Intro to Student Loans - The class they don’t teach

Introduction to student loans is a course which college and universities will not teach you. A course about not paying off your student loans so fast.

Students who graduated in the month of May usually have a 6 month grace period before they received their first bill for their student loans. In the school year of 2005-06 the College Board estimated that the federal government student loan programs loaned out more than $57 billion to college students. Many students borrowed from private student loan banks which have higher market rates an estimated $17 billion. In the school year of 2004-05, 15.2 million students attended college and only about 5.3 million undergraduate students borrowed from federally subsidized Stafford loans, an increase of about a third since 2000.

Depending on the type of student loan (subsidized, unsubsidized, etc.) and the lender, who the student borrowed from, interest rates can fluctuate. Due to the last couple of years of low rates and the opportunity to consolidate all of your student loans into one loan, 9 percent or lower has been the average rate on student loans. 

A student who borrowed an estimate of $20,000 in loans with a 10 year payment plan will be paying a monthly payment of $200 to $250. Five figures in student loan debt is not the way that college grads plan on starting life off. Paying off these student loans as quickly as possible is appealing. Grads feel a mental satisfaction if they pay off their student loans as fast as possible, so they would be able to pursue their career without student loan debt overshadowing them. This decision is not the best decision all the time.

Recent grads tend to forget that student loan interest offers a tax deduction, some restrictions apply. If you plan on making extra payments to pay off any debt, double check the interest rates on all your debt (credit card, student loans, private loans) and apply the extra payments there. Pay off the higher interest rates first.

Try choosing an employer who has a retirement account which matches your contributions on a dollar for dollar basis. The more money you put in the more money you get in return. By not participating in this type of retirement plan, you are losing a 100 percent return, because you choose to pay more on your student loan instead of more to yourself.

If you decide to own your own home one day, research showed that recent college grads can afford monthly mortgage payments a couple of years out of school, but due to their commitment to pay off their student loans or invest in their retirement account, grads do not have money to furnish the home or even put a down payment on it.

Look into investing into a Roth Individual Retirement Account (IRA). As an alternative of paying extra toward your student loans use your extra cash toward your own investment. Roth’s has penalty free policies for withdrawing funds to purchase a home and the best things about Roth’s is you don’t have to pay taxes on the earnings.

Being a responsible parent also means letting the student learn how to be responsible. Let them learn how to manage their monthly responsibilities and advise them on the consequences on not doing so. Consider helping them invest and manage a 401K plan or a Roth IRA. 

PAYING MYSELF
Student loans payments will be due sooner than you think. If you have extra money, instead on paying off your student loan, here are a few suggestions where your extra cash can go:
- High interest credit cards
- High interest personal loans
- Saving to purchase a home
- Investing in a 401K plan
- Investing in a Roth IRA

Democratic Congress may help with college bills

Avoid getting in debt with student loans