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Captainneeda 04-14-2013 12:14 AM

College and College Loans
 
I feel like I have spent too much time trolling this section of the forum and not contributing. So, without further adieu, a couple of thoughts and points on college loans, in the US.

Subsidized vs Unsubsidized loans:
Know the difference, it matters when it comes interest. With a Subsidized loan the federal government pays the interest on the original principal until you finish school. With an Unsubsidized loan, you being accruing interest the moment the loan in dispersed.

Advice: Pay as much of the interest as you can, on your Unsubsidized loans, while you are in school. That way you are not paying interest on your accrued interest. Even $20 bucks a month can make a huge difference, by the time you finish school.
Forbearance:
Allows the borrower to delay payments for a period of time. Accrued interest may be added to your principal (called capitalized interest).

Advice: Avoid forbearance like the plague. It should be thought of as a 'nuclear' option
Federal vs Private student loans:
I have nothing to say for this section other than federal student loans are lesser of two evils. Believe me when I say that private student loans border on usury. Here is a great story of a private student loan issuer who went after the parents of a dead college student (TLDR, after a public uproar the bank forgave the debt).

Advice: If you have to take out private student loans, know what you are getting into. Know the interest rate(s), what kind of interest it is (fixed, variable, etc), and what your overall obligation is.
Loan Consolidation:
Do not count on being able to do a loan consolidation when you are done with school. In the case of a federal consolidation, not all loans are eligible for consolidation, even loans issued by state institutions!

Furthermore, it might not be in your best interest to consolidate immediately. Generally, the interest rate that you pay post consolidation is a weighted average of the amount of money you have borrowed, and at what interest rate you have borrowed it. Here is an example:

Loan #1: Subsidized Federal Stafford Loan $5,000.00 3.400%
Loan #2: Subsidized Federal Stafford Loan $7,500.00 3.400%
Loan #3: Unsubsidized Federal Stafford Loan $2,500.00 6.800%

Loan post consolidation: $15,000 4.000%


That kinda sucks. That one unsub loan is kinda killing your interest rate. What would happen if you were to pay back just part of that loan before consolidating?

Loan #1: Subsidized Federal Stafford Loan $5,000.00 3.400%
Loan #2: Subsidized Federal Stafford Loan $7,500.00 3.400%
Loan #3: Unsubsidized Federal Stafford Loan $1,000.00 6.800%

Loan post consolidation: $13,500 3.750%

Hey, a quarter percent difference. You might be saying 'Well that is not too impressive'. I disagree.

Great tool from the federal goverment: Loan consolidation calculator

Advice: Try to knock out as much of your higher interest loan debt as possible, before consolidating.
Enrolling in EDA:
An Electronic Debit Account is just an automatic payment from your bank account. Not only will you never forget, they give you a quarter percent reduction on your interest rate. Furthermore, nothing is stopping you from making additional payments!

Advice: I think it is a great program. YMMV
Watch this space, more tips and advice inbound!

Captainneeda 04-14-2013 12:19 AM

(space saved for future posts)

cwest1977 04-15-2013 12:10 AM

I would add one thing, this may be common sense, but you would probably be surprised how many people do this. If you have a school loan for a specified amount of money per semester, and your school bills are lower than the specified amount, the loan company will send the poor college student a check. I received several of these checks while in school. They varied from $300-$700. As exciting as it is to get a check in the mail, immediately give that money back to the loan company to put against the balance. When you are out of college and trying to set up a new life, you will be glad because your payment will be lower!

Murf425 04-15-2013 09:21 AM

Number one, single most important thing to consider before taking out ANY student loan is to ask yourself one simple question, and answer it honestly:

"Will the degree I intend to get make me employable enough that I'll be able to find a job that pays well enough to pay off this loan?"

We've all seen the arts majors and political science majors and such who financed 100% of their education, then acted shocked to learn that those things don't exactly show up as credentials in job listings very often. Those are the people who end up on the news, working at Starbucks, bitching because they can't pay off their loans.

