Categorized | Student

Student Loan Debt

Posted on 25 September 2008

Will it be Wendy’s or McDonald’s for dinner tonight? Have you and your six roommates decided which consignment shops you’ll visit to beef up your spring wardrobe? Gladiator is out on video, just in case you couldn’t afford a ticket to see it in the theaters. If this penny-pinching profile describes you, you’re not alone. College students and graduates are sinking deeper and deeper into loan debt. Yet they struggle on, trying to maintain a standard of living that allows them to stay on their chosen career course.

Since 1966, an estimated 40 million students and their families have borrowed approximately $270 billion dollars in federal student loans to pursue post-secondary education, according to Erin Love, public and media relations representative for Sallie Mae (Student Loan Marketing Association).

Given today’s skyrocketing tuition costs, it’s not surprising that 82 percent of all enrolled medical students have education debt, according to Love’s research. The news isn’t any brighter for aspiring lawyers either. In addition to undergraduate loans, the average law graduate faces $80,000 in debt by the time his or her repayment schedule kicks in, according to a recent article in Student Lawyer Magazine.

Yet, as staggering as these student loan statistics are, borrowing is on the rise. Medical students took out more than $1 billion in federal loans in 1999, says Love.

Real World Worries
With a degree in hand, many college grads enter the job world not only having to repay their student loans, but loaded down with credit card bills, too. Almost 52 percent of young adults aged 18-24 carry plastic–and an average monthly balance of $584 per card, according to Steve Rhode, founder of, a non-profit financial crisis center.

Let’s face it, to obtain a credit card, all you really need is to be of legal age (18) and have a pulse. And creditors will extend credit to medical and law students in particular, based on their income potential, according to Rhode. “The [creditor] game is to extend the maximum amount of credit they can to you so that you can’t go anyplace else.”

The problems begin when student expectations for the future clash with the economic realities of life. “As many American students get close to graduation, they think that the money’s going to start rolling in and they naturally take on more debt,” says Rhode. “Many of them actually feel compelled to get a new car. Doctors often feel they have a certain image to keep up to appear successful to their peers.”

If you’re banking on earning the big bucks in this job market, keep dreaming. A starting salary in the six figures is the exception–not the norm–for the newly minted doctors and lawyers of today. The median starting salary for law grads is $50,000, according to Student Lawyer. Even if you work for a big firm in a large metropolitan area, where you may be able to negotiate better-than-average wages, the costs of rent, transportation, clothing, food, and student loan repayment will siphon off excess cash flow.

Loan repayment takes 8 percent or more of the typical graduate’s monthly income, so you may want to re-think that BMW lease and go for the Honda instead. And just because you received a tempting mail offer for a high-limit credit card, “it doesn’t mean you should accept it,” Rhode advises. “You can tear it up and throw it away.”

Financial Foul-Ups
Living on borrowed money causes serious anxiety for many students. “The hardest part of getting out of debt may be overcoming your denial,” says Rhode. “While being in debt seems like a real life crisis, credit bills don’t kill people.”

If you find yourself in over your head and you can’t make payments on one or more of your student loans, don’t freak out. There are a slew of resources from repayment programs to debt counseling organizations and books that exist today to help you get your financial life in order. For starters, it’s worth investigating if you are eligible to cancel or defer your student loans. The process for obtaining and maintaining a deferment involves a great deal of paperwork and government red tape. And one of the following conditions must apply: you die, you are unable to work or go to school because of a terminal injury or illness, or you attended a trade school that went belly-up or falsely certified you.

You can also defer payment on certain loans if you are unemployed–but actively looking for new work. According to Robin Leonard, author of Take Control of Your Student Loan Debt (, you may be entitled to a three year deferment if you receive public assistance, such as welfare.

Even if none of this applies to you, there are still options. Teachers who serve certain populations–including low-income or disabled students–may qualify to have their student loans canceled, according to Leonard.

In order to recruit health care professionals for communities in desperate need, the National Health Service Corps extends loan-repayment funds to health care professionals who commit two years to priority health professional shortage areas (HPSAs). The benefit can reach up to $50,000. For eligibility and regulations, check out the Web site.

Other Options
If you’re in way over your head and facing hard times, consider applying for a forbearance. In this instance, your loan holder may allow you to postpone or temporarily reduce loan payments if you are experiencing hard times. Forbearances are often easier to obtain than deferments and they will keep you out of default, according to Leonard. The downside is that interest will continue to accrue while you are not making payments, regardless of what type of loan you have. This means that your loan balance will increase during a forbearance period.

Your loans have probably been placed in default if you’ve missed one or more loan repayments for a period of time (typically nine months). Be prepared for the consequences, such as receiving harassing letters from a collection agency or having your default reported to national credit bureaus. More serious actions may include adding collection fees to your student loan balance, having the Department of Education take hold of your IRS tax refund, having your wages garnished, and even being sued.

And nobody wants that.

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4 Comments For This Post

  1. collegeloanconsultant says:

    Also, you cannot discharge your student loan debt through bankruptcy- whether they are federal or private loans.

  2. John Roberts says:


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  3. Chris Chen says:

    You guys have no idea how many student loans I got. I’m entering contests and working two jobs and applying for more scholarships. Recently I enterd for a chance to win $10,500 worth of prime tech stuff, brand new decor and more. Enter the Residence Renovation Contest and amp up your rez!

  4. Pell Grant says:

    I agree that student loan debt can be crippling to recent graduates who simply need to make ends meet, although it doesn’t make sense to attend a college that may be out of reach in terms of tuition costs when you can choose a state school that may be significantly less.

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