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Student Loans and You

July 21, 2020

I want you to imagine $1,560,000,000,000 – 1.56 TRILLION dollars. That’s approximately the annual GDP of Russia. With that amount of money, you could buy everything Thailand, Iran, and Austria make in a year and still have enough left over to purchase the entire NFL.

That massive pile of cash also represents the student loan debt Americans held in 2019.

Student loans are a serious business, and many Americans are struggling to pay them back. As this is an election year, you’ve probably heard candidates talk about their proposals to address this pressing issue.

In this article, we’ll discuss some student loan basics, as well as how myKlovr is trying to make the process easier and safer for users like you.

When to Consider Student Loans

Out of all the ways to pay for college, you should consider student loans as your last resort. Now, don’t get me wrong. Student loans, like credit cards, aren’t inherently evil or wicked. It’s just that, in general, it’s incredibly easy for young Americans to get in way over their heads with debt. Entire books have been written on this topic, so I’ll spare you the details.

Before we tackle student loans, let’s explore some of the – mostly – risk-free alternatives to funding your college education.

Scholarships

Pros: In my humble opinion, scholarships represent the absolute best way for you to pay for college. And with the internet, it’s easier than ever to search for and apply to them. Also, many colleges and universities award automatic merit-based scholarships to incoming students with an excellent high school GPA and outstanding ACT/SAT scores.

Cons: Like grants, scholarships have many stipulations that you must meet for them to renew. For example, a scholarship may require that you maintain a minimum 3.0 GPA every semester of college. For you, who likely earns excellent grades in high school, that requirement may not seem like a big deal. However, remember that college can throw you curveballs, and many students struggle their freshman year.

Grants

Pros: Grants, like scholarships, require no repayment. They’re literally free money. Also, too, many schools award them to eligible students automatically.

Cons: Most grants are need-based, meaning that if your parents make over a certain amount of money, you don’t qualify even if your parents do not intend to contribute one red cent to your college education.

The Bank of Mom and Dad

Pros: Who doesn’t love the Bank of Mom and Dad? I did. But why did I put it at the bottom of this list? Well, the Bank of Mom and Dad will be most likely to chip in if you can show them you’ve already earned some scholarships and grants. Also, the less they have to help you out, the more likely they are to do so. They love you and all, but they also have a mortgage, need a new carpet, and, you know, dad’s 401(k) just took a hit…

Cons: Money issues rank at the top of the list of things that families fight over. And the more your parents contribute to your education, the more influence they have over you. If they want you to be a doctor or lawyer, and you want to be one, too, that’s cool. But let’s say you want to change your major to something…less financially lucrative. That could cause some serious friction between you and your folks.

Now that we’ve discussed the best ways to pay for college without loans, let’s get into debt!

What Types of Loans Are There?

Just like in the previous section, I’ve listed loan types by my personal preference. In other words, start at the top and work your way down.

Federally Subsidized

As the name suggests, federally subsidized loans are those the federal government provides college students. Both subsidized and unsubsidized loans have annual limits, meaning you can only borrow so much money each year. Also, federal loans have much lower interest rates than private loans.

So why are subsidized loans at the top of this list? One reason – interest does not start accruing until you graduate. This simple fact can save you thousands of dollars down the road.

Federally Unsubsidized

Once you exhaust federally subsidized loans, you may need to take out some unsubsidized loans. Yes, the interest will start compounding from day one, but they pose less risk than…

Private

Starting about 20 years ago, skyrocketing tuition rates made it impossible for many college students to fund their education with only scholarships, grants, and federal loans. The private market jumped in to fill the gap – easy credit with high-interest rates attached.

Then the Great Recession happened.

After 2009, the private student loan market contracted significantly, and today, most private loans require a co-signer (e.g., your parents) who is also legally responsible for paying back the loan. Fortunately for you, most private loans in 2020 are significantly less predatory than they were pre-2009. However, higher interest rates mean that you will end up paying more over time.

Who Can Help Me Choose the Right Loan(s)?

As private loans are where many college students get into financial trouble, we at myKlovr want to provide you with tools that can help you explore private loan options that best fit your needs. That’s why we’ve partnered with GradFin, a financial services company that works with college students and graduates to both select the right loans and create a payment plan that promotes long-term financial stability.

In the near future, myKlovr users will be able to take advantage of GradFin’s many services, including:

Loan searching
Refinancing
Debt forgiveness

Throughout the process, GradFin experts work with users one-on-one to create a bespoke plan that features loans with the lowest interest rates.

Additionally, GradFin will offer its services to myKlovr users at no additional cost.

Final Thoughts

As we wrap up, let’s take a moment to consider how much debt is too much debt.

Simple Answer: It depends on you.

Complex Answer: As you begin exploring student loans, consider your academic and career goals. Is the job market that aligns with your intended major soft right now? Are average salaries lower than you expected? If the answer to either question is ‘yes,’ you may want to consider cheaper colleges and universities.

