How to manage student loan debt
Soon the sounds of "Pomp and Circumstance" will fade and thousands of college graduates will have to really start facing the music -- their education loans.
For them, I have a new tune: Know what you owe.
That should be the mantra for every student borrower because an unsettling number of graduates -- and their parents -- only have a vague idea of how much has been borrowed. It's only after the degree has been obtained that they add up the costs. Many don't know who they borrowed from or how many different loans they have.
In 2008, about two-thirds of students graduating from four-year colleges and universities had student loan debt averaging $23,200, according to data analyzed by the Project on Student Debt, an initiative of the nonprofit Institute for College Access & Success.
Okay, graduates, so now that you have your degree, what do you know about your loans, and how will you manage them?
For this month's Color of Money Book Club selection, I am recommending a CliffsNotes book -- "Graduation Debt: How to Manage Student Loans and Live Your Life," by Reyna Gobel. True to the CliffsNotes brand, this compact guide walks you through the student loan labyrinth starting with "know what you owe."
"In order to work toward paying off your student loan debt, you need to be aware of the existence and the amounts of each loan," writes Gobel, a freelance financial journalist who amassed $63,000 in student loans obtaining her bachelor's and then two master's degrees.
More than 1 million people have at least $40,000 in student loan debt, according to data from the National Center for Education Statistics, Gobel reports.
The book starts with a pop quiz that I know many recent graduates would fail: How many different federal student loans do you have? Do you know the servicers on each loan or the interest rates on every single loan, or how many are subsidized or unsubsidized?
"Whether you just graduated from college or you've been out of school for a decade, it's not always easy to keep tabs on eight semesters of loans," Gobel writes.
She is tender where I might be tough. I think you darn well should know intimately every single loan you've taken out long before you take that graduation march, especially when you're locking yourself into financial bondage for several decades. Maybe if more students kept up with how much debt they were accumulating and the interest due, they would borrow less.