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Know Your Student Loan Debt

Some people treat student debt like the plague, and make no special effort to pay bills right away or at all. The good news is that the numbers of those who elect to ignore their student loan debts are declining. According to the US Department of Education, student loan default rates have dropped from 22 percent in 1990 to around 5.9 percent in 2004. Educators attribute that decline to an improved US economy in the 1990’s and 2000's and improved awareness on the part of loan recipients of the importance of paying off their student loan debts.

That tells me that student loan borrowers are taking their debt more seriously. It also tells me that people are beginning to understand that knowledge is power and that the fastest way to pay off your student loans is to face them head on and know what they’re up against.

This is a highly significant occurrence. By knowing your debt and understanding how it impacts your financial life, your chances of eliminating that fiscal albatross around your neck increases exponentially.

But what, exactly, does “knowing your debt,” mean?

For starters, it means knowing how much you owe on your loan. If you owe $8,000, then, if nothing else, you know where you stand. It seems like a simple concept but some people can’t be bothered to know their debt amounts. They’re too busy starting their careers or tackling other, more appealing, fiscal responsibilities like a new Jeep or a vacation rental down the beach for the summer. These are the people who are in the highest danger of defaulting on their student loans, simply because, for whatever reason, they stopped paying attention to it.

Don’t be like that. Know your loan. Know its terms, its payment schedules, its repayment options. Know that if you make higher monthly payments you can pay the loan off more quickly. Know who your lender is and where you can reach them. Know that if you move, you need to contact your lender and let them know your new address. Hey, young people move all the time. They get jobs in different cities or decide that they want to live in San Francisco or Boston at least one time in their lives and up and do so.

Knowing your debt also means knowing what to do if you can’t make a monthly payment for some reason. Lenders are usually fairly gracious about this, as long as you let them know you won’t be paying and when they can expect the next payment. Keeping your lender in the loop is a huge part of knowing your debt. Closing them out or ignoring them will only lead to complications and possibly default. And if that happens, good luck landing that new brownstone apartment in Haight-Ashbury or Harvard Square.

Above all, knowing your debt means reading and understanding all of the correspondence you’ll receive from your lending institution. Yes, the language lender use in their statements reads like the Tibetan Book of the Dead. But read it anyway. Remember that it’s all part of knowing your debt.

And knowing your debt could mean the difference between financial freedom down the road or financial fiasco.

Loan Snapshots: If You Got the Money, Honey, I Got the Time

When the cost of attending a good four-year college rivals the cost of a good four-bedroom Colonial in the ‘burbs, you know sticker shock isn’t too far away. According to the College Board in its 2003 report “Trends in College Pricing Survey”, tuition and fees at four-year public colleges rose an average of 14.1 percent from 2003-2003.

For the current academic year, tuition at public colleges averaged $4,694, up almost $600 from the year before.

Published Jan 04 2007, 06:24 PM by moneycoach
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