Dear Class of 2013,
Congratulations on finally finishing school! You exit school with friendships, memories, and an education that nobody will ever be able to take away from you. Unfortunately, you are graduating at a difficult time. You are among the first graduating classes to enter an American Workforce where more money is owed on student loan debt than on credit cards; today Americans owe over one trillion dollars on their student loans. You are also entering a workforce that has far more workers than jobs.
In the very near future, most of you will start getting letters, emails, and phone calls from many student loan companies. Some of these companies may be totally unfamiliar to you. It can be a stressful time, but its very important you make smart, well researched decisions. Many “debt relief” companies prey upon naive recent grads, and its not always easy to tell the substance from the sales pitch.
As someone who was in your position only a few years ago, I have a bit of advice I’d like to share with you. First and foremost, now is the time to start planning your financial future, research and learn exactly how much you will be paying each month on your student loans, and learn how long it will take for the loans to be paid off in full. Not only is this great information to have, but if you are one of the lucky few who has a job waiting, you may even be able to use this information when negotiating your salary.
Here are a few extra tips just for recent grads:
-> Never, ever, ever, consolidate your federal government student loans with a private company. http://www.loanconsolidation.ed.gov is the ONLY place to consolidate your Federal loans. Remember all the advantages of Federal Loans over Private Loans? If you consolidate your federal loans with your bank, those advantages go away.
-> You are now entering your 6 month “Grace” period. “Grace” is a terribly misleading term here. It would more aptly be called the “balloon” period. Your loan servicer may not tell you this, but unless all your loans are subsidized, the balance grows during this payment free time. If you have the money to pay down some debt, don’t wait… and make sure it goes towards your unsubsidized or private loans.
-> Visit http://studentloanjustice.org and read just a few of the horror stories. It can happen to you if you are not careful.
At this point in time, you now have a fancy college education. Don’t think for a moment that your learning has stopped. Learn everything you can about student loans. If terms like IBR, PAYE, compounding interest, or loan forgiveness are foreign to you, fix it. There is no shame in asking questions or asking for help. In fact, not asking questions or getting advice can be very expensive. Don’t let your ignorance cost you money.
I sincerely apologize if I’ve become the bearer of bad news, but if this letter is the slap in the face that motivates you to get your act together, then I’m really not that sorry.
Congrats on your graduation and good luck out there!
– The Student Loan Sherpa