Today’s college graduates leave the graduation ceremony with more than just a diploma. According to CNN Money, two-thirds of the class of 2010 had “an average of $25,250” in debt. This data, taken from the Institute for College Access & Success’ Projecton Student Debt, reported that these graduating seniors entered the job market at a time when the “unemployment rate for young college graduates” was at an all-time high of 9.1%.
The Project on Student Debt looked at debt levels for students at more than 1,000 colleges and universities across the U.S and the District of Columbia. Students carry more debt due to increasingly high tuition fees and a struggling economy.
What Do College Students Owe?
Unlike scholarships, which are awarded to students by colleges and other organizations and do not need to be repaid, a loan for educational purposes needs to be repaid. The SmartStudent Guide to Financial Aid summarizes the 3 types of education loans:
- student loans — Stafford and Perkins loans
- parent loans — for example, PLUS loans
- private student loans — also known as alternative student loans
A 4th type of loan — known as a consolidation loan — can be used for the borrower to group all loans into one, unified payment. More than “$100 billion in federal education loans and $10 billion in private student loans are originated each year,” according to the SmartStudent Guide to Financial Aid.
Federal education loans are disbursed through each college’s office of financial aid with funds from the U.S. Department of Education as part of the Direct Loan program. Student loans, like Stafford and Perkins loans, and federal education loans, and Parent PLUS loans are available to students and their parents. The interest rate for federal student loans, Parent PLUS loans, and consolidation loans range from 6.8% to 8.5%.
Very few students can attend college without some form of financing. In the 2007-2008 school year, more than 65% of students in a 4-year undergraduate program graduated with some debt. The average debt for each student is approximately $23,186 (excluding Parent PLUS loans), according to the SmartStudent Guide to Financial Aid.
Using data from a U.S. Department of Education study, SmartStudent reported that the “median cumulative debt” was $19,999 in 2007-2008 school year. The U.S. Department of Education released its National Postsecondary Student Aid Study through its National Center for Education Statistics. A total of 114,000 undergraduate students and 14,000 graduate students were surveyed. With students carrying loan debt, finding employment is paramount.
Finding a Job To Pay Off Your debt
A USA Today article from 2010 chronicled the path of a Class of 2010 graduate. In the 2010 school year, there were 2.4 million graduates who received either bachelor’s or associates degrees as reported by the USA Today using data from the National Center for Educational Statistics.
Today’s graduate faces not only the task of finding a job but also will be competing against other graduates, workers who were laid off, retirees returning to the workforce, and graduates from previous years who still have not found employment.
Jason Ferrara, a senior career advisor for CareerBuilder, stated in the article that stiff competition for jobs is coupled with an unemployment rate above 9%. Ferrara, referencing a 2010 CareerBuilder survey, noted that less than half of employers would hire a new college graduate. Graduates who must repay debt after graduation face a bleak future.
What Happens If You Can’t Find a Job?
In today’s tough economic times, finding a job may not be possible for all graduates. But, with the burden of loans, students need to look carefully at their financial situation. CNN Money offers recent college graduates and others a primer on controlling personal debt.
According to CNN Money, the path to managing debt starts with looking at your financial situation, including examining:
- credit card balances, rates, and minimum payments
- loan balances, rates, and payments
- day-to-day spending — keep records of what you spend
The next step is to pay off debts with the highest rate first. For college graduates, the highest debt will be the student loan. CNN Money recommends that you seek the counsel of a financial advisor before your situation escalates.
If you are unable to find a high-paying job, but have a job, your loans will still need to be repaid. Students should know that there is a 6-month grace period for repaying a student loan. The SmartStudent Guide to Financial Aid recommends that recent graduates adhere to the following guidelines when dealing with their student loans:
- set up a folder for all loan paperwork
- add a reminder to your calendar when the payment date is due
- don’t miss a payment
- set up an automatic debit from your checking account
Graduates may apply for a temporary suspension of loan payments in times of economic hardship, according to SmartStudent Guide to Financial Aid. But, suspensions of loan repayment will increase the amount of the loan.
Another option for graduates who need to repay their loans via monthly payment is a short-term loan. Short-term loans are also known as payday loans. A payday loan or short-term loan can be obtained from a payday lender. Payday loans range in amounts from $100 to $1,000, with finance charges, maximum loan amount, and repayment date varying by state and lender.
Graduates face an uncertain future with high unemployment rates and jobs harder to find than in previous years. With planning and patience, graduates will learn how to manage their loans and their financial situation.