One need only read the daily newspaper to realize that students are leaving college with massive amounts of debt, with the figures being even higher when post-graduate and professional school loans are included.
Q: How can I minimize the impact of student loan debt on my post-college future?
A: Step 1: Do your homework before you start your college education. Get an accurate estimate of the yearly and total cost of the degree you intend to pursue. If you have a choice, compare the costs of several schools and consider cost when you choose a school.
Step 2: Understand all the funding sources available to you. Loan and grant programs change from time to time. The website of the U.S. Department of Education's Office of Federal Student Aid (http://studentaid.ed.gov
) includes information explaining the types of aid available. Talk to the student financial aid offices of the schools you are interested in about your financial aid options.
Step 3: Borrow as little as possible—no more than you need to get through the year—and supplement your loan with work/study programs and summer income.
Step 4: Explore various school, state and federal programs that include any provisions for full or partial loan forgiveness, including teaching in a designated impoverished area, or practicing law or medicine in an approved public service position. In addition, consider employment with a federal, state or local government agency, entity or organization, or a non-profit organization that has been designated as tax-exempt by the Internal Revenue Service, in order to qualify for Public Service Loan Forgiveness.
Step 5: Begin repaying the loans as soon as possible, and be aware of any grace periods or deferrals. Make all payments on time. Interest continues to accrue until the loan is paid in full. Late payments may also lead to collection or attorney fees being added to the amount of the loan, which can, in some cases, double the amount that must be repaid. Furthermore, any default in federally guaranteed loans can exclude you from other federal loans, such as a VA or FHA loan, in the future, and can also lead to interception of tax refunds. Also, being in default will disqualify you from special loan repayment programs.
Remember: You are responsible for repaying your loans, whether or not you finish your degree.
Q: Can my student loans be discharged in bankruptcy?
A: The simple answer is – almost never. The only exception is if payment of the loan will create an “undue hardship” and prevent the graduate from maintaining a minimal standard of living, with no foreseeable improvement.
Q: What if I cannot afford to pay back my loans once I start making payments?
A: If you can no longer afford your payments under a standard payment plan, there are two programs that may provide some relief: the Income-Based Repayment Plan (IBR) and the Pay as You Earn Plan. Go to http://studentaid.ed.gov for information about these plans, and talk to your loan servicer to see if you qualify. Seek help before you get behind in payments.
Law You Can Use is a weekly consumer legal information column provided by the Ohio State Bar Association. This article was originally prepared by attorney Terry D. Zimmerman, a partner in the Akron firm of Kaffen & Zimmerman. It was updated by Linda Cook, senior staff attorney for the Ohio Poverty Law Center in Columbus.