“Programs can help recent grads struggling with college loan debt” |
| Programs can help recent grads struggling with college loan debt Posted: 26 Sep 2010 01:28 AM PDT Grabbing a job is one way many college graduates grind it out in this tough economy while waiting to make it in their chosen fields. But earning just any paycheck won't cut it when it comes to paying everyday bills - and paying off student loans. Grads who are having a tough time paying the bills need to know there are options. But they need to review the rules of available programs to make sure they are not creating bigger problems. Bloomfield Hills resident Jason Chapman has had a few jobs since he graduated from Michigan State University in December 2008. But he's getting nowhere digging out of college debt. The jobs he's had for the past two years paid $10 an hour. As a case manager for a health care agency, he made slightly more through commissions. Chapman, 29, has made some money here and there, too, including $300 as his share of a prize for creating a song called "Trouble" for a contest by mtvU, a 24-hour television channel available on campuses. Still, once he factored in rent, auto insurance and other expenses, Chapman said there was no way he could afford the $300 monthly payments on his student loans. So, he took steps to hold them off. "I definitely don't think I had a choice," said Chapman, who is looking for a job in which he can use his degree in journalism. Still, the interest keeps building on more than $25,000 in loans. Eventually, Chapman's going to be paying interest on top of interest. A $25,000 debt easily could turn into more than $30,000 at the end of three years in forbearance, said Mark Kantrowitz, publisher of Fastweb.com and FinAid.org, websites that provide information about scholarships and student aid. Over the life of the loan, the cost could be nearly $42,000. Many recent college graduates who find themselves underemployed or even jobless have to do something to keep from going into default on their loans. Here are some strategies: • If you owe far more in college debt than you're likely to see in an annual salary for many years, there is an income-based repayment plan that assures a borrower never has to spend more than 15 percent of discretionary income on loan payments. In 2014, the rule changes to 10 percent. (2 of 2) To see if you can qualify, try to figure out your own payments with the online calculator at www.studentaid.ed.gov. Or, go to www.finaid.org. Talk to your lender. Remember that you will need proof, such as income tax returns, of financial hardship. • What if your income is affected by such things as the loss of a job or a medical problem? Even if you graduated years ago, if you have money troubles, you might try to get a break on student loans through hardship or forbearance programs. The economic hardship program has a three-year time limit and the forbearance program has a five-year limit. You also have to reapply each year. During a hardship deferment, Kantrowitz said, the government would pay the interest on subsidized federal Stafford loans, federal Perkins loans and a portion of a consolidation loan that paid off a subsidized federal Stafford loan. A borrower still would be responsible for interest on an unsubsidized federal Stafford loan. With a forbearance, the borrower remains responsible for all interest - which keeps building. Again, contact your lender. Private loans can offer forbearance typically for a one-year limit and may charge a fee. The best idea is to pay something toward those student loans with a job - even if it's not great. Susan Tompor is the personal finance columnist at the Detroit Free Press. This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php |
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