Finally, no matter which school you attend, myKlovr and GradFin will help you make the right decisions regarding your academic and financial future.

5 Questions To Ask Before Making Your College Choice

March 6, 2020

As a high school senior currently involved in the college application process, the last few months have been long and complicated. At this point, you have visited several colleges, submitted applications, written essays, double-checked deadlines, and filled out enough forms to last a lifetime. For many, the final step of the process has finally arrived. If your lucky, you were accepted to a few or several colleges you applied too. Now, you must choose where you will spend the next four years of your life.

Most schools set the deadline for choosing a school for May 1st. I highly advise you to review the deadline for each school to ensure they do not have there own, earlier deadline. Regardless of when the deadline may be, the choice of where to attend college is not something to take lightly. It is a decision that will have long-lasting implications on your future, career, and overall quality of life. As you consider your options, here are five things to think about before making this critical choice.

#1 – Does the school provide the type of environment you need to succeed?

It is easy to be impressed by a sprawling campus that has beautiful buildings, new classroom technology, big-time campus events. The quality of the school is essential. However, it is not about how wonderful the campus looks or the school appears to be. It is about the environment it produces and if it is right for you. If the school is not providing what you need to be successful, then you need to ask yourself why you would go there in the first place?

To understand what exactly you need, you can ask yourself some basic questions. For example, what kind of class size are you comfortable in? If you benefit from smaller class sizes and situations that allow you to ask questions, then you should avoid the schools that offer mostly large lecture hall type classes. How easy or difficult will it be to get from class to class? If the school you are considering has your future classes located on different campuses, that is something to take note of. The key is to collect as much information about what life will be like at that school and decide if it will serve your needs.

#2 – What types of career services to offer current students and graduates?

If there are two or three colleges that you are considering that appear similar, this could be a crucial tiebreaker. While college is meant to help you grow as a person and become independent, it’s primary purpose is to prepare you for a fruitful career that will allow you to make the impact you seek. If you are going to spend four years and thousands of dollars on a school, you need to be sure they have the necessary services to help you obtain a job when you graduate.

As we have spoken about in past blog posts, it is crucial during campus tours to visit the school’s career center. This is the department that is supposed to help you find internships, craft your resume, and help connect you with employers after graduation. Does the school you are considering to offer these services? If you are unsure, connect with alumni on LinkedIn and them directly about how helpful the school was with these tasks. It would be best if you were choosing a school that will act as your partner and does everything possible to ensure you start your career off on the right foot.

#3 – What do the alumni have to say?

During this process, you have hopefully asked a lot of questions. You have inquired about various topics with your tour guide, admissions counselor, and faculty you have met along the way. While their answers are essential and can be valuable, it is crucial to gain information for those who are not currently employed by the school. It’s not that these people will give you incorrect information; it just means that they are more likely to provide you with positive answers because they work for the school.

This is where school alumni come into play. Alumni are a great resource because they used to be a student and have already gone through all of the things you are about to encounter. They will give you an honest insight into the school. This is where you ask your questions about internships, dorm rooms, food quality, class size, and anything else that is important to you. Ask about where they are in their career and the role the school played in getting there. Lastly, ask them point-blank if they could go back in time would they still choose that school. By connecting with 3-5 alumni, you can get the complete picture you seek.

#4 – What makes this college worth it?

I have spent the past few years asking college graduates about their time in college and what they would have done differently. Nearly every single graduate answers by talking about student loans. Simply put, graduates did not do enough research when it came to the loans they were signing up for. The result was massive debt waiting for these students after graduation. They were caught off guard by the considerable monthly payment they were being required to make.

I am not saying that you should not take out loans to cover the cost of college. However, if you are going to be taking out loans that impact your future, you should know precisely why you are doing. It is crucial to understand what makes this college worth the price tag. If you are deciding between a few schools, and one is considerably more expensive then the other, you owe it to yourself to find out why that is. Ask yourself, is this college worth this amount of money? If they have the major your want, a great internship program, and an amazing alumni network, then yes, it might be worth it. However, you may find that cheaper option on your list also has all of these things. If the more affordable, less known school, is going to deliver what you need to succeed, then that might be the school for you.

#5 – Am I ready to go to college?

This last question is more about internal discovery and honesty; then, it is about any particular school. The college admissions process comes on strong and basically takes over your life for several months to over a year. You get so caught up in paperwork and research that you may lose sight of what is truly important. College is the step in life that is supposed to prepare you for the real world. It may seem like the obvious next step, but that does not mean it will be an easy one.

Before you choose a college, you need to conduct some self-discovery. Are you mature enough to go away to college? Are you ready to study harder and longer than you have before? Do you know what your plans are for after college? What are you going to study, and why did you choose that area? It is okay if you do not have all the answers right now. Just be sure to take the time to answer them before you move forward into one of the most important phases of your life.

