- 1 how much can you take out in student loans
- 2 6 Questions to Ask Before Taking Out Student Loans
- 3 I Have Student Loans - How Can I Teach English Abroad?
how much can you take out in student loans
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As of 2015, 68% of students graduating from a four-year institution had some form of student loan debt, according to a recent report from the Institute for College Access and Success. Additionally, Student Loan Hero reports that more than 44 million Americans collectively owe over $1.3 trillion in student loans, varying on average from $3,000 to $53,000 per person. What this means is that the nationwide average debt per person has continued to increase year over year, and according to the institute, it now sits at an average tab of $30,100.
And while the recession saw lenders tighten their restrictions on who can apply for certain loans (i.e., mortgages), they continue to take advantage of young, inexperienced Americans who often have little to no credit history to speak of.
“Student loans are the only credit vehicle where a lender continues to extend credit year after year without knowing the person’s ability, or even willingness, to pay,” Vice President of Analytics and Business Development at Experian, Michele Raneri, told Bankrate.
Lenders know that student loans differ from other types of debt in many of the worst ways, but that doesn’t stop them from going after their goal. Senator Elizabeth Warren, a Harvard law professor who specializes in bankruptcy, has even stated that “student loan debt collectors have power that would make a mobster envious.” Suze Orman, a personal finance expert who spoke at an event hosted by Politico with Warren, went a step further, saying that financial institutions are effectively “financially raping … our children.”
With that in mind, we give you five of the biggest reasons why you should think carefully before piling on the student loans.
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Unlike with other types of debt, your student loans (in most cases) won’t disappear if you end up filing for bankruptcy because you can’t afford to pay them back. And while it isn’t true that your student loans can never be discharged in bankruptcy, it is very, very hard to have them reduced or eliminated.
Part of the reason that it’s so difficult is because the law is vague. You see, currently, student loans cannot be discharged unless the individual filing them can prove that it would cause him or her “undue hardship.” Except “undue hardship” isn’t defined in bankruptcy law. Meaning that whether you succeed in discharging your loans is subjective; it’s up to the court.
If you can’t pay your loans but don’t want to file for bankruptcy, loan holders will sometimes negotiate temporary reduced payments or deferments. But this might not be the best call. Why? Because your loan will usually grow larger while you are postponing payments or paying smaller amounts. And after you’ve recovered from economic hardship, your loan will be even more unmanageable than it was before.
Private loans can be particularly nasty. While federal student loans often come with borrower protections — such as deferment, forbearance, grace periods, and income-based repayment options — private loans aren’t required to offer you any of these luxuries. They can demand a certain amount of money from you each and every month, and, generally, there isn’t a whole lot of flexibility.
Student loan repayments | iStock.com
The interest rates on student loans are much higher than on most other types. Federal loans are often between 5% and 6%, with some graduate loans just under 9%. Private loans can vary between 2.5% and 12% — three times the rate of most mortgages, and getting close to the rate of an average credit card. Furthermore, many private loan interest rates are variable, making repayment even more uncertain. While the current climate means that variable interest rates are competitive, this could easily change as they begin to rise.
Federal student loans are now capped with fixed rates, which takes some of the guesswork out of how much you’ll actually be paying. However, the annual percentage can still change from year to year. What this means is that the loans you take out during your senior year of college could still have a higher interest rate than the money you borrowed freshman year. As Credible points out, a 2% difference can mean thousands of dollars more over the lifetime of the loan.
While federal student loans certainly look pretty good when compared to most private loans, it’s important to understand that the federal government isn’t doing you any special favors here. Rather, the government expects to make a bunch of money off of your debt. In a 2015 letter to the former Secretary of Education, six different state senators wrote that according to President Obama’s budget that year, “The federal government is still expected to produce $110 billion in profits from its student loans over the next decade” — a figure the senators consider unfair. “Student debt is threatening to drag down both our families and our economy itself,” the letter continues, arguing that the Department of Education should stop implementing policies “designed to maximize federal profits on the backs of our kids.”
College debt | iStock.com
According to a 2016 report from American Student Assistance, 42% of college graduates delayed moving out of a family member’s home because of existing student debt. A full 24% of graduates delayed that move for two or more years. Of the non-homeowners the organization surveyed, 71% said student debt was the reason they couldn’t save for a down payment to buy a home.
