Wednesday, June 01, 2011

Student loans: good, bad, ugly



No really sure why I've been thinking about student loans lately, but I have. Certainly not all, but most folks end up with student loans during some point of their education. Particularly undergraduate education. I just read that about 66% of 4 year program students graduated with student loans in 2008. The average student loan debt among these graduating seniors was just over $23K (finaid.org). Supposedly, students who applied for financial aid borrowed even more. Not sure how that works. Did they have greater need, got less in grants (money that does not need to be repaid), and thus borrowed more? I'm not sure, but anyway...student loan debt is still a bear.

So much so, that our Federal Government started the Income-based Repayment Plan in 2010. On the up-side, the minimum monthly payment is based on your income and family size. As your income changes, your payment amount may change or you may become ineligible. But...if you are eligible and make the payments for 25 years, any remaining loan will be forgiven. This is an over-simplified description of the program, so please go read for yourself if you think you are eligible and think you may want to participate.  There are certainly some down-sides to the program. If you are only making little bitty payments and then all of a sudden you start raking in the cash....eek...you'll have a big chunk of balance to pay off.

I'm in a good spot. My loans are deferred while I'm in grad school. That means no interest earning and no payments needed till 6 months after I graduate at which time I will have a relatively low interest rate because back in the stone age when I graduated from college the first time, interest rates weren't so bad. I could start paying them off now, but I'd rather meet other financial savings goals for now and have fun with what little money is left. I will not be participating in the Income-based Repayment Plan. Based on my projected income and family size of zero, I won't be eligible anyway. No big deal though. If I'm not income eligible that should be something to be thankful for!

Does anyone out there participate in this program? Anyone wish they had known about it sooner? Anyone have opinions?

3 comments:

Kate said...

Oh, yes, I will definitely be participating! Under the program that applies to me, if I remain employed in a public service legal job (legal aid, public defender, state's attorney's-type offices) for 10 years and make the applicable income-based payment, then the remainder of my loan is forgiven. The program was designed to keep people in the public sector, since many good attorneys simply could not afford to pass up a private firm job that pays more. Thankfully this program is available, otherwise I would not be financially able to work in the public sector at all!

Kevin said...

I'm not a fan. No offense, but I'd rather my tax dollars not pay for your education. What ever happened to people paying for their own debts?

It's just the fiscal libertarian in me talking.

TusaRebecca said...

@Kate - I think it's an interesting way to reward those who are willing to take a public service job with way less pay.

@Kevin - No offense taken. I was curious to get different takes on the program.

I hate to tell you, but your taxes are not only paying for my tuition right now, but you're also paying my graduate student salary. It's a bit different, but still thought you'd like to know where your tax dollars are going. Thanks! ;)