10 Questions for … a Student Loan Consultant
Is it ever worth it to take on a big amount of student debt today for the promise of higher earnings tomorrow?
Debt is not to be taken lightly—it has significant and lasting consequences. However, education is highly valuable and arguably more important than ever—people with post-secondary degrees continue to have lower rates of unemployment and higher earnings over time. Of course, for many Americans, higher education is impossible without taking on debt, so I encourage clients to carefully consider what they can afford, borrow only what’s necessary, and look at federal loans first.
Do you believe the student-lending industry is broken—and, if so, can it be fixed?
We have a debt-based system of access to higher education, and I’m concerned that students and families are assuming unmanageable student-loan burdens that make it hard to save for retirement, qualify for a mortgage or start a new business.
So I’d like to see an increased emphasis on improving affordable educational alternatives (such as innovations that leverage technology, like Massive Open Online Courses or MOOCs), a simplification of federal student-aid programs, and better accountability in the student-loan “servicing” provided by companies that handle billing and are usually prone to error. Although I’m encouraged to see increased interest in these policy issues among elected leaders, I haven’t started holding my breath yet. But over time, and with continued commitment, I believe that meaningful reform is possible.
Are there any resources, strategies and tools that you’d recommend to borrowers who are deep in student-loan debt?
There is nearly always something that can be done to fix a federal student-loan problem, but the system is overly complicated—and the details matter.
Everyone should start by getting a clear inventory of their loans. For federal student loans, you can check out the National Student Loan Data System. And for private loans, you can consult AnnualCreditReport.com.
Other great resources to explore include StudentAid.ed.gov and StudentLoans.gov, which are both managed by the U.S. Department of Education and provide descriptions of the various federal-loan repayment plans, as well as offer calculator tools to help estimate future payments. And StudentLoanBorrowerAssistance.org, managed by the National Consumer Law Center, is especially useful for borrowers facing financial distress, student-loan default or collections issues.
In your experience, are college-bound students today any more aware of the perils of taking out student loans?
Yes, I find that students and families tend to be more committed to evaluating their options for financing higher education. But it remains the case that student loans are excessively convoluted—even the most sophisticated students and graduates struggle to navigate the system. So increased awareness of the perils doesn’t necessarily mean an increased ability to avoid the perils.