RICHMOND, VA (WWBT) – Graduation is a big day for students but after the degree -- there's another major task, paying back those loans. According to one financial site, the class of 2011 is the most indebted class ever. Financial counselors say not repaying them will sink your credit score.
Leshana White thought college would only be a four year journey. That wasn't the case, she couldn't find a job and ended up staying in school in pursuit of a master's degree. Hopefully it means a better job - but it certainly means more student loan debt.
"I worry about it every beginning of the semester, every time I get my student bill and I see that it's like 3,000-5,000 I'm like now I'm up to 20,000," he said.
Student loan debt is now bigger than credit card debit in America. According to Finaid.org and Fast-web.com -- there's $850 billion in loans, compared to $828 billion in credit.
The average debt of Bachelor's Degree recipients is just shy of $20,000 -- add another $25,000 for a Masters. Patrick Owens is a Credit Counselor for Clear Point Credit Counseling Solutions and he said "once you graduate college, life kicks in."
Owens says the first things students should understand is that there is a difference between federal and private loans.
"The federal loans normally have a fixed interest rate, where as the private loans may be variable after you graduate. Those are the ones you want to focus on repaying first or making pre-payments during your grace period," he said.
The first sign of trouble is late payments. Owens says, "When you miss your payment they can charge penalties for it and that will affect your credit, you can do 30, 60 and 90 days behind and each time they report that a missed payment has gone through your credit score is declining lower and lower every month."
Owens says when it comes to repaying debt, planning is key. He says, "Make sure you know what your other expenses are, keep track of your other expenses. If student loans become a hardship an there are not many options available for you, see if there is anywhere in your budget you can cut back."
Some students may choose to defer the payment or go into forbearance -- both options give students a break from repaying -- but with forbearance, interest is accruing. If you're already behind -- you still have options.
"Don't cut the lender off and work with them see if there are any options they are willing to consider. With federal loans just see if you can consolidate your loans into one payment," he said.
Financial expert say also keep in mind there is no statute of limitations on student loans -- they stick with you forever. Also, when it comes to federal loans, if you don't repay them, the department of education can take your federal refund. For more information on student loan debt you can visit the links below:
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