By Dr. Daniel B. Prescott, Jr., NDG Special Contributor
The season of graduation is upon us and there are very few families out there who can’t name someone taking a trip across the stage to receive a diploma. In my day, that was just reserved for high school and college. Nowadays, there are even graduations for pre-kindergarten classes! The topic of graduation is an important one because it means that a chapter in your life is closing and a brand new one is opening up just over the horizon.
My column this time around is going to delve into the topic of student loans. Yes, I’m aware that I don’t know too many pre-kindergartners putting themselves through school by borrowing money, but for a large portion of our folks attending college, student loans are a necessary lifeline. According to last year’s statistics, two-thirds of college graduates completed school with some form of student debt. The average amount? $37,000 per student.
For those who find themselves beholden to loans to finish schooling, I have some words of wisdom for you: You can’t put a price on the value of becoming an educated individual, but you can put a price on the failure to adequately pay back your student loans–your future credit score.
I want to provide some instruction on basic do’s and don’ts about student loans and recent graduates who utilized financial aid should heed this advice carefully. First and foremost, how familiar are you with your student loans? Did you read the fine print, or did you cash the checks, only interested to see how far the money would last for room and board, books and tuition? Typically, your student loan payments are expected to come due six months after graduation. That’s not much of a grace period.
While there are multiple forms of financial aid available to students who qualify, almost every instance requires some form of repayment. Familiarize yourself with what your loan repayment requires and make a plan. And don’t wait until you’ve landed that first six-figure job to get started. You can meet with your financial aid representative or loan servicer and create a payment plan immediately. Your representative should be skilled in helping you determine what you can afford to allocate as you integrate yourself into the workforce.
If you have multiple student loans, you may be eligible for a consolidation. Keep careful track of your payments. Go out and buy a simple ledger book if you have to. There are even several mobile apps and websites designed to get you on the right track. A full listing of these can be found on the helpful website, www.studentaid.gov.
Once you’ve begun paying back your student loans, pay back more than your minimum balance if at all possible. Works the same way as a credit card. You’ll cut into the principal amount rather than just covering the interest, allowing you to pay off your student loan quicker.
If at any time you find yourself unable to meet your student loan repayment obligations, don’t ignore your debt! Take action. The most important factor is keeping your loan servicer continually aware of your situation. You can request either a deferment or forbearance period, but you must follow specific instructions for taking advantage of these options. Each will require you to prove eligibility for them.
If you don’t pay a student loan repayment on time, it will be considered delinquent. Failure to make any form of payment to your student loans past 270 days is considered a default. And you don’t want that term on your credit report if you hope to drive a nice car some day or buy a house in the future.
If you aren’t aware, under certain circumstances, a portion or all of your student debt can be eliminated in a process called student loan forgiveness. To qualify for student loan forgiveness, it usually entails some form of volunteer work, military service, the practice of medicine in certain specific communities, or meeting other justifiable criteria. Under an initiative begun by President Obama, you can read up on the Public Service Loan Forgiveness Program (PSLF) or visit www.studentdebtrelief.us  to find out if you qualify for any of the programs. Their toll-free number is 1 (844) 669-4407.
To all of our recent graduates, we congratulate you and wish you the best of luck. If you are leaving school with student loan debt and don’t know where to begin, Transformance is always available to answer your questions and assist you via our website, www.transformanceusa.com or by calling 1-800-249-2227.
Dr. Daniel B. Prescott, Jr. is the interim CEO of Dallas-based Transformance Inc., a fully integrated financial services capability nonprofit. He can be reached at dbprescott@transformanceusa.org.
