The College Debt Dilemma And Tips To Solve It

College is back in session, and second by second, students are racking up more debt. As of this year, 43.3 million Americans owe a total of $1.26 trillion on student loans, and with an average monthly of payment $351. Graduates this year will pick up their diplomas owing, on average, $37,172.

Former Colorado State University professor Richard Gutowski, Ph.D., knows this situation intimately, having taught and advised college students for decades. He’s put his best guidance in his book, “Debt is a Four-Letter Word: The College Experience”, and shares these tips for scholars and parents who choose to take on student loans:

• Track  your student loan amounts owed judiciously. Once your loan amounts reach a certain level, and you’ll be bumped to a bracket that extends your repayment period, from 5 years to 10 for instance. Avoid a move to a higher bracket, and it will significantly reduce the amount of interest you’ll end up paying overall.
• As soon as you start your loans, begin making interest repayments. Borrowers have the option to defer repayment until graduation, yet interest that accumulates while you’re in school gets added to your overall debt. Over four years’ time, that can add up to a significant amount, forcing you to pay interest on interest. Alternatively, making reasonable monthly repayments at the start of your loan can save you thousands in the long run.
• Weigh the pros and cons of consolidating debt at the end of your studies.  Graduates are offered the opportunity to pool their loans to make a single monthly payment, rather than multiple payments on multiple loans. While more convenient, the flip side is that you’ll likely end up with a single loan with a much longer repayment term. Gutowski used the example of owing on four loans with a 10 year term that get converted to one loan with a 25 year term, again, putting the borrower in the position of paying significantly more in total interest.

A few simple decisions tied to your student loans can make a huge impact on what you ultimately pay.