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No Turning Back?Dec 20 '06 Write an essay on this topic.The Bottom Line Careful planning and bulldog tenacity are essential in turning your career dreams into reality and avoiding financial disaster... Next to an IRS lien, going into student loan default is the greatest financial disaster a person will ever experience. It makes you one of the economy's walking dead, with the mark of the beast of bad credit burned into your forehead. Unlike the IRS lien, this gorilla isn't subject to a statute of limitations, it sits on your back like a murder rap until your debt to society is paid in full. And, when they come at you, they come hard. They can place liens on your property, garnish your wages, seize assets, and other evil stuff if you welch on the debt. Considering the fact that your average Stafford subsidized/unsubsidized loan maxes out at about $50K, you can wind up paying this off for a long, long time. Signing up for a student loan should be the first step on a long and carefully planned journey. Get all your ducks in a row, make sure that whatever you're doing is worth doing well. Switching majors, picking some obscure field like the study of rat feces, or using your checks for trips to Las Vegas are tried and true ways to get your butt in a sling. Alternately, if you're in a field where the classifieds are screaming for help on a weekly basis (like medical, education, managerial), then put your nose to the grindstone and don't let up until the sheepskin's in your hand. Degreed professionals in well-paying industries normally have little problems handling loan payments. College grads working at Wendy's, however, end up wishing they hadn't tied this financial millstone around their necks in the first place. Another important factor is your interest rate. The Federal government, in trying to deal with foreign competition in the global economy, has been trying to alleviate the burden of college grads in repaying their loans and continuing in pursuit of their educational goals. Scores of investment and banking firms have jumped all over this milk cow, ready to pick up a note at the drop of a hat. It's a buyer's market, so take your time and shop around for the best deal. Rates have been as low as 5%, so be sure and select, don't settle when looking for a lender. Don't - don't - DON'T squander this money, it doesn't grow on trees no matter what it feels like when it's falling! You can squeeze through four years for about $25-30K with plenty left to start grad school, if you stick to a shoestring budget and keep your nose in the books. 5% of 50K is $2.5K from where I'm sitting, and that's assuming you aren't accumulating additional interest anywhere. Big numbers have ways of putting on weight, so don't even start in that direction. Plan on getting out as soon as possible and getting on the career path so you can pay this off and get on with your life. Grad school carries big risks but the payoff is even bigger. You'll need a 'B' average or better (as opposed to 'C' as an undergrad) to stay on-course, but an MA puts you in a higher pay bracket in most major industries. Best part is that it's only two years' extra work, and the lender will increase your max credit line to boot. Like I said, you'll have a bigger note when you're done but the rewards are definitely there. Best suggestion: have as much credit available when going into grad school so that balloon doesn't get much bigger. Finally, look around for a deal where you can knock off the principal with big payments. This allows you to look for part-time jobs where you can throw some back from time to time. If you're in a sales position where you can score bonuses, discipline and hard work can help you knock these numbers down long before payback time comes around. The idea of a college student paying back a loan with after-school bonus bucks may seem ludicrous, but many a wise student has breathed a sigh of relief once that monkey's come off their back in the early stages of their professional career. Consider this: next to your rent or mortgage note, and your car note, your student loan is going to be your third biggest bill. Mortgage bills go on and on, but car payments can be a temporary difficulty. You can make your student loan fit comfortably in between. In summation, DON'T go into default, FIND a degree program you're comfortable with, FIND a competitive interest rate, DON'T max out if at all possible, and KEEP the loan amount in check with a smart payment program. If you follow these rules, you can pay off your loan and join the ranks of America's upper middle class in the prime of your life, or go into indentured servitude to Uncle Sam for a long, long time.  |
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