5 Solutions to Student Loan Debt Headaches

Student loans are an inescapable fact of life for a significant chunk of Americans — 44 million, to be specific. These borrowers each owe an average of $37,000 in federal loans, and it’s overwhelming them. During the Obama administration, for example, about 8.7 million people defaulted on their student loans; that’s roughly one default every 29 seconds.
While a recent New York Times report found an increasing number of cash-strapped graduates are successfully getting their private loan debt erased, most won’t be that lucky. For everybody else looking to make a measurable dent in their educational debt, good financial practices, like finding the right repayment plan, combined with a bit of creative maneuvering is essential.

PUT POCKET CHANGE TO WORK

As the saying goes, every little bit counts. That’s the theory behind the ChangEd, an app that helps you incrementally — and painlessly — pay down debt by rounding up everyday purchases to the nearest dollar and depositing the spare change into an FDIC-insured account. For instance, buy a cold-brew coffee for $4.50, and ChangeEd will take the extra 50 cents and save it to your account. Every time your account hits $100, they’ll send a payment to the debt of your choice.

PARTNER UP WHEN SHOPPING

Before your next grocery or pharmacy run, check to see if your loan is eligible for Sallie Mae’s Upromise, which applies a cash-back bonus of up to 5 percent on certain purchases to help you pay down student debt. Big name retailers like Kohl’s, Walmart and Groupon participate, as do many travel sites and restaurants. “Upromise lets you earn rebates not just for college savings before college, but also for repaying student loans after college,” says Mark Kantrowitz, publisher and vice president of strategy for college-search and scholarship site Cappex.
There’s also EvoShare, which offers a similar system — shop at one of the site’s partner retailers, and you’ll earn a percentage back toward your student loan balances (or toward retirement savings, once you’ve paid off your student loans). “You can’t cash out,” says Miranda Marquit, a financial expert with Student Loan Hero. “It either has to go toward retirement or paying down your student loans.

SWITCH THE WAY YOU PAY

Here’s a solution that doesn’t require you to spend money to save it. By simply splitting your monthly payment in two, you could shave more than an entire year off the life of your loan. That’s because there are two months in the year in which you’d be making three half-payments, totaling up to one extra payment a year — and that can mean big savings over time. And if your loan has a variable interest rate, you’ll save even more — because half your payments will be processed early, you’ll lower the daily balance that’s subjected to interest charges.

MASTER THE ART OF NEGOTIATION

Over the last several years, a few large employers — and a handful of smaller ones, too — started offering student loan repayment as a perk to attract talent, says Robert Farrington, founder of The College Investor. “These companies will contribute anywhere from $500 to $10,000 a year toward their employee’s student debt.”
While only an estimated 4 percent of employers currently offer student loan benefits, it doesn’t mean you can’t bring it up yourself when considering a job offer. Many new hires are able to successfully lobby for a higher salary or more paid time off; it stands to reason that student loan reimbursement wouldn’t be off the table either.

GET IN WITH THE GOVERNMENT

Since it was signed into law a decade ago, the public service loan forgiveness program (PSLF) has allowed thousands of borrowers to find debt relief from federal loans. If you work for the government or a nonprofit, or hold a service-oriented position like teaching, nursing or law enforcement, the remaining balance on your student loans will be forgiven after 10 years on the job. Though the future of PSLF is in doubt under the current administration, for now it still stands as a wonderful way to rid yourself of debt while contributing to the greater good.
Bottom line: If you look around, there’s sure to be a strategy that will help you pay off your debt in less time. “There are solutions for all people with student loans,” says Brandon Yahn, founder of Student Loans Guy. “They just need to know what their options are and how to find them.”
Homepage photo by Justin Sullivan/Getty Images.
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Inside the Move That Saved 2,761 Students From Millions of Dollars of School Debt