Conclusion

Choosing a college is a choice that will impact your quality of life for decades to come. You owe it to your future self to make a choice that is in your best interest. You also have every right to ask if a school is worthy of your time and your money. As long as you do your research, ask the right questions, and take it seriously, you will end up with a choice that will set you up for a successful college experience and real-world career.

About Kyle

Kyle Grappone is an educational coach helping students prepare for the next steps in life.

5 Questions To Ask When Considering A Student Loan

August 26, 2019

Student loans. That is by far the most common answer I hear when I ask college graduates what they regret about their past choices. To be clear, they do not regret taking out loans. They regret not researching their options. Most of the college grads I talk to claim they had no idea what they were signing up for.

Most graduates apply for and accept student loans without understanding how they work. The result is that most grads are surprised about how much they have to pay back every month after college. An unexpected large monthly payment can have a serious impact on your future plans. Before applying to any student loan, be sure to ask these 5 questions.

What Is The Total Amount Of Money I Am Borrowing?

First, it is crucial to understand how a loan works. A loan is an agreement between you and a bank. They will give the money you need but it will cost you. This cost is called an interest rate. Simply put, they will grant you $1,000 at 10% interest to spend on college but they are going to expect you to pay back $1,100 after your graduate.

If you know the amount you think you will need to borrow, be sure to review all the documents and understand how much money you will be expected to pay back. If you borrow $10,000 you will end up paying back closer to $13,000 when it is all said and done. That is how a loan works and it is important to know that when you are determining how much you want to owe after graduation.

What Is The Interest Rate Of This Loan?

We have established what an interest rate is and how it works. You should always know what the interest rate of your student loan is going to be. You should also be actively researching loans from various sources and comparing your options. Do not assume that the option you are looking at is giving you the best offer.

It is important to research your options when it comes to your interest rate because of the impact it has on your life as an adult. The longer it takes to pay back your loans, the more you have to pay back because of your interest rate. The lower the interest rate means the less you will have to pay back over time. That is why it is worth it to take your time and compare all of your options to ensure you are getting the best deal.

When Do I Have To Start Paying This Loan Back?

Not all loans have the same terms and conditions. Do not assume that every loan is the same and that you do not have options. Pay close attention to these terms when you are considering applying for a loan. Make the choice that makes the most sense for your situation and future.

You should know exactly when you will have to start paying back the money you are borrowing. Some loans require you to begin your monthly payments the month after you graduate college. This could become a serious issue if you cannot guarantee you will already be in your first post-college full-time job immediately after graduation. The last thing you want to do is miss a payment and hurt your credit score as a result.

Look for loan options that give you some breathing room after graduation. Loans that do not require first payment until 3-6 months after graduation will give you time to secure and settle into your first full-time job and begin saving some money. Regardless of what you choose, you should know what your payment schedule is going to be like and how you plan to make those payments on time every month.

What is the Minimum Amount I Have To Pay Back Each Month?

The biggest shock to college graduates is the amount of money they have to pay back each month. It is a shock because they did not bother to research this before signing their loan applications. Graduates have personally told me their stories where they graduated from college, bought a car, got ready to move out and then were blindsided by their first loan payment bill.

In addition, to shock, most graduates feel serious regret once they realize how much of their paycheck is going towards paying off their loans. If they had known this was going to happen, they would have researched more options and perhaps even chose a more cost-effective college to attend.

Figure out the exact amount you will be required to pay back every month. If your minimum payment is going to be over $500, what does that mean for your future? Will you be able to buy a new car and move out of your parent’s house? How much does an entry-level job in your field of interest pay after taxes? These are the numbers you need to be looking at while making this important decision.

Would The Minimum Amount Be Less If I Went To Another School?

Let me be clear, you should not choose a college strictly based on cost. There are several factors to weigh in making this choice. I cover them all in my online course ‘How To Select The Right College For You’ where we talk about what makes college worth the money. If you are going to spend all that time and money in a college, you want to make sure it is worth it.

Once you determine how much your minimum payment is for College A, run the numbers again against the other colleges on your list. If your minimum payment drops by $100 a more per month, that is something worth taking note of. If those colleges are offering the same courses and opportunities, it would benefit you in the long run to borrow less. You do not have to choose the most expensive college to get the best education.

Conclusion

Student loans are not necessarily a bad thing. They can be a useful tool that allows you to attend the college of your choice and build the career and future you want. However, they are not be entered into lightly. They deserve a significant amount of time and research. You should completely understand what you are signing up for and what will be expected of you after graduation.

We cover this topic in even more detail, as well as the other parts of the college selection process in my on-line, on-demand course entitled “How To Select The Right College For You”. I invite you to check out all of the topics we cover and watch the first lesson for free.