(MS) - As college tuitions and room and board fees have risen dramatically over the last decade, one of the least publicized side effects of this rise in costs is the amount of debt facing college students once they graduate.
More than ever before, young college graduates are facing mountains of debt once they stroll across the stage in cap and gown to receive their degrees.
According to the Project for Student Debt, which works to identify cost-effective solutions to expand educational opportunity while increasing the public's understanding of the increased role borrowing plays in paying for higher education, recent college grads across the nation are starting further and further behind each year. In Minnesota, for example, 72 percent of 2006 graduates had to finance their education through borrowing. The average debt upon graduation? A startling $23,375.
While student loan debt knows no gender, the rising reliance on borrowing might be a cause of concern for young men more than it is for young women.
Research has indicated that women are far more likely to live on a budget than men, suggesting men might need more help when it comes to managing the growing amount of debt they're facing as they graduate from college. For young males about to graduate or those who have recently found themselves among the working masses, consider the following tips for student loan management.
· Know the grace period. This is specifically for recent college graduates who have yet to begin repaying their student loans. Student loans, unless otherwise specified, come with grace periods the time between leaving school and the day the first payment is due. Far too many students are taken by surprise when, six months after graduating or leaving school, they're mailed a bill for a couple of hundred dollars. That's the first payment on student loans, and depending on the loan (the first payment on a Federal Perkins loan is typically nine months after leaving school, while the Stafford loan is usually six months) it's due each month once the grace period expires.
For young men, who research has indicated might not be as budget-conscious as their female counterparts, knowing when these grace periods end is especially important. No one wants to start off on the wrong foot by missing the first payment.
· Payments can be postponed. As today's economy drifts closer and closer to a recession, many new college graduates will find it's not easy getting that first "real" job. This can be particularly stressful for young men who know full well the clock is ticking on repaying their college debt.
Fortunately, there are legitimate options to postpone repayment of student loans. Lenders often grant deferments to borrowers who are unemployed, experiencing health problems, or continuing their education. Better yet, for students with subsidized loans, interest will not accrue during the deferment period (no such luck on unsubsidized loans). Another, though less attractive, option is a forbearance, which is not as ideal because interest will continue to accrue regardless of the nature of the loan.
· Beware of consolidating. While consolidating loans is a common and beneficial option for most borrowers, it's important to research and understand the pros and cons of each before signing on the dotted line. The primary benefit of consolidating is convenience, as borrowers can combine multiple loans into one easy, manageable monthly payment. For men who might not have a knack for budgeting, combining loans into one monthly payment is especially valuable, as it makes bill paying that much easier. But be careful, as not all consolidating offers are equal, and loans can only be consolidated once.
One trap many recent graduates fall into is consolidating federal and private loans. This should never be done, as borrowers lose all the protections, such as deferment and forbearance, that federal loans provide.
· Don't ignore student loan bills. It's never a good idea to ignore any bill, but not paying back student loans is one of the biggest financial blunders a young person can make. If a person defaults on a student loan, which can happen if a payment is as little as 15 days late, a host of negative results quickly go into effect. Perhaps the biggest is that eligibility for federal grants and loans is now taken away, a tough pill to swallow for anyone considering furthering their education down the road.
Defaulting on a student loan also damages a credit report, something that will affect nearly everything most people do in their lives, such as purchasing a vehicle, a house, or even financing their own children's educations in the future. Collection fees on defaulted loans are also very large (nearly 20 percent on the total loan balance), and it's possible wages could be garnished if a loan goes into default. Defaulting on a student loan is perhaps the biggest mistake a person can make, and should be avoided at all costs.
As tuitions continue to rise, it's no coincidence the amount of student debt does as well. For young men, who haven proven to be less budget-conscious than women, managing that debt is of the utmost importance.
