The two words that make me involuntarily cringe

Student loans.

Funny how these two words can conjure up anxiety, despair, worry, stress and tears (for those that have them, which is a huge majority of graduates). Like many of my peers, I signed my name to these seemingly innocuous documents. I mean, it was either that or don’t go to the university of my choice. My parents didn’t have enough to pay for the part of my tuition that grant/scholarship money couldn’t pay for. And my whole life I was told that I would go to college, and that I could go to any college I wanted and that I could major in anything I wanted. So, the private university of my choice it was, and I was determined to go, despite not being able to afford it. I mean, everyone  has student loans, right? And they’re good investments anyways, right? Once attained, I’ll always have my degree, I’ll always have the knowledge gained. So what if I owed money after graduating? What was my alternative? I’d have a career anyways to pay off the loans over time.

This is what we tell ourselves. And, for the most part, it’s true. It is a good investment (especially compared to the money you pay for a car, which isn’t an investment, it’s a pure expense). You will always have and use the knowledge you gained. Plus, who can put a price on all the amazing experiences you had in college? No one. They’re priceless. If you can’t afford to pay for college (you or your parents) you basically have three options:

1. Don’t go.

2. Get more money through working.

3. Get more money through scholarships or loans.

Let’s face it, for many of us number one isn’t a viable option. Number 2 is pretty viable, though very stressful and can sometimes hinder the whole degree-getting process. So number 3 seems like the best option. More scholarships are difficult to attain sometimes. And when there’s a shiny, pretty piece of paper offering to loan you the difference (and you don’t even have to pay for it while you’re in school!), that seems like the answer to your prayers. I know it did to me.

So we sign off on them. Year after year. It doesn’t seem like much at first. $5000 here, $10,000 there. And the interest is covered! And you don’t have to start repaying until 6 months after you graduate! You’ll have a good, solid job by then!

Two weeks ago, I received a piece of mail that when opened, made me shriek upon reading it. My friends were alarmed, thinking I had received terrible news.

My federal loans were to enter repayment December 21st.

My time had come. It felt like the gallows.

I mean, I know the exact amount of what I owe (it’s in the 50,000 area, for those of you curious readers). I knew it would be coming soon. But actually getting the letter telling me the inevitable was upon me, I wished I had a prescription for Xanax. And this was just for my federal loans. What’s awful is that about $30,000 of the $50,000ish I owe is… gulp… private. Which is the actually terrifying thing.

Why? Let me break it down:

Federal loans– owned by the government– will do anything to make paying the loan easy for you. They have a myriad of repayment plans– including a new Income-Based repayment plan (thanks Barack!) that bases your monthly payment off of 10% of your annual income, and stretches your repayment time to 20 years (and if you make it to 20, anything not paid off could be forgiven depending on your circumstances). This is the plan I’ll be choosing. But there are lots of others that could fit your needs and circumstances! And as long as you’re in contact with the Feds, not ignoring them, they’re really lenient. Just let them know you’ll be missing a payment due and it’s fine! Plus, there’s quite a few ways to have your loans completely forgiven; Peace Corps, teaching, librarian, armed forces, etc. Awesome right?

Private loans, however, are bitches, to be quite frank. They don’t offer various repayment plans to make it more affordable for you to repay. They usually don’t offer any ways of deferment or forgiveness, except if you’re going to grad school. You must repay on their terms on their timetable. If you have trouble paying? Good luck getting anyone sympathetic on the phone. I haven’t tried to figure out to tell my private loan holders I won’t be able to pay their $350 a month payment yet, but when I do, I’ll let you guys know how it goes and what’s best to do.

So, for those of you who also got the letter not to long ago, here are some helpful things you should do:

1. Organize your loans. I suggest Student Loan Hero. You can also use Evernote or an Excel spreadsheet. You need to know the principal amount you owe (how much you initially borrowed), the interest rate, the amount due each month.

2. Decide how you want to repay your federal loans. Is consolidation better for you? There are pros and cons! Which repayment plan fits your needs best? Are you poor with a not-so-good part time job or did you land a job at Google right out of college?

3. Talk to who owns your loans. For federal loans, it’s most likely FedLoan Servicing. Call them up and change your repayment plan, your due date, tell them you’re deferring, that you’re doing Peace Corps, or whatever it is that you need to tell them. Communication is key.

4. DO NOT IGNORE YOUR LOANS. They will never go away unless you pay them off. You NEED to pay or let them know why you can’t pay, ASAP. Student loans effect your credit score. Since the interest rates are so low, this is actually the best money you can owe. Take solace in that.

5. Pay. Whatever your amount is per month, pay it. In fact, if you sign up for the auto-payment, you get some numbers knocked off your interest rate, so you pay it off sooner and for less money. Nice, huh? You need to put the monthly amount into your budget and make sure it’s a priority. If you can afford to pay more than the monthly amount, do it! By all means, pay more to get them over with faster. Call up the reps and tell them that the amount over your minimum you want applied to the loan with the highest interest.

Next week we’ll deal with private loans.

I feel I should mentions, since the elections are tomorrow, that who you vote for directly impacts your loans. One candidate has done lots for student borrowing already– easier payment plans, forgiveness, buying private loans to make it easier for borrowers to repay, placing stringent loan practices on private companies… the list goes on. The other candidate wants to reduce Pell Grants, making grant money less available to students, leaving them with borrowing as an option to pay and touts for-profit colleges as good institutions. To find out more, you can go to StudentDebtCrisis.org 

Above all else, when you get down about student loans overwhelming you, making you feel like you’ll never get to lead the life you want to lead, remember the great times you had in college. That’s what I do. The pictures below are favorites of mine that remind me of what I bought. 🙂

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