answer to ?how should I pay off my student loan obligations?? was relatively cut and dry: use the education you?ve borrowed money to fund to land a decent-paying job, then apportion some reasonable amount of your income to the cause of ridding yourself of the debt over time. In fact, it wasn?t even so long ago that student loan debt was rosily considered ?good? debt. But in economic times such as these, it?s increasingly difficult to view any debt as ?good?. That said, good or bad, the debt exists and while paying them off may have become more difficult, there are strategies for doing so. Besides the more obvious remedies for a cash crunch (reducing spending on big ticket items, doing away with creature comforts and smart budgeting), here are a few handy tips:

Mind Your Credit: On this front, we at Quizzle are happy to help. Credit scores can be crucial in determining whether or not you?re able to finance that car payment or home mortgage?or even get that job. Maintain older lines of credit to help enrich your credit history and try not to use more than 30 to 50 percent of any one particular line of credit at a given time. Know your credit score, obtain a credit report card, and don?t let what?s out of sight become out of mind.

Utilize Retirement Accounts: Stay positive?you will find work! It may take longer than you anticipated or pay less than you had hoped, but when (not if) you find a job, be sure to contribute a healthy amount to your retirement account. Many companies will offer you matching funds at a certain level of investment; take full advantage of this as it amounts to ?free? money. Also, look into Roth IRAs; they?re particularly helpful both for savings and in the event of an emergency. The sum of your contributions can be withdrawn tax/penalty-free for any reason at any time, while earnings can be withdrawn without penalty after five years and after you?ve reached age 59.5.

Prioritize Debt Payments: All debts were not created equal. While you?re worrying about paying off that student loan behemoth, you may really be getting slammed by credit card debt. A recent Sallie Mae study found 9-in-10 college students toting around at least one credit card and by the time those students graduated, cardholders held, on average, $4,000 in debt, paying interest rates upwards of 17 percent. Pay these down early and often; don?t turn your back on the credit card ocean.

Know All Your Options: You may not be as tightly bound to your loan debt as you think. For instance, federal student loans, guaranteed or direct, can often qualify for graduated, extended, or income-adjusted payment plans. This can provide some necessary breathing room if your cash flow isn?t meeting the bill at the moment.

Consider Loan Consolidation: Alert: This is time sensitive! You have until the end of June to sign up for a program offered through the U.S. Department of Education, which allows you to consolidate your loans at a 0.25 percent lower interest rate (and another -0.25 percent if you enroll in automatic payments). Now, if you?re eligible, you probably should?ve heard from an Education Department loan servicer, but if they missed you somehow in the bureaucracy, contact current lenders or call the Department of Education at 800-433-3243 for details.

Do Good. Pay Less: If you?re entering a particular field devoted to public service, such as the Peace Corps or Americorps and you make 120 on-time payments over 10 years, your outstanding balance, including interest payments, may be forgiven outright via the Public Service Loan Forgiveness Program (PSLF). Also, Perkins? loan balances can be reduced by 70 percent for 2 years in the Peace Corps and a full 100 percent for service in the United States military.

Don?t Default: You can?t fight City Hall, which in this case has been federalized. Unlike certain debt that you may be able to evade or escape, government loans follow you. The Feds can confiscate tax refunds, benefits like Social Security and disability payments, even garnish wages up to 15 percent of disposable income. There?s also no time limit for them to sue. With student loans, you can run but you can?t hide.

When You Can?t Pay, Defer: If you?ve suffered from poor health or other unforeseen personal problems, you may qualify for forbearance accommodations even if you?re already in some stage of default. This means you make no payments to your lender for up to one year at a time. However, interest continues to accrue, so consider this more a stay of execution than a full pardon.

With national student loan debt eclipsing credit card debt, Washington has taken notice of the problem, rhetorically pledged to address it, and promptly commenced to partisan fisticuffs. For college graduates, however, the problem isn?t political but intensely personal. While politicians bicker over how best to help you, help yourself by knowing the facts, making a plan, and taking control of your situation. If you have questions, leave them here and we will answer.

Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!

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