Greensboro, NC -- Student loans can help ease the burden of paying for a higher education. But what happens when you graduate and the bills start pouring in? Could your child use financial game plan?
Matt Logan discussed the rising problem with school debt on the Sunday Good Morning Show. He is a financial advisor for Matt Logan Inc and Summit Brokerage.
Here's his submission:
Student debt is becoming more and more of a hot topic as the debt swells and more students are either deferring or not paying anything on their loans. Many people do not realize how large this debt is for our country. According to a recent article from US News and World Report, "Sudent loan debt has doubled since 2007. At an estimated $1.1 trillion, it's the nation's second biggest form of household indebtedness, after mortgages."
There are multiple factors that have made this such a problem. The first is the economy and the lack of jobs. Many people are going to school in hopes of bettering their financial situation only to graduate saddled in debt and unemployed. The second factor is the rising costs of higher education.
Simply said, it is not cheap to go to a University and it keeps getting more expensive. Another factor is the relative ease of getting student loans. Many times, the student getting the loan is only 18 or so and does not have a full understanding of the financial world or the significant obligation of paying back that loan. Logan has heard horror stories of students taking out loans to go on Spring Break in some instances.
Logan still believe that education, whether paid for with loans or by parents, is one of the best investments you can ever make. While a college degree does not insure success, it will open doors that may otherwise not be open.
According to the Bureau of Labor Statistics website bls.gov, students with a bachelor's degree had an unemployment rate of only 4.5% in 2012 vs a 6.8% rate of all workers. Their earnings are also higher than those without a college degree.
Students should be more cognizant of what they are signing and what it means to them. Make the loan and education process be a conversation with the entire family and only borrow what you absolutely need. Another thing he suggest is to work part time while in school to offset some of the expenses.
So let's say that you have already been through school and even gone through law or medical school and now have student debt. How should you approach it?
Logan sys there are many factors that go in to this decision. There is the size of your loan and your interest rates, your current income as well as your expected future income to take in to consideration.
For couples earning less than $125,000, you can deduct up to $2500 a year in student loan interest. For those who do not qualify for any deduction, I recommend finding out how much you can afford to pay, as well as how much is the minimum required for each loan.
If you have any extra, apply it to the loan with the largest interest rate first. I will let you know that this can be a very long process to pay off these loans. Keep it as a priority in your financial life because these debts can lead to stress. There is a major sense of accomplishment in being free from these debts.
Final tips for people dealing with student debt:
Stay on top of it and track it on a regular basis. (Avoiding it will not help the situation) If you cannot pay the debts, call the loan provider about it because there are ways to have these negotiated based on your income and ability to pay.
Finally, see if your financial planner can help you to build out a plan to address the debt so you have an idea of which way you are going.
Matt Logan can be reached at www.mattloganinc.com, 336-808-0126 or firstname.lastname@example.org.
Matt Logan Inc and Summit Brokerage Services