Friday, April 06, 2007

Student Debt

The new issue of ABA Journal, April, 2007 has an article on law student debt: “Redoing the Math” pp. 46 - 47.

Advice: • Avoid high-interest credit card debt

• Figure your monthly & yearly obligations (rent/mortgage, transportation, food, insurance, loans). Subtract from your take-home pay and then consider your priorities. Look for room-mates, consider selling your car, look for second job.

• Consolidate loans - lower monthly payments by extending payment schedule, and (possibly) arranging better interest rate. More than just federally-backed student loans can be consolidated.

• Find out about loan forbearance or deferments. Both let you put off paying loans, but deferment stops the accrual of interest. Forbearance keeps the interest accruing, but lenders are more willing to extend the time longer since they don’t lose money.

• Some federally-backed loans allow graduates with a high debt-to-income ratio (you owe a lot and don’t make much dough), to use an “income-contingent” repayment plan. Don’t have to pay interest on the loan – reduces monthly payments.

• 20 states have a loan repayment program, but the eligibility varies. Some law schools also have loan repayment programs. (See ABA LRAP page, below.) The states that currently have LRAPs: Arizona, District of Columbia, Florida, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oregon, Texas and Washington.

• Stay in touch with your lender. Tell them if you are having trouble paying the loan and ask them for help. They would rather work out a payment plan than find you in default.

Here is more advice and some helpful links:

USA Today article on Student Loans, 2/22/06 link
Sidebar, by Sandra Block suggests:

• When borrowing for college, opt for government-guaranteed student loans before you turn to private loans. Because private loans aren't guaranteed by the government, interest rates and fees are usually higher than for federal Stafford loans. The maximum that dependent undergraduates can borrow under the federal program is $23,000. So some students with high college costs have to use private loans. But others are taking out private loans before they've taken full advantage of the federal program. A 2003 study by the Public Interest Research Group of students with private loans found that nearly 24% didn't take out any Stafford loans, and 26% borrowed less than the maximum allowed.

• Don't compound your problems by running up credit card debt. The average undergraduate has a credit card balance of $2,169, according to a 2004 survey by student lender Nellie Mae. Only 21% of students paid off their balances each month.

• Many students use credit cards to pay for books, supplies and class fees. But keep in mind: The average interest rate for a standard, variable-rate card is 13.7%, according to And overdue payments can cause those rates to soar.

Access Group (non-profit Student Loan provider, with a focus on law students) -
Know Your Options
Lower Your Payments
Avoid Default:
Strategies and Resources for Repaying Your Loans

SallieMae - nation’s leading provider of student loans
Includes advice on managing loan repayment, postponing payments, managing debt. Very helpful advice in an easy-to-use website.

Loan Forgiveness - beware searching the web - many websites spoof government or non-profit status but are only out there to lend you more money!
Links to various options for loan forgiveness - a good website with lots of links. Appears honest.

ABA LRAP (Loan Repayment Assistance Programs)

Christian Science Monitor article on student debt, May 17, 2006
interest rates [increased] on July 1, when federal loan programs move from a variable rate system to a higher, fixed rate. Stafford loans will jump from the current 5.3 percent rate after graduation to 6.8 percent. PLUS loans, designed for parents, will rise from 6.1 percent interest to 8.5 percent.

Image is from the Maori/New Zealand education website

1 comment:

Betsy McKenzie said...

Our law school student paper just came out with snaps of students' spring break adventures. The casual assumption that, "Of course, everybody traveled on their spring break," was striking in light of the heavy debt burden incurred by our students through undergraduate and law school loans. How have students come to feel deprived if they don't get to ski or bask on their breaks? This is the same kind of striking shift in our culture that underlies the huge wedding industry. Nobody just has a simple wedding in the park these days. Expectations have been pumped up by ads, by movies and t.v., and the consumer feels bad if their life does not match what looks like the new norm. Your cranky librarian crabbing along here!