FEAR around student loans is real, and justified
I recently had the opportunity to spend 30 minutes talking one on one with 25 college seniors, all of whom had student loans. The students I met with were sincere in wanting to learn, honest about how they got here and uncertain where to begin.
What were the lessons?
(1) The size of the loan did not correlate to level of fear. Students with lower loan balances had the same level of fear as students with much higher balances.
(2) Student loans were the TOP money concern.
(3) There was very little understanding of “variable interest rates,” yet most had variable rate debt.
Where do I start if I have student loans?
It was surprising how many of the students I met with did not know their total loan amount, interest rate or where to go to find this information. This is important data to have. Knowing what you owe, helps you build a plan to repay it.
It is difficult to optimize a plan for student loan repayment, if you don’t have or know all of the pieces. Troutwood has built a “debt rank” feature that helps to solve this issue.
What are variable interest rates?
Federal student loans have fixed rates that DO NOT change over the life of your loan. Private student loans can be fixed rate or variable rate. Variable rates DO change over the life of your loan.
The same if of course true when interest rates drop. Interest rates have risen sharply over the past year, and I don’t believe many students were aware of the impact this would have on their monthly payment.
What if I’m still in High School, how much can I borrow?
This is an important, but personal question, and the answer differs for each of us.
The last 10-years have taught us that while different degrees and occupations equate to different income potential, student loans are treated equally.
Debt is a legal obligation and must be taken seriously. Tools like the Federal Student Aid Loan Simulator exist to help you make informed decisions around student loans. Take time to understand both the opportunity and the impact.
Own your financial future!