By CityTownInfo.com Staff
April 20, 2009
Financial experts are offering advice to cash-strapped, unemployed new graduates who are now faced with seemingly insurmountable student debt.
The New York Times reports that according to FinAid.org, a Web site that specializes in financial aid, roughly two-thirds or about 1.8 million students have taken on student loans, and will graduate with an average debt of about $22,500. But since the economic downturn has resulted in many more graduates finding themselves without a job or with jobs paying far less than they expected, student loan default rates are on the rise: The Education Department recently reported that the default rate on federal loans was 6.9 percent, the highest rate since 1998.
"You often hear the quote that you can't put a price on ignorance," noted Ezra Kazee, who graduated from Minnesota's Winona State University last May with $29,000 in student debt and cannot find a job. "But with the way higher education is going, ignorance is looking more and more affordable every day."
Yet options are available for helping with federal loans. CNN advises graduates to consider volunteer work with loan-forgiveness programs, such as through AmeriCorps, Peace Corps and Volunteers in Service to America.
Graduates with careers in education may also qualify for aid: A portion of Perkins Loans can be forgiven for elementary or high school teachers with students from low-income families, and up to $17,500 from Stafford loans can be forgiven for math and science teachers working in high-need schools.
Similarly, many law schools forgive loans of students working in non-profit positions, and the National Health Service Corps and Nursing Education Loan Repayment Program offer loan forgiveness to doctors and registered nurses who practice in areas lacking adequate medical care.
The Times notes that all federal loans can be deferred for up to three years, although the interest will continue to accrue and can significantly increase the size of the loan. Another option is to extend the loan's term, though this too will add interest.
Beginning July 1, federal loan borrowers will be able to consider the "income-based repayment" program, which caps student loan payments at a reasonable percentage of income. Employees earning less than 150 percent of the poverty level will not owe any money. Loans will be forgiven after 25 years of payments, or after 10 years for public service careers.
Fewer options are available with private loans, but many are pushing for legislation to help ease the burden for students. Cleveland.com writes that the National Consumer Law Center, a nonprofit organization assisting attorneys working with poor consumers, recently released a report urging lawmakers to rewrite bankruptcy laws so needy students will not be plagued with student debt.