Student Loan Debt

Reducing Student Loan Debt

Student debt is rising every year. College costs, as well as graduate school costs, have gone up faster than inflation. Pell grants have not kept up, but Stafford loan and other federal student loan interest rates are near record lows.

College Student Loan Debt

A recent study by the Institute for College Access and Success (1) shows that two-thirds of college seniors who graduated in 2011 had student loan debt, with an average burden of $26,600 per borrower. The average cost of college is increasing at twice the rate of inflation. A report by the National Center for Education Statistics (2) estimates that per year, the average cost of attendance for an in-state student at a 4-year public school is $20,100. For students attending a 4-year private institution, the average cost is $39,800 per year.

Planning Your Financial Aid Package

There are a variety of financial aid options, from scholarships, grants, federal loans, and private student loans. There are several great resources for planning your financial aid. First, try the the recommended financial aid tools from the U.S. Deptartment of Education. Of course, individual schools provide scholarships to attract the students they want, but there are also many private or non-profit organizations that provide information on student aid. We've compiled a list of sites and organizations that provide financial aid and student tax information.

Reducing Your Student Loan Debt Burden After College

Once you've graduated you have to start paying back your student loan debt. There are many ways to reduce to your debt load, the most common among them is to consolidate student loans or simply to refinance your student loans. There are two main benefits to student loan consolidation.

The bigger benefit is reducing interest rates, and therefore monthly payments and overall debt. Interest rates are near record lows now, so chances are you'll get a better rate now than when you first got your loan.

The second advantage is reducing the number of creditors. This makes it easier to keep track of your payments. More importantly, it means you only have to deal with one creditor if you're late with a payment or need to renegotiate your loan for some reason.

Of course, you can't consolidate student credit card debt in with your student loans - these are very different kinds of debt. However, you can consolidate credit card debt through private companies, and you can potentially consolidate your private student loans into the same loan. But remember, federally funded student loans have much lower interest rates than private loans, and if you roll them together you would be required to use the higher interest rate - so keep private and federal student loan consolidation programs separate.

Reducing monthly payments also helps to keep all of your loans current (that is, it keeps you from having any defaulted student loans, which can affect your credit very badly).

Medical Student Debt

According to a recent study by the Association of American Medical Colleges (3), the cost of attending a private medical school has grown at 1.8 times the rate of inflation, and the cost of public medical schools has grown more than twice the rate of inflation, over the last 13 years. Another report by the AAMC (4) indicates that medical school trainees from both public and private schools graduate with an average debt burden of $166,750..

Compound this with slow physician salary growth, young physicians are faced with increasing difficulty in paying their college student loans and medical student loans.

The good news is that medical schools, and importantly the organization that licenses medical schools, recognize the problem. During the re-accreditation processes he LCME (Liaison Committee on Medical Education) asks every medical school how they intend to reduce medical debt. This puts pressure on the schools to either reduce costs or find creative ways to help students finance their debt.

References

(1) State by State Data. Institute for College Access and Success, 2012.
(2) Price of Attending an Undergraduate Institution. National Center for Education Statistics, 2012.
(3) Trends in Cost and Debt at U.S. Medical Schools Using a New Measure of Medical School Cost of Attendance. AAMC, 2012.
(4) Medical Student Education: Debts, Costs, and Loan Repayment Fact Card. AAMC, 2012.

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