Student loans are like any other investment loan; if the final result will not cover the expense of getting there, then do not do it.

Captainneeda 04-16-2013 08:40 AM

Quote:

Originally Posted by Murf425 (Post 2684059)
Student loans are like any other investment loan; if the final result will not cover the expense of getting there, then do not do it.

Not for the sake of argument, but I am going to strongly disagree.

True: If your motivation to go to school is to earn more money, spend some time quantitatively analyzing the cost/benefit of your degree program. It may be more worth while pursuing a job training program if the numbers do not come out in your favor.

However, if you motivation to go to school is to become the best damn (insert non-traditional profession here), do not let the money stop you. You only get one life, don't waste it. Do some soul searching. Make sure that you are perusing a dream that means more, to you, than money.

Lohman446 04-16-2013 08:58 AM

I am going to add my comments in here:

An important note about federal student loans: THEY ARE NOT DISCHARGEABLE IN BANKRUPTCY. You will pay them back one way or another.

Education is wonderful for educations sake. It makes the individual more rounded, more intellectual, and more suited to many tasks. HOWEVER there has been a decade or so of "media blitz" by colleges, your highschool teachers, your guidance counselor, television and various others that have tried to convince you that college is the way to a better career. There are certain careers that you are more likely to advance in if you have a degree - if you have picked one of these careers a degree may be worth it for you. If you are going to college because you "have to to get a good job" you are wrong. Technical schools are as likely (if not more likely) to get you a stable and good paying job - especially if you are not the top 5% of the class.

Many employers pay for college. Around here one of the gas stations has a reimbursement for its employees (even part time IIRC) that pays back a percentage of your expenses depending on your grades. Others are more related to the field you intend to be in. If you can gain experience (and connections) while going to college you may find that takeing a few dollars less an hour in return for reimbursement of college expenses is AN INCREDIBLY GOOD INVESTMENT. If being a janitor for a few years will get your college paid for for you (apply at the university, request this as part of your compensation) then by all means do it.

Lohman446 04-17-2013 11:13 AM

An added note: Some universities offer "degree completion" programs in conjunction with community college.

For instance: Central Michigan University has a program that allows you to earn a degree from CMU that you start and cover the basic courses at a select community college. The kicker is even the credits from CMU are priced at community college prices (about half the cost). It can literally cut the cost of your education in half.

99BPS 04-17-2013 11:47 AM

This is awesome, I'll add a section about applying for Grants as well if anyone would like. I've spent the last year working to lower my Graduate school tuition payments through grant applications, and most qualify better then me (a white boy from an upper middle class family). Some people (my gf for example) can end up getting about half their cost of tuition from grants that never need to be paid back if they put enough work into writing applications.

Murf425 04-17-2013 11:50 AM

Quote:

Originally Posted by Captainneeda (Post 2685110)
However, if you motivation to go to school is to become the best damn (insert non-traditional profession here), do not let the money stop you. You only get one life, don't waste it. Do some soul searching. Make sure that you are perusing a dream that means more, to you, than money.

True. But, if you make the conscious choice of "I'm going to study ____, the marketability of it be damned", then don't start whining and crying a few years later about being unable to pay off your loans because you can't get a well enough paying job. If you're intentionally going into something that pays peanuts, you're giving up the right to bitch about the debt you encumbered yourself with to get there.

99BPS 04-17-2013 11:56 AM

Quote:

Originally Posted by Murf425 (Post 2686295)
True. But, if you make the conscious choice of "I'm going to study ____, the marketability of it be damned", then don't start whining and crying a few years later about being unable to pay off your loans because you can't get a well enough paying job. If you're intentionally going into something that pays peanuts, you're giving up the right to bitch about the debt you encumbered yourself with to get there.

Completely agree. I was never sure what the psychology students at my school (an unimpressive school for a bachelors in psychology) were going to do with their life if not graduate school. Now I know. Most either changed their mind and packed bags for grad school or are still working in a position that did not require a college degree in the first place.


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