*POCSmom’s DIY Insight: College Lists and Student Loans

Cliché: Default on.    
POCS Reality: Colleges and the government keep track of student loan defaults.      

 

Horrible. Disturbing. Frightening. I’m talking about the growing student loan default rate. When forming a college list think ahead so these words don’t apply to your situation.

The Department of Education’s latest figures show a 2003 low default rate of 4.5% rose to a 2009 8.8%:  

http://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html 

Although the late 80’s and 90’s had double digit default rates, they fell steadily until 2003. Now they’re at a 12 year high:

http://newmexicoindependent.com/71400/college-loan-default-rates-hits-12-year-high

and bankruptcy is growing among college grads:

http://money.cnn.com/2011/09/13/news/economy/bankruptcy_college/

POCSmom’s DIY Insight: Choose colleges that are affordable for your family now and after graduation. Add up available savings but don’t raid retirement funds. Project potential income and length of time to secure employment. College is supposed to help not hinder a student’s financial future.

If you need to borrow, choose a federal education loan not a private loan or home equity loan. Federal student and parent loans are regulated by the federal government, have special terms and interest rates, unique loan forgiveness programs, and do not require collateral.

Before borrowing, calculate monthly repayment amounts including the amount borrowed (principal) and borrowing costs (fees and interest). Make sure you can afford any loans.

Note: student loans are treated differently from other consumer loans under bankruptcy laws and it is much harder to obtain a discharge.

*POCS: Parent Of a College Student