Three years after the 99-percenters first rallied to close the mammoth gap between the insanely rich 1-percenters and everyone else, the Occupy Wall Street is still continuing its valiant fight.
According to NPR, Strike Debt, an offshoot of the Occupy movement, has announced that they purchased and erased $3,856,866.11 worth of private loans held by 2,761 individuals who went to Ev­erest College (a nationwide chain of for-profit schools that are shutting down left and right).
Here’s how the activists pulled it off: In the case of private loans (versus federally backed ones) when a student can’t pay back his or her debt, the original lender can sell it off to a third-party debt collector at a significant discount. Everest’s loan portfolio was potentially worth millions, and more unscrupulous organizations could have taken advantage of that. Instead, Strike Debt unleashed project Rolling Jubilee.
As the Guardian explains, “Rolling Jubilee bought the $3.8 [million] worth of student loans for a total of $106,709.48 in cash. That’s about 3¢ for $1 of student debt.”
MORE: Ask the Experts: How Can We Keep From Drowning in College Debt?
While $4 million is only a drop in the massive $1.2 million student loan bucket, Strike Debt’s move is not only much-needed relief for the nearly 3,000 Everest students that were completely overwhelmed by their debt, it’s an infuriating example of why the student loan industry needs major reform.
Ev­erest is one of the three schools owned by Corinthian Colleges Inc., which is facing 200 lawsuits and has been accused of a slew of unsavory practices by the U.S. Consumer Financial Protection Bureau, including predatory lending, blocking access to educational resources and withholding diplomas.
Awareness of the predatory nature of loans is key. Most 17-year-olds probably have no idea what they’re signing away when they enroll in college.
Strike Debt has now renamed Rolling Jubilee and turned it into a new project, The Debt Collective, which attempts to empower students to “renegotiate, resist, and refuse unfair debts while advocating for real solutions in­cluding free education and universal health care,” says Thomas Gokey, a Debt Collective organizer.
This is not the first time Strike Debt has relieved individuals of massive financial burdens. The social do-gooders have also claimed to wipe out a staggering $15,000,000 in personal medical debt over the past two years.
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With School Debt Skyrocketing, This College is Using Email to Teach Their Students Financial Literacy

When most students take out loan after loan to pay for college, they probably have no idea how much higher ed is actually costing them. Well, until the bills start to arrive four years later.
A college education is expensive but it’s unfair to allow students who aren’t even in their 20s to make such a large financial decision — especially if they don’t understand how to handle money. In a 2012 study, about 29,000 American 15-year-olds took a test that measured their ability to manage money and make sound financial decisions, and only one in 10 earned a top score. Meanwhile, 17.8 percent didn’t even have what is considered a basic understanding of financial literacy.
This is very expensive problem — and one of the reasons why the national student loan crisis has ballooned to a staggering $1.2 trillion. (On average, student loan debt is $29,400 per borrower.)
However, one school has come up with a brilliant — and surprisingly simple — solution. Since the 2012-2013 school year, Indiana University has sent students across its seven campuses a few letters via email about the loans they’ll be taking out for the next year, Bloomberg reports.
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The idea is this: If you warn a student once in awhile about how much he or she owes, they’ll realize the financial commitment they’ve made, and perhaps learn how to borrow more responsibly.
Nursing student Natalie Cahill, 22, decided to search for more scholarships after seeing her debt letter from the school. “When you take out loans for the year, you just see a smaller number than the grand total,” Cahill told Bloomberg. “Seeing the letter definitely put things into perspective.”
So far, the plan to boost financial literacy is working wonderfully. Federal Stafford loan disbursements to the university have reportedly dropped 11 percent, or $31 million, compared to the national 2 percent drop.
“We are having more contact with the student where they can say ‘I don’t want this,’ or ‘I want less,’” Jim Kennedy, the associate vice president and director of financial aid Indiana told Bloomberg. “If they know at all times their debt, and the repayment, it helps with a lot of planning.”
Until financial literacy 101 hits every college campus, Indiana’s efforts to teach its students fiscal responsibility gets an A+ from us.
DON’T MISS: Ask the Experts: How Can We Keep From Drowning in College Debt?

