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Released: January 08, 2015
Paying for college: What are the options for student borrowers?
Whether you're looking to fund higher education or paying back school loans, we found the resources you need to see
WASHINGTON, D.C.- As college application deadlines loom, it’s time for students and their families to consider how to pay for higher education. If you are one of the seven in 10 college students who will need help paying for their education, it’s hard to know where to begin or how to get help. One thing is certain: The earlier you learn about your options, the faster you can get on the path to becoming debt free post-graduation. Consumer Action has surveyed some of the best student borrower resources available and compiled them into its new Student Loan and Education Resource List.
With the student loan business burgeoning, it’s hard to determine what is sound financial advice and how to avoid predatory lenders who prey on young students with dangerously high interest rates and illegal debt collection practices. The List targets three types of student borrowers:
• Students and families looking for education funding;
• Student borrowers currently in repayment;
• Student borrowers struggling to make monthly student loan payments.
While higher education has shown to significantly boost lifetime earnings, many students are confused by their options when it comes to securing the finances needed to attend college or vocational school. Knowing the difference between federal and private loans could have a huge bearing on your future financial security and your ability to repay the debt once you graduate. If you’re looking for grants or financial aid, you’ll want to know if you are eligible and how to apply. Consumer Action’s List provides resources written by the Department of Education, the Consumer Financial Protection Bureau and many other reputable sources that help explain students’ options.
According to the Wall Street Journal, 77 percent of college seniors who graduated in 2014 from public and private non-profit colleges owed an average of $33,000. This can be a daunting figure as recent grads enter the workforce and begin prioritizing numerous monthly expenses, like rent, health insurance and car payments, on an entry-level salary. It’s important to remember that student borrowers with federal loans have greater repayment options and don’t have to accept the monthly payment amount their lenders suggest. While private loans have less flexible payment options, it’s crucial to establish clear repayment guidelines with your loan servicer. The List links to resources that help borrowers communicate their needs to the companies managing their loans.
Though the national student loan default rate hovers around 14 percent, the future isn’t hopeless for borrowers struggling to make their monthly student loan payments. There are options to get out of default and to have a default status removed from one’s credit report. For instance, many borrowers don’t know about income-based repayment (IBR) plans, which use salary scales to determine monthly student loan payments based on the borrower’s income and family size. There are also student loan rehabilitation options that help borrowers consolidate their debt, making monthly payments more manageable. The List links to several sources that provide borrowers with advice about their options, including easy-to-follow instructions.
While taking on debt may seem an unfortunate necessity for those seeking a brighter future through higher education, making wise borrowing and repayment choices is possible if you research your options from trustworthy sources. Consumer Action’s Student Loan and Education Resource List will help you move forward, whether you’re anticipating your upcoming college career or hoping to get back on track and pay down your outstanding student loan debt.
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About Consumer Action
Consumer Action has been a champion of underrepresented consumers nationwide since 1971. A non-profit 501(c)(3) organization, Consumer Action focuses on consumer education that empowers low- and moderate-income and limited-English-speaking consumers to financially prosper. It also advocates for consumers in the media and before lawmakers to advance consumer rights and promote industry-wide change.
By providing consumer education materials in multiple languages, a free national hotline, a comprehensive website (www.consumer-action.org) and annual surveys of financial and consumer services, Consumer Action helps consumers assert their rights in the marketplace and make financially savvy choices. Nearly 7,500 community and grassroots organizations benefit annually from its extensive outreach programs, training materials and support.
Paying for college: What are the options for student borrowers? (Student_List_PR_1-15.pdf)