Helping the Class of 2012 to be free from Heavy Student Loans

Heavy Student Loans
Heavy Student Loans

Mark Kantrowitz, publisher of, projects that the class of 2012 who have borrowed for their education will hit a debt load of $28,700. When broken down, that amounts to $330 of standard monthly payments, which means the graduate must have a salary of around $40,000 to be able to pay that easily. The sad news is; half of all the current graduates are unemployed or underemployed according to an AP analysis.

The class of 2012 is said to graduate college with bigger loans than the classes before them. With an economy recovering from a recession, getting the means to pay for this heavy debt load is quite difficult. For parents, this is probably a situation they thought they would never see. So how can parents help their children with their financial issues without hurting their own pockets, financial experts suggest a 3 step plan to help the new graduates.

  • Get Organized

To help the newly graduates pay off the loans, get them organized on knowing the IOUs as soon as possible. You wouldn’t want your child signing for a car lease in July as it would leave a zero surplus for the loan payment coming in December, remember they only have six months to repay. To determine how much they owe, call a financial aid from the college and visit the website

2 months before the loan is due, instruct your child to visit the site so they can merge the federal loans into one for a simpler tracking and billing process. Earlier graduates that have yet to consolidate should do the consolidation by June 30, so they can avail of the discount (0.25%).

For private and federal loans, have your child arrange an automatic payment, also encourage the child to budget the income to avoid late dues or insufficient funds.

  • Opt for Lighter Loads

If the borrower owes payment more than 20% of their income (defined as above $1,400 a month for single people) then they could get into financial trouble. If your child owes an amount close to that, the federal loans could offer some options:

  • Income Based Payment- here bills are restricted to 15% of the child’s discretionary income, for borrowers involved in public service, the balance may be pardoned after 10 years.
  • Graduated payment- removes 30% off the standard payment during the first two years, then raises the payment two years allowing the borrow to pay in 10 years time.
  • Extended payment- If the graduate owes more than $30,000 the loan terms can stretch for up to 10 years and 25 years for low payments.

Of the three, some experts suggest graduates to choose income based repayment as it offers more flexibility.

  • Offer a Hand but Consider Your Welfare as Well

Statistics show one in five students receive financial help from relatives or family members, this is entirely normal of course, as family members can’t take the burden placed on the child. But before doing that, consider less costly ways first, remember you also have retirement to look out for. You can let the child live in your home and direct the money from rent towards repayment of the loan.

The author of this article on student loan is written by Merck Williams, writer of numerous online articles on loans and debt repayment. Merck particularly writes on current and pressing issues such as student loans. He blogs at


Helping the Class of 2012 to be free from Heavy Student Loans