Like The Herald Business Journal on Facebook!
The Herald of Everett, Washington
Heraldnet.com

The top local business stories in your email

Contact Us:

Josh O'Connor
Publisher
Phone: 425-339-3007
joconnor@heraldnet.com

Maureen Bozlinski
General Sales Manager
Phone: 425-339-3445
Fax: 425-339-3049
mbozlinksi@heraldnet.com

Jim Davis
Editor
Phone: 425-339-3097
jdavis@heraldnet.com

Site address:
1800 41st Street, S-300,
Everett, WA 98203

Mailing address:
P.O. Box 930
Everett, WA 98206

HBJ RSS feeds

Graduates should chart their loan debts now

SHARE: facebook Twitter icon Linkedin icon Google+ icon Email icon |  PRINTER-FRIENDLY  |  COMMENTS
By Michelle Singletary
Published:
The music has stopped, the cap and gown have been packed away, and now the work begins. But not the work you think.
Now you have to work on getting rid of your student loan debt. So where do you start?
“If you pay your student loan bills every month, and then try to forget the giant pile of debt to which your loans are attached — stop,” writes Reyna Gobel in “Graduation Debt: How to Manage Student Loans and Live Your Life” (Houghton Mifflin Harcourt, $16.99), which is the Color of Money pick for this month — again.
Several years ago, I reviewed the first edition of Gobel’s book. Oh, how times have changed, which is why I’m recommending the recently updated second edition.
College graduates — and many people who don’t have a degree — are carrying $1 trillion in student-loan debt. The burden is so heavy that many households headed by young adults with student loans lag significantly behind their peers in wealth accumulation, according to an analysis by the Pew Research Center. The gap is wide. College-educated young adults with no education loans have about seven times the net worth ($64,700) than households carrying debt ($8,700).
Thirty-seven percent of households headed by an adult younger than 40 currently have some student debt — the highest share on record, Pew found.
But “you can manage your student debt while maintaining a lifestyle that is productive in the grand scheme of a financially secure future,” Gobel writes.
To start, stop thinking one monthly payment at a time. You have to know what you owe. After four years of college, people could have two or three loans per semester, Gobel says. You have to face your debt demons — all of them, she adds.
After a bachelor’s degree and two master’s degrees, Gobel added up her debt. She had amassed $63,000 in loans. She’s still making payments. But she has used her experience and her buckle-down budgeting approach to paying off the debt and written “Graduation Debt,” which is part of the CliffsNotes brand.
Given the complexity of the rules around student loans, having CliffsNotes helps. Gobel gets you started with recommending that borrowers create a chart of their debt. From there her book covers a lot of territory, including defining loan terms, information on consolidating your loans, the difference between federal and private loans, various repayment options, budgeting, and strategies to pay your loans off early.
I love the advice about constructing a chart. Sounds simple. And yet lots of borrowers haven’t taken the time to map out what they owe. Gobel actually suggests creating two charts, one for your federal loans and another for any private debt you may have.
I’ve come across a disturbing number of student-loan borrowers who know very little about their loans. They can’t tell you the interest rates, what company is servicing their debt or even how many loans they have.
You have to take the step to organize the debt so that you don’t forget any loans and go into default. I was helping a relative organize her debt. She had no idea that she was in default on one of the loans because she had overlooked it.
If you’re having trouble making your loan payments, you’ll find a lot of help in the book on how to recover, including information about new regulations for people in default.
If you fall behind on your student loans, you have to make good faith payments to get out of default. For many people, such payments are unaffordable. But now there’s default rehab, Gobel writes. As of July, a new formula will be used to make default rehabilitation payments more affordable.
There are a lot of myths about student loans and Gobel debunks them chapter-by-chapter. You’ll find the section on budgeting helpful because you have to figure out where to find the money to make your loan payments.
This isn’t a summer-fun read. But it’s full of the information borrowers need to know. So, if you’re still trying to figure out what type of gift to give a recent college graduate, get this book if he or she has loans. It’ll help them get focused and hopefully on track to pay off their debts on time, if not early.

Michelle Singletary: michelle.singletary@washpost.com.
Washington Post Writers Group

Online chat
Michelle Singletary will host a live online discussion about “Graduation Debt” at 9 a.m. Pacific on July 3 at washingtonpost.com/discussions. Reyna Gobel will join her to answer your questions about managing your student loans. Send your comments about your student loan situation to colorofmoney@washpost.com.
Story tags » Personal Finance

MORE HBJ HEADLINES

CALENDAR

Share your comments: Log in using your HeraldNet account or your Facebook, Twitter or Disqus profile. Comments that violate the rules are subject to removal. Please see our terms of use. Please note that you must verify your email address for your comments to appear.

You are logged in using your HeraldNet ID. Click here to update your profile. | Log out.

Our new comment system is not supported in IE 7. Please upgrade your browser here.

comments powered by Disqus

Market roundup