Finally, Some Tuition Relief For California’s Middle-Class Students

Guess which school is cheaper to attend for a middle-class student, Harvard or a California state school?
You’ve hit the nail on the head if you went with the Ivy League. As the San Jose Mercury News reported in 2012, even though Harvard’s annual tuition is around $36,000, its enormous endowment helps cut costs for middle-class students by more than half to $17,000. Meanwhile, due to skyrocketing tuition, middle-class students who attend Cal State East Bay pay $24,000. At UC Berkeley, tuition costs $19,500.
Although no one is playing a tiny violin for families that make $80,000 – $150,000 a year, middle class families are shouldering a heavy burden when it comes to college tuition. Their income bracket, unfortunately, disqualifies them from federal and state grants that are usually reserved for lower income students. This means middle-class students often take out giant loans — and we all know how that’s going for the country.
MORE: Ask the Experts: How Can We Keep From Drowning in College Debt?
But finally, some relief.
As the Los Angeles Times reports, California’s new Middle Class Scholarship will award tuition grants to an estimated 156,000 undergraduates. Up to $1,450 will go to University of California students, and up to $650 for California State University students.
Frank Ballmann, director of federal relations for the National Assn. of State Student Grant and Aid Programs, called the middle-class scholarship “groundbreaking” since it’ll reach so many students.
He added that other higher education institutions might just follow the state’s lead. “Even if [California] is the first, I suspect they won’t be the last,” Ballmann told the LA Times.
UCLA freshman Madison Acampora, whose family makes $96,000 annually, is likely to receive the scholarship. A little goes a long way, especially for her parents, who just paid for college for Madison’s two older sisters, too.
“I became used to not getting any money. So this makes me very happy,” she told the newspaper. “Even if it just helps cover my books and supplies.”
DON’T MISS: Ask the Experts: Why Should Americans Care About Income Inequality?

This Venture Capital Firm Bets on College Students

In this country, we used to talk about ballooning credit-card debt. Now the bigger money worry? Student-loan debt.
As more students graduate with a crippling amount of it (the total amount of student loan debt now tops $1.2 trillion, according to the Consumer Financial Protection Bureau), Silicon Valley is rethinking the way in which we ask people to pay for college.
As it currently stands, borrowers carry all of the risk while the government lender is only responsible to make up for unpaid balances through taxpayers around two decades later. Private lenders are only responsible for paying a collection agency to chase the unpaid balance and schools receive tuition regardless, all the while a borrower could go into default and ruin their credit for the rest of their lives. And for low-income students, this risk is even greater.
Instead of placing the entire burden on students, financial executives at venture capital firm 13th Avenue Funding believe that education loans should be perceived as equity, placing bets on a student’s potential achievements and earnings.
Two years ago, the New York-based firm offered four students at Santa Barbara’s two-year Allan Hancock College $15,000 for tuition to become a part of a “cohort” before transferring to a four-year institution to earn their bachelor’s degree. The students leave college without the possibility of defaulting and are expected to pay a small percentage of their salary each month if they make more than $18,000 a year post-grad. If they should surpass an annual income of $25,000, they’re required to pay back five percent of their income for the next 15 years.
Granted, borrowers do run the risk of paying back more than they received — but the money is used to cover other members of the cohort who are unable to repay the loan. And any additional remittances are used to fund new scholarships for future cohorts.

“It’s pooled venture capital,” said Casey Jennings, chief operating officer for 13th Avenue. “It’s sharing risk.”

The 2012 experiment, which is the first of its kind in the United States, was backed by four of the VC firm’s founders as well as two board members. The firm put together enough money to support a second cohort of seven students last year and hopes the model will be successful enough to continue.

While the idea is unique, it’s actually similar to that of investing in any small tech startup in Silicon Valley. You run the risk of failing — more often than not — but the chance of success can be worth it. The challenge therein lies with convincing higher education professionals to take the gamble on the concept of “income sharing” agreements.

“It’s really painful,” Jennings said. He continues to meet with college administrators to make them the “investors,” but has found no school wants to be the first to take a chance. “We talked to a bunch of colleges. They’re like, ‘It’s interesting, but come back when you get another college.’ “

If the 2012 experiment succeeds, it shows that students — especially those with low-incomes — can be an untapped market for investments. When it comes to funding those low-income students, Jennings added, “the payback for getting that group to go to college is unfathomable.”

After all, having a more diverse group of college graduates is something that you can’t put a price tag on.

MORE: Ask the Experts: How Can We Keep From Drowning in College Debt?

The Average College Graduate Has a Whopping $30,000 in Debt. How One Startup Is Helping Them Pay It Back

