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The
Debt Debate
by
Feona Sharhran Huff
 Wanna'
read a scary story? Okay, here goes: Dan was up
to his eyeballs in student loan debt -- I'm talkin'
more than $40,000. Even though this college graduate
was making the minimum monthly payments on his
Federal Stafford Subsidized loan, he didn't feel
like his financial status was getting any better.
Not to mention, his lifestyle was suffering (no
parties, no movies, and no entertainment extravaganzas
for him). He eventually got frustrated and opted
not to pay off the loans anymore. Dan's still
in debt to this day.
Gotcha
-- this is only a test. I repeat, this is only
a test! So did Dan's loan debt dilemma frighten
you? If so, hopefully, it's positive fright you
were feeling -- meaning, you'd never even think
about ditching your loan repayment obligations.
Besides, your money-borrowing situation doesn't
have to get that bad, if you're smart with your
loan choices from the beginning, says Pat Scherschel,
consolidation product executive at Sallie Mae,
an educational loan provider. She offers several
options for preventing loan debt now and forever:
It's
Okay to Be Cheap
When
it comes to borrowing dollars to fund your education,
Scherschel urges you to be as frugal with your
loan selection as possible. She advises you to
consult with your school's financial aid office
to determine the loan best suited for your repayment
pocket.
According
to Scherschel, a Federal Stafford Subsidized loan
-- on which the federal government pays interest
while you're in school, during your grace period,
and during some authorized periods of non-payment
after you leave college -- is the cheapest loan
available right now. The interest rate is currently
at 8.25 percent.
And
by all means, says Scherschel, taking out a student
loan is more cost-effective than swiping your
credit card. Remember: The object of the money-borrowing
game is to get the lowest interest rate.
Pay
As You Go
Again,
in the case of the Federal Subsidized Stafford
Loan, the government's got your financial back
on the interest tip throughout your school days
and beyond. With the Federal Unsubsidized Stafford
Loan, you have until six months after graduation
before you begin repayment. Even though you have
a sort of grace period in both loan cases, that
doesn't mean you have to wait until the loan payment
time to start settling your debt.
"Pay
the interest as it accrues, or at least make a
big lump-sum [payment while in college]," urges
Scherschel.
AbraCadabra...
Turn Several Loans Into One!
How
is this possible? One word, says Scherschel: Consolidation.
By combining all of your loans into one after
you graduate, you can simplify the aid process
and reduce your monthly payment. Beware, though
-- since you may be grouping low-interest loans
with high-interest ones, you might end up paying
more interest. Be sure to make an informed decision
if you go the consolidation route, by speaking
with a financial aid advisor or your accountant.
Your
Debt Can Be Forgiven If You Fit the Profile
Are you an aspiring educator? If you take out
a Perkins loan and later become a full-time teacher
in an elementary or secondary school serving students
from lower-income families, some of your loan
will be forgiven, or cleared, under the National
Defense Education Act. More details, you ask?
Fifteen percent of your debt will be knocked off
for your first two years of teaching, 20 percent
for your third year, and 30 percent for your fifth.
More
good news? Loan forgiveness isn't just for teachers,
Scherschel assures. There are many other professions
to which it applies. For example, if you plan
to work in non-profit or public-interest positions,
your law school may very well wipe away some of
your debt. (Check with the National Association
for Public Interest Law's Web site at www.napil.org,
for more information). Is there a nursing shortage
in an area where you plan to work after graduation?
You may be eligible for the Nursing Education
Loan Repayment Program (get that loan prescription
at www.bhpr.hrsa.gov/nursing/loanrepay.htm).
Some volunteer organizations even offer loan forgiveness,
insists Scherschel. She points out the Peace Corps,
AmeriCorp, and Volunteers in Service to America
as three to look into if you're willing to donate
some of your time to decrease your debt.
The
bottom line to all this loan debt talk? Don't
let it take you by storm. Get the financial facts
first, weigh them heavily, make your decision
rationally, and then "school it up" and live happily
ever after.
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