The student loan debt nightmare continues

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    Student loan debt in the U.S.

    Student loan debt: still rising by degrees. (Shutterstock)

    The Senate passed a bill that could tie interest rates on student loans to the market.

    The plan passed Wednesday by the Senate and still subject to approval by the House of Representatives, undergraduate students this coming school year would pay 3.86% interest on all federal Stafford loans.

    At the moment, that means lower rates, but it’s a change from the fixed interest rates of the past. Republicans are happy with the change, some Democrats are not . Either way and no matter what the interest rate, the debt keeps piling up. More students are borrowing to finance college degrees. Outstanding student debt hit $914 billion in 2012. That’s up nearly 280 percent since 2003. 14.4 percent of that debt is past due.

    Since students take out a new loan each year, the changes mean graduates could have multiple loans at different fixed rates. Their monthly payment will be a weighted average of those rates, says Justin Draeger, chief executive of the National Association of Student Financial Aid Administrators.

    Student debt is now second only to mortgages as an overall household liability – eclipsing even credit card debt, which totals $672 billion. Student loans are also the only form of household debt that has increased since the recession. All other types have gone down.

    The average 2012 college graduate owes $28,720 in student loans. Repayment is a problem for some as entry-level jobs are scarce. 53 percent of recent graduates are either unemployed or unable to find full-time work.

    Tips to avoid the student loan debt

    1. Attending a community college or trade school from an accredited institution can save you thousands.

    2. When on campus, consider work study or research and school job opportunities. In some schools you get your room and board covered, thus reducing the need for student loans.

    3. The importance on knowing what to do in high school: Talk to your high school guidance counselor and research online about scholarship opportunities.

    4.  If you excel at athletics or the arts, nurture and develop your skills and apply for school scholarships.

    5. Consider military service. The G.I. Bill provides college funding assistance after serving.

    6. Understand the difference between federal loans and private loans. Federal loans are guaranteed and will generally have lower interest rates. Private loans, (bank loans) may have higher interest rates and may be less flexible on repayment options.

    7. Don’t forget to apply for financial aid and write down your expenses. Budgeting is the key to saving money, and to being able to pay bills on time.

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