Poor Student No More

We live in a nation in which higher education has become the goal of many, a necessity for most, and certainly a step in the right direction toward achieving the “American Dream.” Politicians base entire speeches on the promise of ensuring the opportunity to go to college exists for all. Teachers in primary and secondary education design their curriculum to prepare students for college, not necessarily for life (which is why we have such a problem with personal financial education — but I won’t digress to that topic here).

Since a college education has become such a commodity (with such a high price) in our nation, wouldn’t you think the government would offer students more opportunities and incentives to go?

There are federal loans (of which only some are subsidized) and grants, but overall, the federal government has not done an adequate job of protecting students from the debt trap that college can cause. Quite ironic considering they are encouraging American youth to go to college and achieve their dreams.

So, what is our government doing to protect students from high interest rates, defaults, and unforgiving lenders? What happens when higher education’s promise of a better financial future isn’t kept?

Right now, Congress is considering ending a program that backs private loans with government money. Instead, the money used to back the private loans would go directly to students, increasing the funds available for Stafford, Perkins and PLUS loans. This would not only save the federal government money, but also save students from high interest rates, unforgiving deferment policies and ridiculous calls from lenders telling you it’s time to start paying up. Yes please.

The most important legislation, however, comes from state legislatures. When there are budget cuts in the state, student aid often goes down, tuition for state universities goes up, and student debt goes up. For example, New York is thinking of cutting its student aid programs mid-year in response to a huge budget cut.

Jon Chattman wrote an article for The Huffington Post arguing that forgiving student debt would stimulate the economy because it would put extra money in pockets without decreasing taxes or giving stimulus packages.

Debt forgiveness is extremely rare, but there have been some ideas floating around Congress in recent years. The late Senator Kennedy introduced the Student Debt Relief Act of 2007 that increased the Pell grant, introduced a student aid reward program, cut interest rates in half, and offered fair payment assurance — meaning that there were less restrictions on granting forgiveness for all or part of student loans.

Keep pushing for more protection for students against private lenders, especially at the state level!

You’re not the only one, and there are options to avoid defaulting, or missing payments on your loan.

If you cannot start making payments on your student loans yet, try to defer.

Deferment is a postponement of payment on student loans.  If you have federal loans, there are forms you must fill out to apply for deferment.  If the loan is subsidized, interest does not accrue during a deferment period.  For all other loans, you can either choose to pay the interest or tack it onto your already existing loan.

If you have private loans, you must check with the company or bank to see if you can defer.  Almost all offer deferment options, and usually require filling out a simple form to prove that you cannot reasonably afford to make the payments.

Deferment periods are usually 6 months long.  You must then file for another deferment or begin paying your loans. There is a limit to how many times you are able to defer though.  Make sure you know these rules before you decide to defer.

The criteria to qualify for deferment are:

• Education Deferments - this type of deferment has to do with a student’s enrollment status, and is sometimes referred to as an in-school deferment.
• Economic Deferment - generally dealing with specific types of economic hardships or unemployment.
• Disability Deferment - a student loan deferment program that applies to disabled students.
• Family Related Deferments - a loan deferment program that applies to mothers re-entering the workforce or those on parental leave.
• Public Service Deferment - a student loan deferment program that applies to students that are in the Armed Forces, Peace Corps, volunteers, or in public health service.

DO NOT DEFER IN ORDER TO CREATE MORE LIABILITIES, LIKE HOUSES OR CARS.

Deferment, however, is a great option if you need some time to build up a good amount of savings and income.