Previous surveys from the organization show that home ownership isn’t the only delayed financial milestone. Making early steps toward retirement, getting married, or even having children are at stake because of student loan burdens. The consequences of delaying adulthood doesn’t just mean a slower start for millennials, however. “This downward spiral has a cascading impact on the nation’s economy as the generation charged with investing in the nation’s future is delaying their lives because of student debt,” notes the organization.
According to the 2015 survey, 73% of young college graduates have delayed saving for retirement or making other investments because of their student loans. A third said that they put off marriage due to their debt, and 43% said that student loan debt has delayed their decision to start a family.
And while some of these statistics may seem surprising at first, they become much easier to fathom when you take into account that for many young people, their student loan burden manifests in the form of a monthly payment equivalent to a second rent check. This means that there is often very little money left at the end of the month for even everyday expenses, let alone retirement savings.
College expense | iStock.com
Student loan forgiveness programs can save you thousands of dollars, yet there are restrictions, and the professions which qualify are limited.
At the moment, only a few occupations (those considered to be “public service” jobs) are eligible for student loan forgiveness. Currently, some of the sectors which qualify include military service, law enforcement and public safety, early childhood education, health care, and public school teaching, among others. Those in government positions, or who work for certain non-profit organizations, can also qualify.
Of course, there are restrictions on the types of loans that can be forgiven. At this time, only Federal Direct loans and Federal Family Education loans can be forgiven, with a few exceptions if some types were consolidated.
Still, even if you do work in one of the qualifying professions, you won’t get your loans forgiven right away. In order to become eligible, you must make 120 on-time, full monthly payments under a qualifying repayment plan while employed full-time.
Which brings us to another sticky point: 120 monthly payments adds up to 10 years, so the program doesn’t actually help young people when they most need it. Regardless, if you think you might qualify for federal student loan forgiveness, you can read more about it through the Federal Student Aid website.
Student loan application | iStock.com
Many young people, fresh out of high school, are told that they should apply to their “dream school,” and not worry about the money. Guidance counselors preach that financial aid will undoubtedly help make their college experience affordable. But allowing students to naively apply to private institutions with yearly tuition going as high as $50,000 without so much as a warning about the potential consequences of student loans seems cruel, foolish, and irresponsible. This especially holds true considering research from the American Institute of Certified Professional Accountants indicates “that less than 40% of all borrowers had a firm understanding of how hard student loans would be to pay back,” and “60% of borrowers said they have some regret over their student loan decisions,” per Bankrate.
Normally, when you take out a loan, it’s a very serious endeavor. You’ll want to weigh the risk and thoughtfully consider whether or not you will be fully capable of paying the loan back. You’ll also want a clear understanding of what protections are in place for you as a borrower. In the case of student loans, the borrower often doesn’t have a clue whether or not he or she will be able to pay back the loan without any trouble. In what other lending situation is this a smart decision?
As Forbes’s Josh Freedman writes, individual student loans are, in essence, akin to the “anti insurance.” Indeed, “rather than spread the risk, they concentrate it on the individual — who has to bear all the downsides if something goes wrong.”
6 Questions to Ask Before Taking Out Student Loans
Americans are more burdened by student loan debt than ever, with the average graduate in their 20s making $351 a month in student loan payments. Suggested changes to the federal student loan program could have even more college students questioning just how much student loan debt they want or can afford.
As part of its overall budget plan, the Trump administration would like to eliminate current provisions in which the government pays the interest on student loans taken out by low-income students while the borrower is still in school and for six months after graduation.
The Trump administration is also proposing to end the Public Service Loan Forgiveness program. This program allows borrowers who go on to work for the government or for nonprofits to have the remainder of their federal student loans forgiven after they make 10 years of payments.
Even though these potential changes might never be signed into law, just the possibility of such changes makes it even more important for students to ask the right questions before they take out federal or private student loans.
Here are six questions you should ask before signing up for any student loan.
Your first-choice school might be the most expensive university on your list. You might be able to reduce the amount of money you borrow each year by choosing a less costly option.
Instead of attending a private college, you might investigate a public university. Instead of going to an out-of-state school, you might consider going to school in-state, which comes with lower tuition. You could also attend a community college for two years before transferring to a private or public university for the remainder of your college years. These choices could reduce the amount of student loan debt you'll have to take on.
The College Board reported that the average yearly cost of room and board at a public four-year university stood at $10,440 during the 2016–2017 academic year. You can save that expense if you attend a college that allows you to live at home while taking classes.
