Student Loan Solutions

Every May, a new group of students graduate from college and begin jobs. For many of them, large student loans put a damper on cashing-in that first paycheck. I was one such student – fortunate enough to have been given student loans, and unfortunate enough to be saddled with them. I asked my experienced contacts at Linkedin to give some advice to anyone struggling with student loan debt. For me, it was landing my first book deal. The advice they give, however, could also likely apply to consumer debt (which is a WHOLE separate issue).

Aron Yert:

  • shop around for the lowest interest rates and ease of use
  • lock in a fixed interest rate rather than a variable one
  • (if you can afford to) pay higher monthly payments to pay off your loan faster (with less interest paid)
  • make payments on time every time and if possible choose to have payments automatically deducted from your account – you’ll typically get a discounted interest rate, which over the years saves you thousands of $

Eva Reid:

You’ll need to provide more specifics about what you would like to know.
Are you asking about your own student loan debt or loan debt in general? Are you trying to pay it off? Are you wondering if you should pay off your student loan vs credit card debt?

I have a fair amount of experience with student loan debt (my own), and I would be happy to help you if I can.

Jennifer L’Allier:

I would suggest staying away from, or seriously reviewing the consolidation programs ‘fine print’. Most of the time, consolidating affords you a lower payment, but is actually just a longer time period, so the end results in a much larger payment. Much like if you bought a car and chose the 5 year plan versus the 3 year plan.

I would also suggest finding someone you trust with your finances (family, friend or professional) to help review your budget and figure out a workable game plan (without consolidating – unless you have to because your debt is larger than you can handle).

For me to get out of debt I needed to recognize that I could either keep accruing debt and always live a restricted lifestyle or just go hard at paying it off in 2 years and then live exactly how I wanted. I chose the latter and even though it was hard to do, I’m so glad I did.

I hope this helps. I know debt is overwhelming.

Tiffany Brown:

Look at the Department of Education. I *THINK* you can consolidate your loans directly from the government. The bonus there is that you can change your repayment plans to lower your monthly payment if you need to.

Jenn Northington:

I used SallieMae when I graduated, and they have great incentives and management tools (online) for consolidating, getting a lower interest rate, deferment, and payment plan options.

Brian Morgan:

Chris – I don’t have expertise in this area. But a suggestion to you would be that CPAs generally have a vast network of people they can refer you to. I would contact your CPA or a local CPA and see if they can answer your specific questions and/or refer you to someone. The other answer is to connect with your reference desk librarian, they have tons of answers and resources.

So, what’s your student loan story?

9 thoughts on “Student Loan Solutions”

  1. Pingback: Credit Debt
  2. I graduated from the University of Connecticut in 1974. There was no tuition, and the student fees amounted to less than $100 per semester. UConn’s budget was heavily subsidized by the state of Conn. The rationale was that UConn was a land-grant college and any high school graduate in the state should be able to afford to go there. The total tuition and fees this year comes to $8,362! We can’t afford to send our kids there or to the other state colleges, which are cheaper – “only” $7,091 per semester. Thank God for the community colleges, where they can complete the equivalent of the 1sts of college and transfer their credits to UConn or the state colleges. Even factoring in inflation, the 1970’s fees don’t even come close to current costs.

    And don’t talk to me about the cost of textbooks!

  3. I dropped out of school and returned when I was advanced in my career enough to pay for school out of pocket. I’m also childfree and take public transit instead of owning a car. After food and rent, school is my #3 budget priority. No loans, no interest.

  4. A very wise person once told me, there are two types of debt. Good debt and bad debt. The trick is to determine which ones are which.

    He also shared that good debt was debt which others are paying. For instance, if one owned real estate and his/her tenants were paying down the mortgage and expenses this would be a great example of good debt.

    Bad debt is what one is paying with student loans, credit card bills mortgage payments, etc. However, regarding student loans; I think its fair that many of us agree that education (in many forms) is very important for many reasons and can yield higher paid jobs, networking opportunities with other like minded individuals and skills that can be applied for life. So assuming we all agree that education is a great investment with an absolute return on investment (when properly applied) its still considered by many experts as bad debt.

    Now, Just because a recently graduated borrower has extended his terms to lower his payments through student loan consolidation does not necessarily mean that he’ll be paying more interest over the long term. In fact, when a client does consolidate he/she often lowers the interest rate and fixes the rate for the life of the loan. (The loan payment terms do depend on the size of the loan, which is the main catalyst for such dramatic monthly payment reductions.) But my point is if the borrower takes the loan to full term, then yes, as Jennifer suggested he/she would unequivocally be paying more in interest than if he/she paid down the loan. Federal loan consolidation programs do NOT have any prepayment penalties like some mortgages do, so the borrower really has full control with student loan consolidation and may pay off the loan early at any time.

    So, once the client has consolidated and started enjoying some debt relief we usually suggest to our clients to take the difference in payments and invest the difference. We usually like to refer our clients to real estate in stable markets because real estate is one of the easiest barriers of entry to get into and often provides high yields of return with a cash on cash return.

    Finally, I think its important to realize the intent of student loan consolidation and then determine if the program fits in your plan. The program was originally designed in the 60s to provide immediate debt relief by fixing the interest rate and extending the loan terms, providing lower monthly payments for the borrower. The idea was (and still is) that the newly graduated borrower may require some time before they start earning enough money to become financial stable. Once the borrower has secured a stable job, he/she can start doubling payments (all federal loans are simple interest, meaning that doubling up on payments means the principle of the loan is paid off even faster)

    Bottom line. Yes, student loan debt is an example of bad debt. But, student loan consolidation can be a great opportunity to leverage into high yielding investments that can set you free. There are also some added benefits to student loan that are much superior to other forms of bad debt. For instance, low interest rates and legal tax deductions.

    Many of our wealthy clients (doctors, attorneys, etc) consolidate their student loans, reduce their payments and take the difference in payments to reinvest into high yielding investments in that order. They then legally write off the interest of the student loan and a portion that was used for tuition as legal tax deductions from their income tax. Ask your CPA for details or search for HOPE credit for more information.

    Stay tuned for a full report on How to legally write off a portion of your student loans and put more money in your pocket. I’ll be happy to post the link here with Chris’ and all of your approval.

  5. I am looking for help with my daughter’s law school loans. Her starting salary is not enough to begin repaying them. Where can she go to get advise on how to deal with this situation?

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