Two years ago Rozlynd Awa left Pittsburgh for Kaneohe, armed with a master’s degree in public policy from Carnegie Mellon University. A staggering $140,000 in student loan debt also followed her to the Hawaiian city, where she’s now an analyst for an education nonprofit. For that amount of money, Awa could have purchased a Porsche 911 (with embellishments, no less), flown around the world (roughly 14 times) or bought a home (albeit a modest one). “It’s overwhelming,” she says when she stops to think about it.
The only daughter to a single father, Awa wasn’t immune to hard work: She took on two jobs to help pay for college and grad school. Yet Awa was surprised when she learned she could volunteer at a company that might serve as a launching pad to an engaging career and at the same time earn money to pay down the money she owed. The opportunity came from a small Pittsburgh nonprofit called SponsorChange, which enables college graduates to chip away at their loans through high-level, skills-based volunteer work at sponsoring corporations. SponsorChange’s mission isn’t far off from programs such as AmeriCorps, but its focus on the private sector sets it apart from similar government-sponsored initiatives.
“Nearly two-thirds of students graduate with debt, which at times prevents them from doing the civic work that they really want to pursue,” says Raymar Hampshire, who co-founded SponsorChange in 2009 with personal savings and support from the Sprout Fund, an organization that invests in community projects in Pittsburgh. SponsorChange serves as a bridge between students, dubbed “change agents,” and companies, matching qualified graduates to specific projects. The sponsor businesses, which range from local law firms to the Boys & Girls Club of America, pay $1,000 per project to alleviate each student’s loan debt. So far SponsorChange has matched about 35 students to various projects, from business consulting to web development, which are split into 40-hour stints. “We wanted to give them a way to pay off that pesky debt a bit while still being involved in their community and increasing their network.”
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It’s a big problem to tackle. A mainstay topic in the debate about education reform, the average student loan debt has nearly tripled over the last 15 years, according to a study from the Pew Research Center, hurting recent graduates as they enter the workforce. In recent years, that growth has begun to set records: Outstanding loans soared past the $1 trillion mark in 2011, exceeding the nation’s total credit-card debt.
Awa’s $140,000 figure is no doubt exceptional, but the average debt for graduates of the class of 2012 was $29,400, up slightly from $26,600 in 2011, according to a report from the Institute for College Access and Success, a nonprofit research group. “Student loan debt is the biggest burden millennials carry into the economy, and it’s crippling their ability to be productive individuals in society who could be growing our economy,” says Joe Bute, president of Hollymead Capital Partners LLC, a consulting firm in Gibsonia, Pa., near Pittsburgh, where Awa completed her SponsorChange project. In fact, student loan debt has become so burdensome that some experts say it’s even hampering a recovering housing market.
Since the program offers only $1,000 per project and participants typically only complete one project, Hampshire, 31, says an equally important part of SponsorChange’s mission is to encourage a love for socially altruistic work among young adults. And students who have participated in the program, such as Awa, are quick to agree. At Hollymead Capital, Awa researched re-entry models and transitional programs for newly released prisoners. “I was less in it for the money, which was really negligible compared to the debt I carried,” says Awa, whose graduate degree focused on education policy. “For me, it was really about exploring a different side of public policy and seeing whether the experience might segue into something else.”
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It’s Hampshire’s greatest hope that SponsorChange can become an outlet for new graduates to pursue these kinds of civic-based explorations. Hampshire was motivated to found the organization because he lacked such an opportunity while working in the private sector, which included jobs at companies such as Merrill Lynch. “Yes, I was able to pay my student loans and live comfortably, but I wasn’t feeling 100 percent fulfilled,” he says of his corporate gig. “I wasn’t actually making an impact or contribution to my community. So I wanted other young people to not have to make that decision — to either pay off their student loans or pursue a job that fulfilled them.”
Hampshire says he’s received great enthusiasm from corporate sponsors as well, many of whom are eager to provide millennials a chance to pay off their debt in a productive way. “That’s what I like most about SponsorChange’s model — that they’re creating a scenario for students to engage with companies in a practical way,” says Bute. “It’s not just random work or students getting coffee. It’s very much project-focused. They get the job done. They see the results.”
Hampshire launched SponsorChange in Pittsburgh, though he’s hoping that recent national attention — including a Dewey Winburne Community Service Award in Austin, Texas, at the SXSW Interactive Festival — will help propel the nonprofit to expand further across the country. The nonprofit has plans for a program that can facilitate virtual volunteering, where students can do remote work such as web programming or research for companies in other locations. Hampshire is also planning an aggressive push to involve colleges and universities in recruitment. “We want to scale what we’ve done so far, which is mostly pairing Pittsburgh-based students with Pittsburgh-based companies,” he says. “Universities and colleges have a ton of talent that could be mobilized to do impact volunteering, and we want to be at the center of facilitating that process…and fundamentally changing the way we deal with student debt at a national level.”
DON’T MISS: This Congresswoman Has a Plan to Protect Students from Crippling Debt