Yes, you will lose out on some of the traditional college experience. But taking on less student loan debt might be an acceptable trade-off.
3. Are you borrowing too much for your potential future income?
Certain careers pay more than others. You need to remember this when applying for student loans. You don't want to take on huge debts if you expect to make $40,000 a year when you graduate. But taking on larger amounts of debt might be a solid financial choice if you are working toward a higher-paying degree.
4. How big of a student loan payment are you willing to make once you're working?
Borrowing money might seem easy when you're still in school. After all, you're probably not making payments on these loans yet. But once you're out in the working world, that student loan debt won't seem so benign.
You will have to make payments each month. And these payments will come in addition to rent, car payments and, eventually, mortgage payments. Student loan payments become a huge financial burden to many. Before borrowing today, you need to consider how comfortable you'll be making those payments in the future.
5. Are there other types of financial aid available?
Before applying for a student loan, make sure you explore all financial aid options with your high school counselor, or the university you plan to attend. Many universities offer merit scholarships to incoming students. You usually don't have to apply for these scholarships. Schools automatically provide them, usually based on your academic performance. Even if you've been offered one, you might be able to persuade your university to provide you with a larger merit scholarship, especially if you are worried that you won't be able to afford the yearly tuition without financial help.
There are other types of scholarships, too, that you should investigate. The U.S. Department of Education says that there are several ways for college students to search for scholarships and grants. They should first speak with the financial aid office at the college they are attending. These professionals often have tips for hunting down scholarship and grant money.
They can also use the free online scholarship finder offered by the Department of Education. The department also offers an online list of state grant agencies that students can search to find scholarships and grants in their states.
Call your school's financial aid office to discuss options such as work-study programs and possible additional financial help.
Even if you get grants and scholarships, you may still need student loans. There are two types of student loans to consider: Federal loans offered through the federal government or private loans offered by private lenders. Federal loans are preferable because they usually come with lower interest rates and more flexible repayment programs. Federal loans also provide more options if, after graduating, you find yourself struggling to make payments, including deferment and eventual forgiveness programs.
It's far better to rely as much as possible on federal subsidized or unsubsidized student loans. The challenge is that these federal loans have limits; you can only borrow so much each school year.
Your school might also offer its own lower-interest loans that would be cheaper than private loans. But if these options still aren't enough, you'll have to determine whether taking out less attractive private student loans to attend college is worthwhile. It might be the only option.
I Have Student Loans - How Can I Teach English Abroad?
Yes — With total outstanding student debt surpassing the $1 trillion mark, the majority of college graduates today finance their education through borrowing and debt in the form of student loans. You may think, how can I get TEFL certified and teach English abroad when I have to pay my student loans?
While student loans are concern for many there are still options that will enable you to enjoy the opportunity of a lifetime to travel the world and work overseas as an English teacher.
Don't let student loans be a deterrent or excuse not to teach abroad or do anything in life! Newsflash to new college graduates: you will be paying these loans for 10 to 20 years.
Later in life you will have a car loan, you will have a mortgage loan, you will always have bills to pay. Will it matter in the long run if you pay off your student debt when you are 32 or years old rather than 31? No. You just need a practical strategy to make things happen in life. Here are a few suggestions that our TEFL graduates do every year.
Deferment is an agreement between the student and the loan provider whereby the student may postpone repaying the loan for a designated amount of time. You may be responsible for paying the accrued interest during the deferment period, but you are not required to pay the interest during the deferment period. To learn more about deferment, please contact the entity that services your loan.
Note that deferring your student loans will not affect your credit rating and will not hamper you from obtaining student loans in the future.
Typically student loans come in 2 forms, subsidized and unsubsidized, know what you have and make a plan.
Subsidized are guaranteed student loans (GSL) through the federal government, these can be deferred with little paperwork.
Unsubsidized are extra loans that probably can not be deferred (but check with your loan provider).
Now is the time to look at your paperwork and figure out exactly what you have and can make a smart plan going forward.
Excuse # 1 to avoid: I don't want to pay that extra interest for delaying my payment a year.
Reality check: When you make money later in life, pay the interest off early. You have either time or money in life, now is the time, you will come up with the interest money later. This could be anywhere from $ 10 to $ 50 a month in interest (depending on your loan).
In the big picture you should ask: is this really what will hold you back from living abroad? Are you making an emotional decision or practical decision based on simple math?
Excuse # 2 to avoid: I don't want to defer my loans.
