The Student Debt Juggernaut

More and more college graduates seem to be talking about the same thing.  How am I going to pay off my college loans?  We have created a student debt juggernaut that is overwhelming.  According to Student Loan Hero, a website that tracks the student debt statistics, just last year the average student debt of a graduate rose 6% to a new all-time high of $37,171.00.  Nationally, the student debt load rose to 1.4 trillion dollars.  That’s greater than what Americans owe for car loans and credit card debt.  In fact, this issue is so great that it was in the national spotlight during the campaign season last year, with both democrats and republicans seeking to resolve the issue.  If we are not careful, the student debt juggernaut will keep growing and cause many college students to stumble for years after their graduation.  What is the solution?

Student Debt: The Governmental Solution

Student debt has become so large that both republicans and democrats have taken notice.  And, although their solutions are quite different, even their acknowledgement of the problem should cause us to take notice.  President Trump, on the campaign trail, proposed revising the federal loan forgiveness program.  His idea was to shorten the length of the debt forgiveness program by making the minimum payments higher.  But many believe that this would only create a greater rate of default.  The current rate of delinquency and default looms around 11.2%.

Other governmental solutions include: eliminating PLUS loans and privatizing all student loans, using federal loans to refinance private loans, or even using some form of employer contribution system.  No one is turning a blind eye to the situation, however, no solution seems to be within reach.  The only prediction…greater student debt.

Student Debt: Good Financial Planning

Even though there are many who graduate college with a load of student debt, there is another alternative.  But this alternative is not for the timid.  It takes hard work and sacrifice.   It is possible to put a plan together that will allow you to get a college education and not incur a mountain of student debt.  Not many people plan enough for their college years simply because loans have become so readily available.  Again, you can create a college financial plan that will meet your needs.

Do you have a good financial plan for the college years?  The best plans start when the future college student is still in preschool.  But there is no bad time to start planning.  These plans should include both financial planning and college preparation.  Start a plan today.  If you need help designing a good plan, contact us!

 

Student Loans 101: CHESLA

College financial planning is more important than ever.  In a 2016 interview, one parent made the comment that it is “impossible to pay for college without some kind of help”.  This is becoming more and more of a reality for every potential college student.  In fact, finances are becoming the number one reason students attend a particular college.  Because of this immense financial pressure, more and more people are turning to student loans to fill the gap between their college funds and their college needs.  But not all student loans are created equally.

Student loans are not our preferred way to take care of the soaring cost of a college education.  However, we do feel it important to offer some guidance for those who may be searching for college loans.  In particular, we want to highlight Connecticut’s state option for student loans, the Connecticut Higher Education Supplemental Loan Authority (CHESLA)

What is the CHELSA?

CHESLA says its vision is to “serve as Connecticut’s leading resource for students as they plan for their college education.”  They continue by stating that they want to “encourage interest in higher education to help the State meet its workforce needs; and enhance economic development through innovative higher education programs.”  As one person said, “It’s Connecticut money for Connecticut students.”  But their mission is greater than just providing student loans.  In their own words, their desire is to “expand higher educational opportunities and enhance the State’s economic development through higher education.”  This is a great offering to those who live in Connecticut.  If you do not live in CT, it would be worth your while to see if your state offers a state sponsored funding option for your student.

Using CHESLA to Pay for college

You can find CHESLA’s loan details on their official website at www.chelsa.org.  But here are a few of the items that make this such a good offering.

  • No application fees
  • Low, simple interest
  • Payment deferral program
  • Borrow up to 100% of your college need
  • No prepayment fee

If you have done any research on student loans, these features are in line with other offerings.  But, what sets the CHESLA apart is that the interest rate is “4.95% Fixed Annual Rate (non-tiered, simple interest)”.  This is almost 2 percentage points lower than most student loan offerings available.  We think the CHESLA is an option that every one should investigate.  It may not be good for your particular financial needs, but then again, you won’t know until you investigate.

Using CHESLA to Refinance current student loans

Recently the CHESLA also became available as a refinancing option.  Starting June 2016, students could apply for the CHESLA refinancing program.   This program offers many of the best benefits of the original CHELSA program.  Again, this option may not be the best option for your specific financial needs, but it is a good offering for you to investigate.

I must restate, that it is never the best idea to use debt as a way to pay for one’s education.  However, if you must take out student loans, make sure you do a little investigating.  Student loans can have many pitfalls, but for some, they are a viable tool available to secure college funding.  One such pitfall about the CHESLA, that is a little hard to find, is that “interest-only payments are required while in school and the repayment period.”  While this was not listed directly on the CHESLA website, it is mentioned on another website regarding CT’s 529 plan called Connecticut’s Higher Education Trust (CHET).  Before you sign any student loans, make sure you have a solution that fits your specific college needs.