loans<\/a>, a study shows that nine of them would not know basic information such as the interest rate or repayment terms of their loan. Half of them would be unsure of how much they borrowed, mostly because they didn\u2019t take the time to calculate what their monthly repayment amount would be.<\/p>\nThat\u2019s not just an anecdotal example, either. It\u2019s based on the numbers.<\/p>\n
Which illuminates an extremely important part of the student loan \u201ccrisis\u201d we are in as a country: A lot of students simply do not understand what they are getting into, or how to get out of it. And while there are plenty of articles that break down how to understand student loans, many people overlook the repayment aspect.<\/p>\n
You shouldn\u2019t. For a lot of reasons.<\/p>\n
READ MORE: Pulling a \u2018180\u2019 From Debt to Wealth<\/p>\n
Post-Grad Probs<\/h2>\n
No matter what job you get straight out of college, or what situation you walk into, finances get real from the moment that diploma hits your hands.<\/p>\n
\u201cShortly after graduation, when you\u2019ve got to start paying those bills, then it really hits you.\u201d<\/p>\n
Those are the words of Luke Alexander, a financial planner\/advisor at JFC Financial Services. But he\u2019s also speaking from experience. Alexander didn\u2019t just wake up one day with the skills to be professionally proficient with other people\u2019s money.<\/p>\n
It took an undergraduate degree, then a joint graduate program for a master\u2019s in business and a law degree. And all that school came with a hefty price tag. Alexander had scholarships for his undergrad and help from family, but when grad school came around it was time to \u201cbe a man\u201d and pay his own way.<\/p>\n
Now, as someone who used student loans to jumpstart a successful career in finance, Alexander understands the value of repayment better than ever. Not everyone will walk the same professional path as he did, Alexander acknowledged, but at the same time, he believes students of all majors and backgrounds could go for a quick refresher in the basic details of student loans, and how to repay them.<\/p>\n
\u201cI think it\u2019s very important,\u201d he said. \u201cI\u2019ve always said that in high school or undergrad there should be a class called \u2018Life\u2019 that basically teaches you how important credit is, what interest rates are, and paying bills on time. Little things like that.\u201d<\/p>\n
\u201cCredit has been so easy to get, that I don\u2019t think a lot of people think of the consequences.\u201d<\/p>\n
The Fine Print of Finance<\/h2>\n
In addition to reminders on big details that affect repayment, like interest rates and due dates, Alexander also said there were nuanced details that go unnoticed.<\/p>\n
When he started grad school, Alexander said he was \u201c50\/50\u201d in terms of thinking about the cost of his degree versus the benefit it would provide. Then, when his loans came out of deferment, the reality hit him all at once: It was time to put his money where his degree was.<\/p>\n
\u201cThen you\u2019re like \u2018that\u2019s a lot of money after I graduate that I have to pay back,\u2019\u201d he said, \u201cand hopefully it\u2019s worth it.\u201d<\/p>\n
Alexander found a way to make it worth his while, but was still frustrated with his limited options for working through his debt. After taking out the maximum in federal loans each year, he built up six figures worth of debt getting his degrees. That is, six figures worth of debt with fixed interest rates, and no flexibility to refinance unless you pursue private loans.<\/p>\n
\u201cI had a few years where interest rates were low, when the recession hit, and I had a few years where interest rates were 7.5 percent for a federal loan,\u201d Alexander said. \u201cLike on my mortgage, when I got my house, mortgage rates were higher. Then you had the bubble and the crash. Then interest rates were some of the lowest in history and so I refinanced.\u201d<\/p>\n
That\u2019s not an option for student loans, though. And although there were other ways to go about it, Alexander said the risk of taking out private loans doesn\u2019t work for all students. Some can\u2019t even get their foot in the door.<\/p>\n
READ MORE: Private Loans 101, A Guide<\/p>\n
\u201cIt pisses me off that the government won\u2019t let you refinance your loans to the rate at the time. You could refinance to a private bank loan, but then you can\u2019t have deferments. If you lose a job (and need relief), you can\u2019t do that on a private loan. A lot of people, if you don\u2019t have a great job right out of school, you couldn\u2019t even get a private loan to refinance.\u201d<\/p>\n
By sticking with federal loans<\/a>, students can avoid the hurdle of having repayment amounts controlled by variable interest rates. Going with federal loans also means they can receive relief from the financial obligation of repayment during certain periods, such as unemployment and financial hardship.<\/p>\nBut that wiggle room only goes so far. Outside of periods of deferment and forbearance, Alexander said federal loans \u201care what they are,\u201d meaning the only way to make them go away is by setting up a payment plan, and sticking to it.<\/p>\n","protected":false},"excerpt":{"rendered":"
Student loans are tricky. At least that\u2019s what the numbers show. If you asked 10 college students about their loans, a study shows that nine of them would not know basic information such as the interest rate or repayment terms of their loan. Half of them would be unsure of how much they borrowed, mostly<\/p>\n","protected":false},"author":3,"featured_media":4206,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[20],"tags":[426,439,429,441,427],"class_list":{"0":"post-4202","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-scholarships","8":"tag-graduate","9":"tag-interest-rates","10":"tag-loans","11":"tag-repayment","12":"tag-undergraduate"},"better_featured_image":{"id":4206,"alt_text":"","caption":"","description":"","media_type":"image","media_details":{"width":1400,"height":500,"file":"s3:\/\/pcom-wp-media\/blog\/wp-content\/uploads\/2018\/06\/10124815\/repayment.gif","sizes":{},"image_meta":{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0","keywords":[]}},"post":4202,"source_url":"https:\/\/wp-media.petersons.com\/blog\/wp-content\/uploads\/2018\/06\/10124815\/repayment.gif"},"acf":[],"yoast_head":"\n
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