out from under student loans
Brother, we feel
for you. You just graduated, and your parents are positively pink with pride in
their seed. But underneath your totally flammable graduation gown, deep in your
back pocket, you have four letters from four loan providers demanding money, pronto
-- and you know nothing about what you owe.
to the best of us. The fact is, most freshmen don't know if "financial aid" means
they're borrowing, work-studying, or receiving largess strictly for good looks
and charm. And after four years of reaping funding from odd sources, along with
moving paperwork into four different dorm rooms, you're bound to have a loose
grip on what you owe after graduation. Here, then, is a crash course in getting
started paying the right way.
Gather your information.
Probably your first wake-up call about owing money was a certified letter(s) reminding
you of your loan(s) and detailing terms of payment. You have about six months
from graduation before most loans start kicking in, so use that time to get your
Don't trust that all those certified
letters made it to your house, especially if you or your parents moved while you
were in school. If you have any paper records, break 'em out. Raid your parents
for their records and then raid your financial aid office for a full printout
of what you owe. Most offices are happy to oblige dazed graduates looking to organize
themselves. If you attended more than one school before graduating, deal with
both of them -- don't assume they've shared records.
you've just graduated or are still in school, an excellent -- not to mention free
-- resource is the National
Student Loan Data System. You can see a consolidated view of all your federal
student loans across all schools you've attended, including graduate programs
just by providing your birth date, SSN and a PIN you register for online. The
online service doesn't contain older records, so less recent grads must call (800)
4-FED-AID to access a scaled-back service. They can give you a list of creditors
-- a.k.a. the folks you owe -- but, unfortunately not the amounts or any payment
Get educated. After getting all your
papers handy, filed, collated, et cetera, now it's time to get jiggy. Know from
whom you've borrowed, what the general terms of the loan(s) are, and find out
what your monthly burden will be. You can view an awesome student loan primer
It's quick (less than half an hour).
least the following for each of your loans:
amount -- "principal" is the amount your borrowed;
"interest" is what you'll pay to borrow that amount.
rate and whether it's fixed or variable.
A variable rate means the interest you pay could go up or down over the life of
- Terms of loan --
how many years you're expected to take to pay it off.
your loan has been subsidized or unsubsidized
while you were in school. Subsidized loans mean the government paid the
interest while you were in school; unsubsidized loans mean you pay all the interest,
although your payments can be deferred until after graduation.
payment required, as well as recommended
Prepare to pay. Get your recommended
monthly payment information together for each loan and consider the results --
you might want to access Finaid's calculators
to get a better grip on this. Don't panic. In fact, get the resident smart-in-math
person in your life to verify what you've learned through this exercise. If you've
already accepted a job, this is a great opportunity to work on a budget and figure
out how not to starve on your salary.
If you are seriously
out of your depth, be aware that you have plenty of alternatives. Consider
consolidating loans. Bundling your federal loans to one fixed-rate loan could
significantly reduce your monthly payment. And, interest rates have never been
In July 2004, the interest rate on federal
Stafford loans dropped to 3.37 percent, the lowest rate in the 38-year history
of the student loan program. Find
out what rates are today.
can also defer many loans if you're in school at least part-time, if you're fired
or disabled, or if you can demonstrate economic hardship. Realize that simply
being fresh-outta-school does not automatically win you the sympathy of those
judging economic hardship. You have to prove you really can't afford this.
is another option. Those in the most dire circumstances can postpone payment of
certain loans for a finite period (usually less than 12 months), although interest
continues to accrue. Certain post-graduate occupations, like teaching for AmeriCorps
or military service, can get a portion of your loans forgiven altogether -- perhaps
a radical move but worth checking out. Take a look at Finaid.org
again for a variety of work options that might help you shovel out from under
Pay something. If you think defaulting
on your loans outright isn't a big deal, consider the evil consequences to your
credit history, including your ability to ever borrow money for education again.
Check out the Department
of Education's scary words to the wise.
you were smart enough to graduate, you can deal with student loans. And there's
always creative begging: Pay my Education Bake Sale, College-Educated Bikini CarWash