This State Might Offer a Novel Incentive to Help Teachers Pay Off Loans

Some problems seem almost too daunting to solve. But that doesn’t mean that you shouldn’t try. And that’s the optimistic viewpoint that lawmakers in Indianapolis are taking.
In order to help alleviate two major problems in our country — the student loan bubble and the still-weak economy — they want to offer qualified students up to $9,000 in state funds to pay off their loans if they go on to become teachers in science, technology, engineering, and mathematics (the so-called STEM subject areas), according to the Associated Press.
This proposal, currently awaiting Senate approval, would also extend to teachers in areas with educator shortages, the AP reports. Recipients would receive this money after completing their third year of teaching in Indiana.
MORE: This 6-Year High School Challenges Everything We Thought We Knew About American Education
This law could be especially helpful not just for our trillion dollar student loan bubble but also for our economy, as the fastest-growing jobs are in STEM fields (think: physician assistants, computer software engineers, dental hygienists, and veterinarians, to name a few). According to the Department of Commerce, STEM jobs grew at a rate of 17 percent in the past 10 years, compared with a 9.8 percent growth in other occupations. President Obama has endorsed an education in STEM to help make sure our students have the skills they need for the jobs of the future. Looks like Indiana is making a promising start.

Here’s Why You Shouldn’t Scoff at a $10,000 Degree

Our nation’s crippling student loan debt, now at a trillion dollars, is holding our country back. And yet, college tuition is still increasing. But what if schools could be more like South Florida’s Broward College that offers $10,000 degrees?
Affordable degrees sometimes carry a stigma. But according to the National Journal, many students who graduate from “cheaper” colleges like Broward are making more than their counterparts at traditional four-year schools. The report, citing a state-mandated study, writes: “Graduates from the Florida College System’s workforce-oriented bachelor’s degree programs earn about $8,000 more the year after graduation than university graduates.”
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Here’s why: At Broward, students learn skills that prepare them for the workplace. “As jobs have become more sophisticated, there’s a greater need for baccalaureate degrees that directly relate to the workforce,” says Linda Howdyshell, provost and senior vice president for academics and student success of Broward College told the publication.
We’re not saying that a large investment in college doesn’t pay off in the long run. It often does. But the reality is, too many graduates and their families are staring down a bottomless pit of loans. Not all of our graduates are getting jobs or are being paid too little in this still recovering economy. This low-cost Florida model shows that when it comes to getting jobs and paying back loans, there are many paths to consider.

This Congresswoman Has a Plan to Protect Students from Crippling Debt

With skyrocketing tuition and a still-recovering job market, more than 7 million Americans are in default on their student loans. But here’s the crazy thing —  as Florida Rep. Frederica Wilson writes in an op-ed for Huffington Post, these people are often worse off than if they had borrowed money for something less worthwhile than higher learning.
“What’s a more useful investment to make with borrowed money: a college education or a binge at the casino?” she writes. “While the answer — a college education — should be evident to everybody, our legal system continues to penalize students and graduates by denying them basic consumer protections available for almost every other type of debt — including gambling debt.”
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That’s why Wilson has proposed a new bill, the Student Borrowers Bill of Rights Act, H.R. 3892, that would help those defaulting on their loans. The bill would provide bankruptcy protection, a six-year limit on collections, and prohibit garnishing wages, Social Security and tax refunds, she writes.
The country’s total student loan debt has soared past a whopping $1 trillion, and Wilson’s bill aims to level the playing field for those seeking a college education.  She tells TakePart, “I’m introducing student loan reform now because I think it can improve lives, boost Americans’ purchasing power, and help promote job creation.” That sounds like a winning bet.

This Startup Helps You Crowdfund Your Life For the Next 10 Years

Founded by a team of former Googlers, Upstart is a crowdfunding platform for entrepreneurs and recent college grads that lets you raise money in exchange for a share of your future annual income. The idea represents a paradigm shift in higher education and in the way startups get funded. Many Venture capitalist firms profess to invest in entrepreneurs, but most firms are structured to invest in companies, not people. “It’s a combination of the money-raising power of crowdfunding platform Kickstarter and the professional networking benefits of LinkedIn,” according to USA Today. Perhaps the most disruptive aspect of Upstart is in the way we view continuing education. Many investors that end up backing individual entrepreneurs also sign up to mentor that person over the course of several years, which makes this new model especially appealing for those seeking an alternative to student loans.