Friday, January 27, 2012

Guest Post: Mitigating That Student Loan Burden

This is a guest post written by Sam Peters, who frequently blogs about topics relating to money and personal finance.

Those of you following my battle against debt have probably realized that a substantial portion of that debt – around $13,000 worth at the end of last year – is tied up in student loan obligations. Student loans reflect a different sort of debt when it comes to prevention or mitigation. Consider it this way: someone with thousands of dollars of debt sitting on their Visa likely made some imprudent spending decisions in the past. But a person trying to pay off their Discover graduate student loans, for example, was probably fully aware of their impending burden when they took out the loans in the first place. They knew they were going to be in debt, they saw the writing on the wall, but they decided that it was worth it to get an education.

Considering the importance of a college degree these days, I believe that there is certainly nothing wrong with that approach. I have student loan debt, to be sure, but education I received has contributed to a job that helps me pay off that debt. In the long run I come out even, if not (hopefully) on top.

So I don’t regret deciding to take out loans and financing a college education. But what I do regret is that I didn’t take concerted steps to reduce the cost, the number of loans I needed to take out, and consequently the debt with which I graduated. If I could go back in time, I would tell my pre-college self to try harder to bring down my college costs. Specifically, these are the tips I would recommend:

Boost Financial Aid

Increasing the amount of financial aid you receive is naturally often a losing battle. Still, there are countless tricks that I may no effort to try back in the day. These tricks include investing assets in retirement accounts, taking yourself as a dependent, and including family liabilities if you have siblings in school at the same time.

Follow A Loan Forgiveness Program

Many schools, scholarships, and financial aid programs provide stipulations whereby a graduate can earn forgive on loan interest if they pursue certain public sector careers for a given amount of time. While such work doesn’t exactly interest me, it would have been nice if I had kept those options open. I could have paid off my debt and moved on to a different job by now.

Save on Textbooks

A surprisingly significant portion of my student loan debt comes not from textbook costs. I’ve always appreciated that textbooks are expensive, but I never realized how quickly that all added up. If I was redoing college, then, I would make a point to shop for textbook deals on, share books with friends, or simply forgo a non-required class that has a heavy reading load.

There are many other tips for reducing your student loan debt, but there are the three main ones I would probably give my pre-college self. Too bad time travel isn’t possible. But fortunately, someday my student debts will be gone and – hopefully – the benefits of my degree will continue to live on.


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