Congratulations! You are on a countdown to the finish line, you can smell the freedom and want nothing more than an ice cold beer, a locked in job and maybe one last hurrah of a summer. But wait, you just opened your mail and found out about your mandatory exit interview for financial aid and it all comes crashing down on you. You have DEBT.
I have to admit I was pretty surprised when I found out that the average graduate of Washington State University, a public school, carried the average debt of just under $22,000 for the education. That is a lot of money for most graduate to start consider paying, but it wouldn’t be so bad if it was a clear channel and all the details were extremely transparent but in case you haven’t noticed the banking infrastructure in the United States has been far from stable and has undergone a large number of changes in the relatively short 4 year period.
From fluctuating interest rates, subsidized loans, unsubsidized loans, PLUS loans, private loans et al; most students are left feeling like they were just hurled through a hurricane and are completely disoriented as to where they should go and what options are available. If you are like me, you thought you had it pretty well figured out but as the exit counselors start talking about the seemingly endless number of possibilities for payback, penalties and interest rates even someone with a profound interest gets confused and sick to their stomach.
Cut the crap!
So what does the average student really need to know during this financial abortion process to try and at least make the most sense out of the situation? First of all, you need to know that the government and all the failing banks were kind enough to randomly (and with no apparent logic), fling your loans to every corner of the room. Therefore, you are going to need to be 100% sure you know every single establishment that you owe money to, or else they will screw you guaranteed.
Once you know exactly who is holding your debt, you then need to asses your current financial situation. Given the fact that most people are finding it more difficult to grab a job you may want to consider an income based repayment method. However, for 90% of the students out there, here is how you are going to keep it simple:
1. Diligently collect the paperwork and names of banks you owe money to
2. Nail down your sources of income for at least the next 12 months
3. Wait 5 1/2 months until after graduation to consolidate your loans
4. Setup auto withdraw to this new singular loan so you are never (with a discount!)
5. Work your ass off, pay off high interest first (credit cards, auto, mortgage) THEN student loans
So you might be asking yourself “Why do I wait 5 1/2 months to consolidate my loans?”. You wait my friend because as soon as you consolidate you responsible to go into payment of your loans immediately. You do however have a 6 month grace period that is intended for you to “find a job” but honestly if you are reading this blog you and I both know you are too driven to just work for someone else…
You are going to want consolidation with auto withdraw because not only will it make sure you are always on time, but most lenders will give you a .25% discount for auto payment and this will make up for most if not all of the added interest cost that will be tacked onto your loan for consolidation. THIS IS GOOD though because imagine the pain and added cost that a missed bill for these guys can create you… they can completely dominate your credit score, and by association your opportunities until you dump all the cash with penalty (read: blood money) to start clearing your name.
Paying off the higher interest debts first obviously makes sense because it will yield you the most buying power at the end of the day my minimizing the amount of money you have to burn in order to settle your debts. More buying power is directly correlated to your ability to cash in on opportunities that you, as an entrepreneur will inevitably come across.
As to my personal experience with all of this going on? It has left a foul taste in my mouth as I weigh the value proposition in which Universities are now offering the general population. A degree is becoming a commodity, and anyone with spirit, drive and hustle is going to have to heavily weigh their options in the near future. This is compounded by the skyrocketing expenses for a degree and lack of stability within the banking system.
If you are about to graduate though, congratulations and good luck. How has the debt of student loans effected your perspective on the college experience? And if you have been out of college for a few years, looking back was everything worth it? If so, why?
