ATTACKING AMERICA’S DEBT:
TAKE CONTROL OF STUDENT LOANS
American Bar Association
Law Student Division
Work-A-Day 2012
WHAT ARE YOUR TOP STUDENT LOAN
FINANCIAL CONCERNS?
1.
2.
3.
STUDENT DEBT:
WHY IS THIS A PROBLEM?
•
Why is this a problem?
In today’s economy students who go to university and beyond are
facing more debt than ever before with fewer job prospects. This
toolkit is meant to give law students the information to help other
students learn about the debt that they are taking on and how to
handle it after they get out of school. This is an extremely timely
topic that students are facing and the Committee and the Law
Student Division are committed to helping students deal with their
debt.
THE COST OF COFFEE:
A STUDENT LOAN PERSPECTIVE
•
What does that cup of coffee actually cost you?
• Study time with 2-3 cups of coffee at Starbucks over 4 years can cost you as much
as $4500 in just PRINCIPLE, INTEREST, AND FEES.
DID YOU KNOW?
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The nation’s national student loan debt is GREATER than the nation’s credit card debt.
•
The average outstanding balance on graduate student credit cards is $8,612, an increase
of 10% from the 2003 average of $7,831.
•
Of students in both a professional or graduate program 56.4 percent of students are
borrowing with a cumulative debt of $40,297.
•
Of those who are in law school 88.6% are borrowing money to pay for school compared to
55.2% of graduate school.
•
The average cumulative debt is $80,081 compared to $31,031 of those in graduate
school.
BREAKING DOWN THE FACTS:
UNSUBSIDIZED LOANS
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Federal government loans that are not based on financial need
• Dependent of Independent Student
• Maximum Amount of loan based on student status
•
Public Service
•
Income Based
•
Volunteer
•
Budget Resources
•
10 Tips on Repayment
•
Online Resources
BREAKING DOWN THE FACTS:
GRADPLUS LOANS
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Unsubsidized Loans
•
GradPLUS Loans
•
Public Service
•
Income Based
•
Volunteer
•
Budget Resources
•
10 Tips on Repayment
•
Online Resources
MAKING THE MOST OUT OF RESOURCES:
BUDGETING
•
Budget Resources
•
10 Tips on Repayment
•
Online Resources
REPAYMENT OPTIONS:
PUBLIC SERVICE LOAN FORGIVENESS
•
How it works?
• Make 120 qualifying loan payments on eligible Federal Direct loans while working
full-time in a qualifying public service program AND
• The federal government will forgive the balance remaining on those Federal Direct
Loans
• While the debt is forgiven, it is counted as income for that year
•
Three Steps to earning PSLF
• Must have eligible loans
• Full Time Work in Qualifying Employment
• Make 120 qualifying payments on those eligible loans while in the qualifying
employment
REPAYMENT OPTIONS:
INCOME BASED REPAYMENT
•
Monthly payments are calculated based on income, rather than the amount owed
•
Qualification
• Annual amount due on all of a borrower’s eligible loans exceeds 15% of discretionary
income
•
Loans
• Only federal loans apply (no commercial or private loans)
•
Bonus
• If you have a partial financial hardship and are allowed to enroll in the Income-Based
Repayment program, you may also qualify for the PSLF program after making 120
payments
REPAYMENT OPTIONS:
VOLUNTEER
•
AmeriCorps
• Serve 12 months and receive up to $7400 in stipends plus $4725 to be used towards
loans
•
Peace Corps
• Volunteers can ask for deferment and partial cancellation of Perkins Loans
•
Volunteers in Service to America (VISTA)
• Receive $4725 after completion of 1200 hours of service
10 TIPS
ON DEBT REPAYMENT
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1. Stop Increasing Your Debt
• Eliminate all excess credit cards. Keep one for use only in emergency situations.
•
2. Record Your Spending
• Keep a log or use an online tool so you can see how you are spending money.
•
3. Categorize Your Spending
• Must Haves – Living necessities such as food, rent, insurance
• (Debt payments are a “must have” – pay more than the minimum required)
• Should Haves – Things you need, but can do without for awhile (new clothes, gym
membership)
• Like to Have – Things you do not need, but enhance your life style (cable TV, coffee
shops, additional functions on your phone)
10 TIPS
ON DEBT REPAYMENT
•
4. Make a Budget Based on Your Spending Record
• Write down the amount spent in each category; make your budget reasonable
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5. Determine Your Debt Fund Amount
• Based on your new budget, there will be areas of spending which can be cut back to
provide extra money to put towards your debt
• Be realistic and come up with budget amounts that enable you to live
•
6. Determine how much you owe, to whom, and on what terms
• Create a spreadsheet including the name of the creditor, your total balance, your
minimum monthly payments, and your interest rate
• Prioritize the debt – high interest rates or past due debt is a priority
10 TIPS
ON DEBT REPAYMENT
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7. Pay it Off
• Apply your budgeted debt fund to your debts – the “extra” money should go towards
the debt with the highest priorities
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8. Continue With the Process Until You Eliminate Your Debt
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Cancel convenience credit cards (gas, store cards) after paying them off
9. Don’t Give Up!
• It took awhile for the debt to accumulate; it will take time to pay it down
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10. Additional Resources
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Resources include Debtors Anonymous and Credit Counseling
BENEFITS OF USING
CASH WHEN REDUCING DEBT
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Using cash will make you feel as though your are spending more money than when using
plastic
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You can avoid financial mistakes and bank fees based on overdrawn accounts
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Make major purchases with cash that you have saved
• Only finance items that are absolutely necessary
ADDITIONAL RESOURCES
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Online Resources
• Equaljusticeworks.org
• Studentloans.gov
• http://www2.ed.gov/offices/OSFAP/DirectLoan/calc.html - Loan Calculator and
Budget tool
• Finaid.org/loans