If you’re still in school, chances are you haven’t given much thought about how much student loan debt you’re carrying. If you’re nearing the end of your program though, you’ve probably had nightmares about how you’ll make payments while trying to make ends meet. It’s much less scary if you know what you’re getting yourself into. Here’s a brief rundown of what having student debt as a college grad means to you, and how a student loan forgiveness act may be on the way to provide relief.
Post-graduate repayment options
For those of us who are ready to begin the daunting task of searching for that coveted job position in our field, repaying student loan debt is also in the very near future (payments generally begin six months after you graduate, stop taking classes or drop below part-time). As if you don’t have enough to worry about, you now have to figure out how much per month you’ll be paying back in exchange for that prized degree. Check out FinAid’s Loan Calculator to figure out how much you can expect to pay per month. For example:
- A total amount of $25,000 in debt at 5.0% being repaid over 20 years will cost the student approximately $165 per month. —> $25,000 is the average amount a student with a bachelor’s graduates with.
- A total amount of $41,000 in debt at 6.0% being repaid over 20 years will cost the student approximately $294 per month. —> $41,000 is the average amount a student graduating with a master’s will owe.
If you’re not sure how much you owe, you should visit your financial aid office on your campus for a one-on-one meeting with a financial advisor. You can also visit Student Aid on the Web for more information. There are many different repayment plans including:
- Standard repayment: You’ll pay a fixed amount (minimum is $50) each month for 10 years until the total amount is paid in full.
- Extended repayment: You’ll pay a fixed annual amount over a period of (not more than) 25 years.
- Graduated repayment: Payments start low and increase every two years and you’ll have up to 10 years to pay your balance in full.
- Income-based repayment: Monthly payments are based on income and family size.
- Income contingent repayment (for Direct Loans only): Monthly payments are based on adjusted gross income, family size and total amount of Direct Loans only.
- Income sensitive repayment plan: Monthly payment is based on annual income. Payments increase or decrease as your income increases or decreases. Maximum repayment is 10 years.
Student loan debt is “good debt”
We’ve all heard that over his or her lifetime, a college grad makes more money than a non-college grad. But, just how much more? According to a study by the University of Washington titled “What is a college education worth for the Citizens, Community, Employers, State and Students,” college graduates with a bachelor’s degree can expect to earn more than $3.3 million in their lifetimes. Compare that with the $1.7 million a non-college grad earns in his or her lifetime, and those student loans aren’t too scary after all, right?
If you’re worried about the unemployment rate, don’t be. As reported by International Business Times in Palash R. Ghosh’s September 15, 2011 post “Despite Unemployment Worries, 95% of U.S. College Grads Have Jobs,” college grads — bachelor’s and advanced-degree holders — shouldn’t have anything to fear. “The BLS report revealed that, as of August 2011, workers with some college experience or an associated degree are facing an 8.2 percent unemployment rate; high school graduates with no college are burdened by a 9.6 percent rate; while those without a high school degree have a 14.6 percent jobless rate.”
So, while graduating and entering the workforce (and a repayment plan for your student debt) may be coming up quickly, remain positive that you’ll find a job and be able to pay off that debt. And, at the very least, keep in mind that student loan forgiveness acts are in the works and could drastically improve the economy and your future.