Reality check: Ok, why not? That's why the government gives you a free pass on deferment, pay the interest, they don't care, the banks made a little extra money and you kept your credit rating perfect.
If you do not qualify for a deferment, your loan servicer may be able to grant you a forbearance whereby you may be able to stop making payments or reduce your payments for up to 12 months. However, interest will continue to accrue on your loan(s). As with a deferment, you should submit your request for forbearance to the organization that services your loan.
For more information on deferment and forbearance options, visit the US Department of Education’s Federal Student Aid website.
The rules of the game were meant to be used, take advantage of them. By the time now as you will not have this time in your life later (ask anyone with a child and mortgage and career if they would take back a year of their life when they didn't have responsibilities).
Ok, if this step doesn't fit your taste, move on to the next strategy, make money to pay for loans.
Option 3 - Teach English abroad in a country where you will earn enough to be able to make your loan p ayments . Choose a high paying country.
How would you like to be earn enough money to pay off a significant portion of your student loan(s) while teaching in another country and enjoying the time of your life experiencing living in a foreign country and traveling to world?
In Latin America and Europe, English teachers typically break even financially, but in Asia and the Persian Gulf nations of the Middle East, most English teachers make enough to save 30%-50% of their salary after expenses.
Step A: Figure out how much money per month you need to pay on your loans (i.e. $ 350 a month).
Step B: Go teach in a country that you can SAVE that amount (or more) every month. H ave the time of your life, put money in the bank and don't sit at home complaining that you "can't go anywhere because you have student loans."
Step C: If you teach in a country for a year that makes you a extra money, put some in the bank for next year if you want to teach in a country that doesn't offer salaries that are as high.
Here are some high paying countries where new college graduates can teach English and save extra money after expenses.
One question to ask yourself is, how much money will I be able to save working an entry-level position right out of college? Why not see the world before you get tied down with a career and a mortgage and at the same time pay off a significant portion of your school loans?
Excuse # 3 to avoid: I only want to go to a certain country, and can't afford it.
You don't always get what you want immediately and there is an entire world out there worth exploring. Go work in a country and make a stack of extra money year one (instead of working at Dairy Queen, the local bar, boring office job, insert non-exciting wage job here) and year 2 go to your desired country with money in the bank to pay off your loans. You will probably love the first country so much (and now have all new friends) that you will stay another year, it happens all the time.
Click here to request a Country Chart that details salaries, hiring requirements, interview procedures and visa information for teaching English abroad in more than 50 countries around the world.
A) Take an online TEFL course instead of a 4 week in person course. Taking an 11 week part-time online TEFL certification class instead of an onsite course will not only save you money on tuition, but it will also save you money since you can take the class while you are still at home. You'll save money since you won't need to take a month off to fly to a new location and you won’t need to pay for housing while you take the class.
Additionally, the online class is part –time so you can earn your TEFL certification while you are still working and can continue to save money for your start-up costs. The price difference between an online course and a four-week course (tuition, housing, food) is typically $ 1,500 - $ 1,800.
B) Line up a job in advance. Another way to save money is to seek opportunities in countries where you can interview in advance so that you have a job waiting for you when you depart for your teaching destination. Lining up a job in advance cuts down start-up costs required to support yourself for the time it would take to find a job once you are on the ground in the country where you want to teach (typically 1 to 2 weeks living expenses). While schools in many countries still prefer face-to-face interviews on location, schools in other regions will interview in advance over the phone, through email, and through Skype .
It is common practice for teachers to line up jobs in advance in many nations in Asia with very strong markets for English teachers such as China, Japan and South Korea. It is also common for schools in the Middle East to interview in advance, and in some other countries like Turkey, Russia, and Mexico.
C) Go to a country where flights and housing is free: China and South Korea have so many positions available the schools are enticing you with start-up expenses waived such as free airfare and free housing. You can get abroad and secure until your first paycheck with $ 600-800. In Russia and Turkey, many teachers (though not all) receive at least an extra stipend to offset airfare and/or housing costs.
Approximately 50% of those teaching English abroad under 30 have student loans, they all were in your shoes, had the same concerns and made a strategy to go overseas.
Don't let student loans become an obstacle to pursuing your dream of living and traveling abroad! With good planning, you can make it happen.
Fill out a contact form or call us at 773-634-9900 to speak to a trained advisor about all aspects of job opportunities for teaching English abroad & TEFL certification.