Notes on Midmorning's student loan talk

Student default rates are at a 10-year high. People now owe more on student loans than they do on their credit cards. What does this mean for students and parents? How should they cope with that if they’re planning for their education – or already trying to pay it off?

MPR’s Kerri Miller talked with the following college-finance authors on Midmorning for some tips:

  • Erica Sandberg, financial education director and co-host for the web-based video program Change Starts at Home, as well as a columnist and reporter for CreditCards.com. She is author of Expecting Money: The Essential Financial Plan for New and Growing Families.
  • Zac Bissonnette, reporter with Daily Finance and author of Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents. He is a senior at the University of Massachusetts.

Here’s the first part of my non-verbatim notes from the discussion:

Is this about the recession or high borrowing?

ES: A bit of both. The economy has taken serious toll on jobs. Students do have options such as forbearance, but it’s tough.

Is the amount of debt increasing with tuition?

ES: Yes, average tuition is about $23,000 or so for a four-year degree. That’s a lot of money. And that’s just student loans – and doesn’t include credit card debt.

Is there leeway for those who need help?

ES: There’s a grace period – six to nine months, depending on the loan

What’s the average payment per person out of school for a year?

ES: Payments average, on a 10-year plan, at least $200 a month. It doesn’t sound like a lot, but it is for a student just out of school it is.

Are there other options?

ES: There is an income-sensitive plan. For example, someone with an annual income of $18,000 can arrange a very low monthly payment contingent on income and expenses.

Does interest continue to build?

ES: Yes. Interest is low, but on that plan your payments may just be covering interest.

Other options?

ES: Graduated plans have small monthly payments. If you have a field where the beginning income is low and your income goes up after a period, you can have payments go up as well. You can have small monthly payments over 25 years if you’re in a field with little money, such as social services. You will pay a lot over time, but at least you won’t go into default.