Student Debt

Average Student Debt

Most undergraduates leave college with around $20,000 of debt, regardless of whether they go to a public or a private college. Graduate students borrow even more; it is not unusual for law school and medical school graduates to leave school with well over $100,000 of debt. Many young people are not prepared to handle this level of debt, so student loan providers have developed options such as consolidation loans and new deferment and loan repayment options.

The Kind of Loan Makes A Difference

Too many students rely heavily on private, high interest, high limit student loans, rather than building their funding plan around low cost, low interest government loans. There are a number of reasons for this – young people may not have the knowledge or guidance to make a more  advantageous choice, the cost of college is soaring, and lenders make it very easy to apply for these loans.

In fact, one of the biggest mistakes many student make is not going to the trouble of filling out FAFSA. Although it is a detailed document to complete, it is also the gateway to all federal loans, grants, and work study. What is more, it is required for most state loans and for most financial aid of any sort from colleges and universities. The student who neglects to file is the most likely to have to work long hours to make money for school while taking out expensive private loans.

Use The Tools Available to Manage Debt

Loan providers have created valuable tools for managing student loan debt, and students should not hesitate to use them if they need them. Most students will have multiple loans,  and consolidating these loans is an obvious and extremely beneficial way lower monthly payments and the hassle of keeping track of multiple accounts, with the danger of accidentally missing a payment. This tool is not perfect, however; the monthly payment is lowered by extending the length of the loan, so if you take the full allotted repayment period, you will end up paying much more for the loan than would have without consolidation. Students can avoid this by prepaying the loan in later years when their finances have improved.

Flexible repayment schedules can also help students adjust their payments to the different stages of their economic life. Once you have chosen a repayment schedule, you generally are not locked in place – if your situation changes, you can change your repayment schedule if you need to. If you do, however, make sure you know for certain what that change is going to do to your payments down the road.