Just in time for graduation season, a recent study from Fidelity Investments found that 70 percent of the class of 2013 is graduating with college-related debt. How much? An average of $35,200.
College loan debt for students in Atlanta ranks among the highest compared to other cities, according to data from Credit Karma, a website that consolidates consumer financial information in one place. For the past two years, student loan debt in Atlanta has hovered just below $40,000 ($39,855 in April, 2013).
The recession, the higher cost of tuition and the rise of for-profit schools are some of the biggest factors affecting student loan debt, says Ken Lin, CEO of Credit Karma. And with so many schools in the Atlanta metro area, it follows that we would have some of the highest rates of college related debt.
“Student loan debt is the one [type of] debt that has been growing aggressively while others are going down,” says Lin. “Student loan debt is no longer forgivable, with very few exceptions. The dollars you are signing up for will stay with you for a very long time.”
About 50 percent of 2013 grads in the Fidelity study were surprised by the amount of debt they accumulated and predict it will take them more than nine years to pay off. Many of them (85 percent) contributed to paying their tuition and expenses and some reported choosing majors that would score higher paying jobs. While they don’t regret going to college, they said they would do some things differently in hindsight.
Here are a few tips from students and experts on what to do before and after taking on a student loan:
Understand the process: Experts and graduates agree on the importance of understanding the financial aid process, how different loans will translate into debt, what future payment obligations your loan carries and how scholarships or grants can offset those costs.
Plan ahead: This is often left to parents in the form of 529 college savings plans, but students can also get involved long before it is time to decide on a school.
Consider your job prospects: Lin suggests making sure your education is valuable. "Education is great, but you have to evaluate the school, the degree you're going to get and the outcomes," he says. You have to be able to make back the money you borrow in order to pay off your loan.
Keep costs down: While in school, look for ways to save and control costs. Have a plan for managing money before graduation.
For students who graduate and find themselves drowning in debt, these tips can help:
Try negotiating: Don't run from debt, try negotiating with the government or lender to reduce the amount of the loan. Some solutions may include an income based repayment plan, says Lin.
Consider claiming a hardship: You may be able to defer loan payments by proving a hardship due to unemployment or other circumstances, Lin says. But a deferral won't last forever.
Refinance: Depending on your credit score and interest rates, refinancing a student loan may help reduce the payments, says Lin.
And finally, know that 53 percent of college graduates turn to their parents for financial guidance. It’s a good idea for parents to stay aware of their child’s debt load and be ready with information that can help them manage it.
