Last month I wrote about issues related to the cost of a college education. The ugly sibling to that cost is the student loan debt that many people have to deal with once they are through with college – hopefully after graduating with a useful degree and becoming gainfully employed.
Student loan debt presents major challenges to a large number of college graduates and, quite often, their parents.
Why is student loan debt such a big problem?
Harsh reality says that in most cases student, parent or both will be facing a student loan debt situation. For the parent this will often be on top of mortgage debt, car loan debt and the costs of daily living. For the student this will be something that crimps his or her new free and independent lifestyle as they begin their work life and, eventually for some, their family life.
A student may not be required to begin repaying a loan until after graduation. But trouble can start early if there is no job or income is insufficient when the first payment comes due. If things are not managed well from the beginning the debt can balloon as interest accrues. Worse yet, penalties might also be imposed if payments are not timely or are missed altogether.
What to do about managing and eliminating student loan debt?
Both parent and student should plan now how they will deal with student loan debt later.
It may be that when the student is done with college and gainfully employed (hopefully) they should consider directing funds toward paying off college debt rather than fixating on getting their “own” place or a fancy car. Maybe they spend a year living at home rather than paying rent somewhere. That may not be the first choice for parent or child but it may be mutually beneficial if one or both are liable for student loan debt. Student loan payments will have to be part of the budget for one or both of you.
There are plenty of stories in the news about both students and parents being crushed by improperly handled student loan repayment obligations. Making a plan right up front will bring benefits later. Think short-term pain in exchange for long-term freedom or peace of mind.
Parents, be serious about dealing with college-related debt and strongly encourage your child to be serious about it also, especially if you are a co-signer on his or her loan. Short-term pain can make the long-term sailing smoother for everyone involved.
Recent graduate Irene Joseph offers some personal insight. She says that counseling is required before getting a federal loan. There is entrance counseling to make clear the responsibilities being taken on by the student with a government loan. There is exit counseling that addresses issues related to loan repayment, interest accrual and dealing with problems in loan repayment, among other things. Irene’s school actually has a program in place to work with students to raise their awareness of student loan debt issues before they graduate and to help them make plans to deal with their debt. She says she has mapped out a 3-year plan to pay off her debt.
Having the issue in focus right after graduation will be important. However, making a plan and executing the plan is key to managing and eventually putting the student loan debt behind you.
Talk to graduates or parents who are currently dealing with student loan debt. They may be able to help you bring some focus to the issue and help you make a good plan for coping with your student debt.