pay the way
avoiding loan debt
The Middle Class Dilemma
By Michael Lux
Do you feel stuck in the Middle?
You are a good student, but not a great student, which means
several college options but few scholarships. Your family is mid-
dle class—too much income to qualify for need-based aid, but
not enough income for the family to pay for school.
This college funding problem often leads to using student loans
to fund an education, and upon graduation, finding yourself
stuck in the middle again: too much income for loan forgiveness
programs and lender aid programs, but not enough income to
aggressively pay down the debt or to qualify for student loan
consolidation and refinancing services.
This can mean a lifetime of minimum payments on student debt.
Today we will discuss some strategies to end the cycle we call the
"Middle Class Dilemma".
Best Route: Avoid Student Loans
Getting in to your “dream school” is great, but if you are going
to break the bank to attend, it could be a huge mistake. Many
community colleges are substantially less expensive options and
if you plan ahead, you can transfer your credits to the expensive
school you want to attend for years three and four. Spending less
on housing and tuition can make a huge difference in future years.
Along the same lines, delaying school to earn some extra money
or attending school at night while you work during the day can
be a wise choice. Not only will going this route help you show
future employers you have a great work ethic, but it will also
mean that your short-term sacrifices will have long-term benefits.
Read This Before You Borrow Private Student Loans
The best advice I can give to anyone attending or planning to
attend college is to avoid student loans. The second best advice
I can give is to only get federal loans if you insist on borrowing
money for college. There are two main advantages to having
federal student loans instead of private loans.
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Winter 2017
The first advantage is that borrowers can select repayment plans
based upon their income rather than how much they owe. Most
borrowers are able to get their payments lowered to 10% of their
monthly discretionary income. This perk is not offered by any
private lender. This means that if you finish school and cannot
find work or lose your job at some point, you will not have to
worry about defaulting on your student loans. Nobody heads off
to college expecting to fail, but success is far from a certainty.
The second advantage is student loan forgiveness programs.
Borrowers who are on income-driven repayment plans can have
their loans forgiven after 20 to 25 years of payments. Addition-
ally, borrowers who work in public service can have their loans
forgiven after 10 years. This allows graduates the opportunity to
pursue jobs in the public interest without having to worry that
they will not be able to pay off their student loans.
Bottom Line
When you are stuck in the middle on student loans it can seem
impossible to get ahead. Facing a lifetime of student debt or the
possibility of failing to pay off your loans is a devastating
situation to be in. Fortunately, there are ways to get past this
problem. It certainly isn’t easy, but it definitely can be done.
Michael Lux is the founder of the
Student Loan Sherpa. He is an
Indiana attorney who knows first-
hand how frustrating it is to deal
with student loan servicers and
massive bills. He created the site
to help other student loan
borrowers navigate the
complicated world of student
loans. For more student loan
advice, visit www.studentloansherpa.com.
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