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Don’t get swamped by student loan debt
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Money ManagementMonthly financial advice
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Are you or someone in your family facing heavy student loan debt?
Recent graduates left college with an average of $19,646 in student loan obligations, according to a study by the Project on Student Debt. That was up 8 percent from a year earlier, while average starting salaries rose only 4 percent from the previous year, the study found. That means the debt that graduates are carrying is growing faster than their initial chances to earn the money to repay it.
There’s no reason to despair, though, according to the Maryland Association of CPAs, because there are several steps that you can follow to manage weighty student debt.
Lower your payments
If your monthly loan costs are simply too much, one simple and immediate solution is to reduce them by finding out if you can lengthen the amount of time you have to pay the loan —- from 10 years to 20 years, for example. You should be aware that extending the loan term means that you will end up paying more interest over time, but lowering the monthly payment amount may be your top priority right now. Remember, that you can always increase your monthly payments later —- and thereby shorten the length of the loan —- if your financial situation improves in the future.
Consider consolidation
Students often sign up for a number of different loans to finance their education. That may mean you end up writing several checks to different lenders at various points in the month.
When you consolidate, you take out a new loan that is equal to your total debt and use it to pay off all your existing balances. You then can pay just one student loan bill each month. That will make life easier, but it may not necessarily lower your overall monthly outlay, depending on the new loan terms.
If you do find a consolidation loan that will reduce your monthly payments, make sure to examine the loan terms carefully. And remember that if you will be paying off the consolidation loan over a longer period, the loan will cost you more in the end, so it may not be the best choice.
Do well by doing good
Do you wish you could make a difference in the world? It’s possible to cancel some or all of your federal student loan
balance by signing up for any one of a number of programs aimed at making positive change.
For example, teaching in an elementary or secondary school in a low-income area can reduce some federal loan totals, while serving a two-year term in the Peace Corps can also lead to a reduction in your loan balance. Volunteers for AmeriCorps and VISTA may qualify to postpone loan payments while they are involved in the program and receive stipends that can be used to pay down student loan debt. Health professionals who spend two years working with the National Health Service Corps serving communities that have a shortage of medical help can qualify for loan forgiveness of up to $25,000 a year. In addition, many law schools have loan forgiveness programs for newly minted attorneys who take jobs in public interest law.
If you have a strong interest in making a difference, then that commitment can also help you relieve some of your student loan obligations.
Ask a CPA
Whether you are seeking to reduce your regular payments or manage your overall student debt obligation, your local CPA can provide advice on the best way to accomplish your
goals. Consult him or her about smart ways to handle your debt or about any of your other financial questions.
Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.
Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.
For CPA referrals in your area, contact the MACPA at
The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.
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