Monday, October 22, 2012

The #1 way to repay student loan debt

PLOT OUT YOUR PLAN: Then stick to it, to repay student loans
Hi, my name is Chris and I have student loan debt.

Yes, it sometimes feels like I should be in a 12-step program because I have outstanding loans from getting my undergraduate degree and MBA. That's because many people think student loan debt is one of the worst things you can have.

While it's true more students are graduating college with debt, and it's harder to find a job due to the economic downturn, it is not true that having debt automatically means you're going to default on your financial obligation or that the debt itself is a negative thing.

Many in the media would have you believe otherwise. Articles have covered how college students are graduating with tens of thousands of dollars of debt, and that many students are defaulting on their loans. And while this is true in some cases, it's also important to remember that getting a college education is an investment in one's future. Like any investment, it requires the investor to think carefully about the benefits and risks. That's why it's so important for students to understand that these loans come with an obligation to pay them back, and that failing to do so will have a negative impact on their futures.

Two parties are key to ensuring that loans are handled in a responsible way -- colleges, and most importantly, students themselves. As a Financial Aid Processor at Post University, as well as someone with student loan debt, I have a firsthand understanding of the role colleges and students should play in ensuring loans are repaid on time.

At Post University, I work out how much money students need to take their courses, factor in any grants they might qualify for, and communicate this to our tuition planners. They then send out award letters to students.

I also work with students' academic advisors to make sure students understand how to stay on track to graduation. We are a team working together closely to secure the right amount of financial aid to help students get through their schooling.

Our tuition planners, academic advisors, and financial planners counsel students to use their financial aid judiciously, and not take more than they need to cover their direct educational costs. We explain that their loans need to be repaid beginning six months after graduation, and that there is a limit to the amount of aid they can obtain over the course of their college education.

So, even if the federal government says they are eligible for more loan money than they need to cover their tuition and other college expenses each year, they should think carefully before accepting it. It might sound like a good idea to use the extra funding available to them in their freshman year to purchase an iPad, but they might need that extra aid to pay for their classes senior year. Students also need to understand that loans need to be paid back even if they don't graduate from college. Using financial aid wisely and staying on track to graduation must be top priorities.

At the end of the day, however, students decide to sign the award letter accepting the financial aid and make decisions about how hard they are going to work in their courses. As a result, students are ultimately responsible for fulfilling their financial obligations. They must think hard about their student loans and how they are going to manage them. They need to read and understand all emails and letters they receive about the loans, and ask questions if they need more information.

Once students leave college, they need to understand that repaying loans has to be a top priority every month. At Post, we are happy to explain to students what those loan payments will look like when they graduate. Students must also know how to create a realistic budget and stick to it.

In my case, my parents taught me fiscal responsibility as a child, first with an allowance and later with the traditional jobs of adolescence and teen years. When I applied for my student loans in 1997, my parents sat me down and told me what it would mean.

When I got to college, the office of financial aid also told me what these loans would mean. I knew approximately how much I would have to repay, in total and monthly, and when those payments would start.

When I graduated college, I was making less than $20,000 a year. However, I have paid my student loans in full every month, year after year. I use auto pay and always make sure I have enough in my checking account to cover the amount. I have not missed a payment.

My story is probably shared by a lot of Americans. However, it needs to be shared by many more. In the end, having student loan debt is not necessarily a bad thing nor does it make you an outcast. It makes you like nearly every American aged 22-45. The most important thing to remember is that the college financial aid office can only counsel you on your loans. You decide how much money you're left paying back. Get all the information you need to make informed decisions, and be responsible.