Student Loan Debt – Know What You Are Getting Into
All too often, students are unaware of exactly what borrowing entails. It is not unusual for a student attending a private university and graduate school to graduate with more than $150,000 or more in loans depending on various circumstances and students carrying over a quarter of a million dollars in debt is no longer an astonishing number. Depending on the terms of the loan, a graduate can be paying back thousands of dollars a month for decades. Quite often, students don’t recognize the reality that they are going to face when they have to begin writing checks each month to cover their obligations. It is easy to just put it out of one’s mind and be hopeful that you will secure a high paying position upon graduation. But that will not be the case for many graduates, and it is unfortunately particularly true in today’s weak job market.
That being said, the importance of an education cannot be overstated but it is just necessary to keep in mind the costs associated with receiving a degree paid for all or in part by borrowing. It is also important to apply for as many scholarships as you can find in order to reduce the potentially crushing debt load. In a recent New York Times article entitled “Is Law School a Losing Game?” stories are told of law school graduates who had expected to receive $160,000 salaries and remain unemployed years after graduation and owing more than $200,000 in student loans. The Wall Street Journal also reported that student loans drove an unexpected increase in the consumer credit increase in November 2010. http://blogs.wsj.com/economics/2011/01/07/americans-boost-student-loan-debt-cut-credit-card-borrowing/ So it is important to have realistic expectations and be aware that it will not be easy to pay back all of the borrowed money. But sometimes you have to pay to play and in order to get that degree, you have to pay for it. So unless you can dunk a basketball or consistently throw strikes you are probably going to be financing most or all of your education without the help of a full scholarship. But you still must be careful. You might not want to spend your student loan checks on fancy dinners and a new car. Be conservative and recognize that every dollar you spend while in school will have to be paid back, with interest.
If the loans begin to pile up, you have the option to consolidate. By doing so, you basically transfer all of your debts to a new lender who pays them off and you are left with a new loan which you now owe to one lender, often times at a lower overall rate and fewer bills each month as you now pay one lender instead of several. Obviously this can only help so much. Even after you consolidate your student loans, you will still have a similar monthly payment to make so it will not get you out of debt but might reduce the monthly payments. Student loan debt can be stressful but there are ways to reduce this stress if you plan in advance and continue to monitor interest rates so that you can consolidate wisely. As with the initial loan options, government consolidation options exist such as the FFELP or Direct Loan Consolidation.