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Considering 'Good Debt' And How to Use It
Tweet Share on Facebook April 27, 2011 Comment (3)With all the attention on the growing menace of educational debt, there is an irony to "investing" in higher education. Excitement turns bittersweet when faced with borrowing money to fulfill this dream.
Educational debt is often described as "good debt": Those with a college degree earn significantly more than high school graduates over a lifetime of work, making borrowing large amounts worthwhile. As we previously reported, the Project on Student Debt estimates the average debt for 2009 bachelor's recipients is $24,000. Students with advanced degrees carry an even heavier burden: Amounts can exceed $100,000 and take decades to repay.
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Pell Grants Survive Federal Budget Process
Tweet Share on Facebook April 20, 2011 Comment (10)Details continue to trickle out about the federal budget compromise negotiated last week. One piece of good news is that the bill provides $23 billion in funding for Pell Grants and maintains the maximum grant at $5,550.
But the bill does eliminate the so-called "two Pells" program, which allows students to get additional Pell Grants for summer enrollment. With Democrats and Republicans already preparing competing budget proposals for 2012, now seems like a good time to review the Pell Grants program.
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Take Another Look at Student Debt Consequences
Tweet Share on Facebook April 13, 2011 Comment (2)In last week's post, "Remember the Student Debt Factor," we discussed the importance of thinking about your educational debt burden as one of the key factors in deciding where to go to college. This week, we'll take a more in-depth look at the long-term fiscal consequences of being burdened with a large amount of educational debt.
Jane Median and Sam Spendthrift are fictional college students. Both did very well in high school and were accepted at a wide variety of schools. Jane Median chose to stay in state and attend a four-year public university. She will graduate with $24,000 in educational loans. Sam Spendthrift chose to go to a well-known four-year, private university. In addition, he used his loans to pay for spring break, rarely cooked at home, and bought a new laptop with his loan money. As a result, he will graduate with $52,000 in student loans.
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Remember the Student Debt Factor
Tweet Share on Facebook April 6, 2011 Comment (3)It's that time of year when high school seniors and graduate school candidates are making their final decisions of where to go to school. There are many factors that come into play in these decisions.
Unfortunately, one of the most important factors—how much debt you will have accumulated when you graduate—is often not on the radar screen. It may be the last thing you want to think about, but factoring the amount of student loan debt you will have into your decision can pay huge dividends after you graduate.
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Avoid Loan Delinquency and Default
Tweet Share on Facebook March 30, 2011 Comment (9)Caveat emptor! Your student loan documents probably do not explicitly state "let the buyer beware"—but maybe they should. A sobering report released this month by the Institute for Higher Education Policy, "Delinquency: The Untold Story of Student Loan Borrowing," suggests that a majority of students struggle to repay their loans.
As the cost of a higher education has exponentially increased over the last couple of decades, common sense and anecdotal evidence has suggested this is the case. Unfortunately, policymakers have relied solely on default rates as a measurement tool. Default rates alone paint an incomplete picture, because they exclude borrowers who have difficulty repaying their loans but avoid default.
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Income-Based vs. Income-Contingent Loan Repayment
Tweet Share on Facebook March 23, 2011 Comment (13)Last week, we looked in detail at one key element of the breakthrough College Cost Reduction and Access Act (CCRAA)—Income-Based Repayment (IBR). But since 1994, well before passage of the CCRAA, the federal government has had a program of Income-Contingent Repayment (ICR). So what are the similarities and differences between IBR and ICR, and which will best fit your needs?
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Repay Student Loans Based on Your Income
Tweet Share on Facebook March 16, 2011 Comment (17)The College Cost Reduction and Access Act (CCRAA) has been a breakthrough for everyone looking to afford a higher education. There are two distinct components related to loan repayment: The first, discussed below, is Income-Based Repayment (IBR) that allows graduates to pay back their federal loans on a sliding scale based on their income. The second, discussed in last week's blog, is Public Service Loan Forgiveness (PSLF), which provides forgiveness on federal educational loans for people who work in the public service sector for 10 years.
It is very important that readers understand that these two provisions in CCRAA are not dependent on one another. Someone can participate in IBR without also participating in PSLF. In fact, IBR provides help to a much larger group of people than PSLF, because IBR does not have a "qualifying employment" element.
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Help Available for Public Servants Drowning in Debt
Tweet Share on Facebook March 9, 2011 Comment (16)A number of articles have appeared in the press in recent weeks about students graduating with advanced degrees, mortgage sized-debts, and few job prospects to pay it back. These stories come as no surprise to those of us who advocate for educational debt relief programs. The amount of student debt that many young professionals have incurred is indeed staggering—even if the graduate has a job.
Law school students have been the focus of many of these articles. According to the American Bar Association, the average annual private law school tuition has more than tripled since 1985, growing from $7,500 per year to $34,000, with many top-tier schools now exceeding $45,000. It is not uncommon for law school graduates to accumulate $150,000 in educational debt. This amount of debt takes years and years to overcome.
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Try On Subsidized Stafford Loans
Tweet Share on Facebook January 26, 2011 Comment (1)If you enroll in college at least half time, you can get Stafford Loans for your undergraduate, graduate, and professional studies through the Direct Loan program. Stafford Loans come in two shades: Subsidized and Unsubsidized. Subsidized is this year's black—it looks good on everyone.
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4 Reasons to Consolidate Your Student Loans
Tweet Share on Facebook January 19, 2011 Comment (24)Consolidation is like refinancing—you get a new loan, the new loan pays off your old loans, and you pay the new consolidation loan instead. Why bother? Below are some important FAQs on this subject:
Which loans can I consolidate? You can consolidate pretty much all kinds of federal student loans like Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Perkins Loans, including most federal loans in default. But be careful—defaulted Direct Consolidation Loans can't be reconsolidated, so you only get one chance to use consolidation to get out of default.
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