Dawn of the (Student Loan Debt)

Student loan debt is a massive expense for many young professionals. The College Investor reports that nationally, on average, college grads have $37,000 in debt because of their education, and this breaks down to a monthly payment of more than $350. For many, this amount of money each month can easily zero out the budget or make it extremely difficult to make ends meet.

Unfortunately, leaving college with debt has become the new norm. According to an article by CNBC, 70 percent of students “graduate with a significant amount of loans.” And these loans not only affect present financial circumstances, but the debt load also may force many to consider retiring at a much later age. Nerdwallet’s New Grad Retirement Report notes that “the Class of 2015 faces a retirement age pushed back to 75 — two years later than what the Class of 2013 could expect — because of increasing student loan debt, rising rents and millennials’ approach to money management.”

For many students, though, loans may be the only way to fund an education that gives them access to better paying jobs and career choices. And today’s generation is deeper in debt than any generation before them. While signing on to student loans seems to promise a shiny future for employment opportunities, not every grad secures the job of their dreams…or even a job that pays enough to pay down the loan balances.

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Delinquent payments aren’t uncommon. CNBC reports that the future looks grim regarding student loan repayments, as an estimated 40 percent of student loan accounts are predicted to fall into default by 2023. The time period it takes to reach ‘default’ status varies by the loan type; some go into default when the account holder fails to make payments for 270 days, but other loans hit default sooner. Once the loan goes into default, the account can be sent to collections.

The worst part about student loan debt? It is forever. Like a zombie, student loan debt lives on. Unlike many other loans and debts, student loans typically can’t be wiped out in bankruptcy.

However, there are exceptions. Per Federal Student Aid, borrowers in bankruptcy can file for an “adversary proceeding” and depending on the outcome, the loan could be discharged or the loan terms amended (this could be a lower payment, lower interest rate, etc.), but an individual would need to “demonstrate that repayment would impose undue hardship on you and your dependents.”

While student loans have caused stress for many borrowers who feel trapped by the monthly payments, there are many in Congress who are trying to amend the rules and help indebted students find ways to recover. A recent court ruling has allowed students who were defrauded by for-profit colleges to be forgiven of their federal student loan debt.

When there is no other way out of the debt load, managing student loan balances and payments simply means tightening the budget reins. Balancing the debt and bearing the burden of the repayment responsibility requires a little financial creativity.
Making Payments Less of a Financial Attack
So how do you keep current with those pricey payments and still stay afloat? The simple answer is one word: budgeting. Most college grads with student loans also have many other expenses like car payments, insurance, healthcare, rent, utilities, gas, and, of course, food. For those who struggle to make their student loan payments, it’s time to break out a spreadsheet, because, ultimately, paying down debt means understanding your unique financial situation. The only way to do that is to figure out your monthly income and review all your monthly expenses. And every expense matters. Lattes, clothes, shoes, movies…anything and everything purchased needs to be evaluated.

Some expenses are static and others are variable. Static expenses are those that are the same each month; these expenses include loan payments, insurance premiums, cable, cell phone, etc. Variable expenses change in price each month and include gas, food, entertainment, clothing, etc. The variable expenses are those that you should examine in detail, because variable expenses can often be trimmed to fit your budget.

Cutting your budget and your expenses is one way that you can make those loan payments hurt just a tiny bit less. But don’t cut just anything. You need to eat; so set a feasible budget for groceries. However, you don’t need to eat out! If you notice that you’ve spent a ton of your income on restaurants, then it’s time to delete the ‘dining out’ option.

Students should also consider researching scholarships, such as the college scholarship provided here by LoanCenter. Many companies and organizations offer various scholarships to give back to the community. Try searching for these opportunities and applying to as many of them as possible, as they often offer thousands of dollars!

Everyone has unique spending habits. Some of us can’t pass up a new pair of shoes, others love gourmet food. But understanding your financial faults is essential to managing money…and debts. Yes, student loan debt can be financially devastating, and sometimes even cutting the budget isn’t enough. Some borrowers may end up working a second job to make those payments.
Tips for Incoming College Students
College grads who already took on their student loans are left with the balance and the responsibility, but incoming college students who are seeking ways to fund their education can learn from their elders. Before applying to colleges, review the cost of tuition. Yes, that dream college is a dream, but if the only way to afford the costs is by taking out a massive loan, then other options may be more financially feasible.

Student loans can take decades to pay off, and every dollar of tuition matters. Weigh the costs of private schools versus public. Understand that in-state options may have lower tuition rates. Some high school grads begin their college experience at an affordable community college and transfer to a larger school after a few years. Of course, students with great grades may want to investigate scholarship opportunities.

College is expensive, and some four-year degrees can cost as much as a new home. So be diligent in researching education options and review and tally up all the costs. Calculate how much those four years will cost you. Compare rates as well as reputations.

The zombie debt threatens to never go away, but you don’t have to let that terrible student loan zombie consume your finances…or your brain. Fight back by taking control of your financial situation. Cut expenses and review your finances. For high school students looking at colleges, understand the costs associated with each choice and weigh all the options. Those who currently struggle to make their payments shouldn’t be afraid to ask for help; call your lender to see if there are any other options for your particular loan. Make the call, though, before that loan hits default. Because once you land in default, that zombie will head to the collection agency graveyard and your loan will never rest in peace.