If you can, then pay them in full and be on time.
In the current economy, however, many well-qualified young adults are finding it hard to land work commensurate with their educations.
The influx of foreign workers and off-shoring (can you say Disney?) is not helping matters.
I digress.*
I am posting on this bright, sunny Saturday morning outside of my usual Monday through Friday schedule.
Why?
Now that Gretchen and I are in Christmas party-attending-mode, I am catching up on the personal lives of professional colleagues and their families.
Consequently, the subject eventually comes around to "What is __________ doing now that he/she has graduated?"
In years past, the proud parent would respond with "He/she graduated last January and started right away with __________. He/she really likes the work and the business travel doesn't both him/her like us old goats. In fact, __________ is engaged to his/her college sweetheart who works at __________.
Now, as often as not, the worried parent's eyes dart from side to side and his tone of voice drops along with the volume.
"Well, __________ graduated last January and still has not found anything full-time. He/she is living in his/her old room downstairs and working two part-time jobs. On the bright side, the student loan invoices show up like clockwork." [Sarcasm]
Does any of this sound remotely familiar? Maybe even from recent conversations with family members over Thanksgiving?
On the front end of the college application and selection process, applying for and receiving student loans for college is pretty simple.
When college-bound students and their parents embark on this next step in leaving the nest, everyone is full of optimism.
When it does not pan out as anticipated, the repayment reality can be tough.
Really tough.
A recent article in Forbes, titled "How to Tackle The Top Three Student Loan Issues," explains that colleges could do a much better at telling students what they need to know.
Some of the practical pointers in the article are obvious.
For example, unless you just fell of the old turnip truck, did you know students can experience obstacles when they start to repay their loans ... when lacking the necessary income to cover the monthly payments?
Duh.
And, some students defer the unemployment problem by going back to school to earn a graduate degree, but are given poor advice on more affordable repayment options.
Again, duh.
On the other hand, the pointers I think are most valuable from the article are those regarding student loan debtor-creditor rights.
For example, did you know a loan servicer must respond to requests for more affordable income-based repayment plans?
In fact, under the federal loan program, a student has numerous options that can help with loan repayments.
Here are a few of the most common issues as addressed in the article and what to do about them:
Federal Loans Made by Private Lenders.
While private loans are under the same repayment requirements as the federal program, anything involving a federal loan entitles the student to some breathing space. Payments can be based on income or gradually increased. There are additional provisions to help should the student become disabled, out of work, or is going back to school.
Avoid the Default "Doom Loop"!
Hey, even if you are not making any payments at present, do everything you can to stay out of default status. According to the Consumer Fraud Protection Bureau, one in five students are in a dangerous no man's land of not making payments. They are teetering on default status and this triggers the "doom loop" that is the collection process. So, how many student borrowers are in default? Would you believer about four million? Yikes! The article advises to find a workable repayment program before this happens.
Do Some Homework About Repayment Options.
Did you know the federal program has some flexibility to alter loan terms and a student can consolidate loans to save money? These are two examples of some relief you may find if you do some homework and are not afraid to ask.
Remember: If you do not ask, then the answer is always no.
* I could drill down way beyond the scope of this blog and get down into the weeds on what I see as the geopolitical, economic, and social underpinnings. However, I think I will leave that to professional pundits and stick to the mission of this blog by providing timely education and insights into the dynamic world of estate planning and related matters.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: Forbes (November 18, 2015) "How to Tackle The Top Three Student Loan Issues"
