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You’re not alone
Topics: Frank Ramirez.
Anonymous user Mon Jun 25, 2007 15:10:04 PDT
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0 responses 0 comments Sallie Mae sounds like a naive and barefoot hillbilly girl but in fact they are a ruthless and aggressive conglomeration of bullies located in a tall brick building somewhere in Kansas.
— David Sedaris, “The Santaland Diaries”

If you’re a typical college student, you may not realize it, but they’re there.
Sitting in the desk next to you in class. Hiding behind a keg at a frat party. In the audience at your graduation. In an nearby cubicle at your first job.
And, when you can ignore them no longer, confronting you, hands greedily outstretched, when you open your first paycheck.
Though many students go through school idly, blissfully unaware of their spending, federal student loans from the U.S. Department of Education are a reality –– and they eventually have to be paid back.
“The student loan industry is a multi-billion-dollar industry,” said Frank Ramirez, financial aid and scholarships counselor and outreach coordinator with Cal State Bakersfield and part of the California Association of Financial Aid Administrators.
Ramirez said that while it depends on the university system, the typical undergraduate American student owes a whopping $20,000 to $30,000 in students loans.
“A lot of students don’t realize that every year they are accumulating more in loans, and at the end of four or five years –– plus grad school for some — they get an enormous bill and say, ‘Wow!’”
Not that Ramirez discourages taking out loans. Student loans are an investment for –– and in –– yourself, and will ideally lead to a satisfying job and more earnings during the course of your career. Instead, he recommends being a smart borrower –– keeping all your loan documents; keeping a record of lenders or loan servicers you talked to and letters sent back and forth; notifying your school and/or loan holder in writing if you move, change your name or Social Security Number, or reenroll in school; and ask questions if there’s something you don’t understand or if you’re having trouble making payments.
Ramirez took the time to sit down and answer some common student loan questions.
Q: How does a student figure out who they owe, how much they owe, and when they owe it?
A: A great resource for  reviewing your federal student loan history is the National Student Loan Data System, or NSLDS. You can obtain information about your NSLDS record by contacting the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). You can also check NSLDS through ED’s Federal Student Aid, or FSA, Web site at: www.studentaid.ed.gov. At the site, click on “Repaying,” then click on “Get Your Loan Information.” If you obtained a private or nonfederal loan you’ll need to contact the loan holder for more information.
• For Federal Perkins Loans, the grace period is nine months.
• For FFEL Stafford Loans and Direct Stafford Loans, the grace period is six months.
• If your parents borrow a FFEL PLUS Loan or a Direct PLUS Loan for you, there is no grace period.
The interest rates for Stafford loans are currently set at 6.8 percent. Interest rates for DL PLUS are 7.9 percent and 8.5 percent through FFEL PLUS. Most federal student loans taken out before July 1, 2006 have variable interest rates that change every July 1.
Q: What’s the difference between a loan and a grant?
A: You have to pay back a loan, but you don’t have to pay back a grant. It’s important that when students get their award letters from colleges that they understand what each fund is. You may get a letter saying you’re receiving $17,000 in financial aid, but you need to know what type of money it is. Some colleges operate more like businesses and prey on students’ naivete.
Q: What are the different repayment options?
A:
• Option 1: Standard payment. This is the option we recommend most highly. You’ll pay less in interest and have your loan paid off in about 10 years.
• Option 2: Extended payment.  With this schedule, you’ll pay the least possible amount per month for 10 to 30 years. But this plan has the worst interest rate, and after 30 years you may have paid double the original amount of your loan.
• Option 3: Graduated payment. This is the payment method for people who get out of college expecting to make a modest but steadily increasing wage. The payment requirements will start off gentle, then increase every couple of years for the next 10 to 30 years.
• Option 4: Income-contingent. If you’re in a commission-based or seasonal business, your income probably vacillates. So your monthly payment bill will be proportional to the amount you are currently making and you’ll get up to 15 years to pay it all off.
Also ask your lenders if they offer discounts for direct withdrawal payment and consecutive on-time payments. The most common loan discounts include a .25 percent interest rate reduction for having your monthly loan payments direct debited from your bank account. Many lenders also offer additional discounts for making all of your monthly payments on time.
Q: What is loan forgiveness?
A: Loan forgiveness is paying off your loans in the form of service, and usually awards those who work in low-income areas with disadvantaged families. Examples would include Americorps and the Peace Corps. The biggest loan forgiveness program in the state is the Assumption Program of Loans for Education, or APLE, loan assumption program for teachers. The APLE is designed for students who are entering the teaching profession to have educational loans assumed by the California Student Aid Commission. This program allows teachers to have up to $11,000 paid off if they teach at a Title I school for four years, and even more if they are a math, science, or special ed teacher. Because of Cal State Bakersfield’s emphasis on nursing, we also encourage similar repayment assistance through the Nursing Education Loan Repayment Program, which offers loans to registered nurses in exchange for service in eligible facilities located in areas experiencing a shortage of nurses. Some branches of the military offer loan repayment programs as an incentive for service. You should also contact professional, religious, or civic organizations.

Q: How can you delay your payments?
A: Consolidation is a good option because it brings all your separate student loans into one big loan. You’ll get lots of calls and letters in the mail from companies wanting to consolidate your loans. However, I’d recommend staying with the bigger names –– CitiBank, Sallie Mae, Wells Fargo, etc. –– as opposed to the fly-by-nights. Since consolidation means you’ll be paying off loans from 10 to 30 years, you’re basically in a relationship with the company, and you want to make sure you receive the best possible service as a borrower.
Deferment is the postponement of payment under various circumstances, such as economic hardship. You must formally request deferment through procedures your loan holder has established.
During forbearance, your payments are temporarily postponed or reduced. Unlike deferment, you’ll be charged interest during forbearance.

Q:  What is default?
A: The absolutely worst thing you can do! For a Federal Perkins Loan, default occurs if you don’t make an installment payment when due or don’t comply with the promissory note’s other terms. Default for a FFEL or Direct Loan occurs if you become 270 days delinquent if you pay less often than monthly. Default can result in you being turned into a collection agency, your credit rating damaged, your employer withholding your wages, and more. There is no reason why a person should go into default. It happens to people who think,  “This problem will fix itself.” Remain in constant communication with your lender to avoid default.

Q: What’s your advice for students regarding loans?
A: Be aware that the option is there for you –– so there is no excuse to drop out if you run out of money.  Also only borrow what you need. Be smart about budgeting, get a job to help pay for college, eat cheaply, etc.

Q: What are some additional student loan resources?
A: www.studentdebthelp.org
www.csac.ca.gov        
www.studentaid.ed.gov
www.csusuccess.org/scholarship

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