student loans Archives - High Yield Savings Accounts

For decades, conventional wisdom told us that you needed to go to college if you wanted to have a professional career and make a high salary. If you wanted to be the boss, college was a must. Any money spent on a college degree would be recouped by the earning power gained from that degree.

Today, things are different. High school graduates are faced with the dilemma of having no money to pay for college because their parents were unable to save. Part time jobs and seasonal employment, which used to help college students pay their tuition bills, are now hard to come by with the unemployed workforce vying for positions that used to be reserved for teenagers and college students.

What are college students to do? Rather than forgo an education, students take out student loans. But at what cost? How much student loan debt will these students be saddled with upon graduation?

Let’s use a medical student as an example. A medical student needs a four year degree just to get into medical school, and will then be required to complete four years of medical school for a total of eight years. Here is a typical breakdown of the financial burden incurred by a medical student attending a private university:

Undergraduate school: Four years at an average tuition rate of $32,000 per year = $128,000

Medical school: Four years at an average tuition rate of $45,000 per year = $180,000

Total Bill: $308,000

Keep in mind that these are just the averages for tuition and do not include fees and housing. Typically, medical students will be assessed fees for their labs, using computers and other on-campus technology, health services, and the library. Grants may cover a portion of the tuition and fees, but medical students on average graduate with student loan debt of nearly $200,000.

Even if the student decides to stop at a 4-year degree and try to find a job based just on that education, they will be graduating with financial burden of $128,000 if no other financial aid options were available to them and they decided to pursue a degree at a private university. Regardless of the subject, a 4-year degree at a private university will run you approximately the same amount, meaning college will cause a debt burden that will be hard to remedy in a sputtering economy.

So, what’s a graduating high school student to do? It may be wise to consider the cost of a college before sending in the deposit to hold your spot at the school. Grants are available, but are limited and usually based on income, including parental income. Graduating with debt may seem like no big deal due to the perceived marketability of a degree, but it’s best to weigh the pros and cons before signing up for debt.

If you’re one of the many recent college graduates having trouble securing work right now, don’t be too alarmed because it’s happening to a lot of people right now. One thing you definitely don’t want to do though is go into default on your student loans. Many companies will check your credit score during the hiring process, and if you haven’t taken care of your student loan debt it could cost you the job. The good news is that there are plenty of resources available to help you manage your student loan debt and prevent you from going into default.

That’s not to say it’s a completely rosy picture though, many of us are more than just a little in debt from college, and dealing with your loans can add tons of stress to an already stressful situation. If you choose to ignore it though, you will be facing much more stress in the future. American Education Services (AES), who handles most of the Federal student loan programs doesn’t have a reputation for being the easiest people to deal with. It is important that you follow up on everything with them, and don’t take someone’s word for granted over the phone. It’s not official until you have it in writing.

Finally, this guide is written with the repayment of Federal student loans in mind. If you have a private loan you will have less options available to you, and the information here will be of no use.

Student Loan Debt Relief Guide

Repayment Options

Postpone Repayment by Forbearance and/or Deferment
Adjust your repayment options
Cancel the loan if you have a qualifying job
Discharge the loan in bankruptcy

Forbearance and Deferment Options

Although forbearance and deferment are closely related in that they give you more time to find work (Up to 3 years), deferment is preferred because the federal government will continue to pay off your interest. There are a number of qualifying factors for each of these options. Although a forbearance is easier to obtain than a deferment, and is sometimes still available even after a loan has gone into default, the interest on your loans will continue to accrue. Please note that deferments will not pay off the interest on unsubsidized loans.

Deferment Qualifying Factors

At least half-time enrollment in a qualifying school – This does not necessarily mean that re-enrolling into school is a good idea just to postpone repaying your student loans. Having clear minded and realistic career goals is much better.
Graduate or Post–Graduate Fellowship Program – If you are lucky enough to land yourself a fellowship then you will be qualified to defer your student loans.
Physical Disability or Rehabilitation – If you have a disability that is currently preventing you from working, or are enrolled in either a drug or alcohol rehabilitation program you qualify for a deferment.
Unemployed – If you are unemployed and seeking full time employment you qualify for a deferment.
Economic Hardship/Underemployed – You will have to fill out a Statement of Financial Status in order to prove your eligibility and receive a deferment.
Family Leave – If you are pregnant you qualify for a deferment.
Public Service – For military personnel, if you are called to active duty to serve in a hostile zone while attending school you qualify for a deferment on your student loans. Other types of public service that qualify for deferment are The Peace Corps, Public Health Workers, National Oceanic and Atmospheric Administration Workers, and Volunteers for Tax Exempt Organizations like the U.S. Department of Education.

Adjust Your Student Loan Repayment Schedule

There are several different plans available to make your transition into your professional life easier. If you’ve run out of forbearance and deferment options, then these programs can make repayment of your student loans more affordable.

Graduated Repayment Plan – Starts your payment off small and increases them incrementally, typically every 2 years.
Extended Repayment Plan – If you have more than $30,000 in student loan debt you may qualify for a long term plan of up to 25 years.
Income Based Repayment Plan – If you have unstable work conditions, these types of repayment plans adjust the amount you owe each month based on how much income you are earning.

Canceling Your Student Loan

Certain professions are able to cancel either part or all of their student debt. If you are in a qualifying profession this is certainly a great opportunity.

Professions That Qualify for Student Loan Cancellation

Teachers
Peace Corp
Active Duty Military Serving in Hostile Zones
Nurse or Medical Technician
Law Enforcement and Corrections Officers
Head Start Employees
Child or Family Services Agents
Professional Providers of Early Intervention Services

Bankruptcy

Although it is certainly not the best option available, if you do find yourself in this unfortunate circumstance you may be able to discharge your student debt. It is not easy however, and you will have to show that you are likely to continue having financial difficulties if the debt is not removed and prove that you have tried to repay the loan in good faith.