Borrower boot camp: Get your graduates in repayment shape with these five tips by Doug Savage, TG Senior Regional Account Executive

Say you had the chance to send next semester’s graduates through a “basic training” in loan repayment undefined a regimen that taught them not only the essentials of responsible repayment, but offered tips on safeguarding their finances in a tough economy. What would you include in the course? How would you help borrowers focus on lean living, building financial muscle, and preparing for the endurance test that is, in essence, repayment?

Here is an “exercise plan” designed to suggest to borrowers a successful path to loan repayment. You could include many things in such a plan; this version offers just an example. Consider adapting these suggestions for your own campus needs, using the information as a supplement to exit counseling, or  including it in future communications by mail or email.

• •·         Build your budget muscle undefined Strong, well-planned budgets do the heavy lifting for short- and long-term fiscal needs. To make sure income is put to “healthy” use, borrowers will need to establish a budget that takes adversity into consideration undefined a lay-off or prolonged job hunt, for example. There are numerous online calculators and off-the-shelf personal finance software applications that make creating and using a budget simpler. The more borrowers can anticipate and plan for their expenses in a budget undefined and adhere to budget requirements with the occasional splurge as a reward undefined the better off they’ll be.
• •·         Watch those spending calories undefined The temptation after getting a job and jumping several income brackets is to overindulge. Graduates used to a student’s Spartan existence may want to upgrade lifestyles without preparation; that is, without setting a spending plan. Instead of buying heedlessly, which can leave borrowers vulnerable to credit problems, they should devise a simple spending plan of purchases matched to income “calories” that takes into account long-term life goals.  Such a plan can help borrowers cut unnecessary expenses and focus on saving.
• •·         Track loan “weight” via NSLDS undefined For a “weight scale” view of where borrowers stand with regard to repayment, the National Student Loan Data System (NSLDS) website (http://www.nslds.ed.gov/nslds_SA/) is invaluable. The site won’t be up-to-the-minute with loan amounts and statuses undefined for that, borrowers will have to contact individual servicers. But the site does offer a central place to track loan calories burned and find contact information for all loan holders. The site can be especially useful for borrowers with split loans.
• •·         Set a long-distance goal with a repayment plan undefined Half the battle with any lengthy endeavor like repayment is setting a goal that is appropriate given need and circumstance. The standard repayment plan is not always the best for some borrowers, given dramatic changes in income or a period of time without employment. In such cases, borrowers may do well to consider Income-Based Repayment or another plan that takes into account fluctuations in salary.
• •·         Talk to your repayment coaches, a.k.a., servicers and guarantors undefined Servicers and guarantors can offer guidance and information to borrowers in tough financial straits. They can also connect borrowers to such repayment options as forbearance and deferment, and explain the pros and cons of loan consolidation.

On the evening of August 1, 2011, the U. S. House of Representatives passed the Budget Control Act of 2011.  The bill has been sent to the Senate, which is expected to pass the bill and forward to the President for signing.  It will prevent the United States from defaulting on its loan obligations and raise the debt ceiling.  Under the bill, discretionary spending will be reduced by $1 trillion over the next 10 years.  The debt ceiling will be raised in two steps:  $400 billion immediately following Presidential certification that the debt is within $100 billion of the ceiling and additional borrowing is required, with a second increase of $500 billion subject to the same conditions, but subject to a joint Congressional resolution. 

Impact on Student Aid

• 1.      Provides additional funding of $17 billion for the Pell Grant Program over the next two years.  This covers the current $5.7 billion shortfall and the $11 billion shortfall projected for next year.  Pell would be covered for FY 2012 and FY 2013, as it is a forward funded program.
• 2.      In order to generate funding for the Pell Grant increase, the subsidized interest for graduate students in the federal Stafford Loan Program would be eliminated beginning with July 1, 2012.
• 3.      The repayment incentives in the federal Direct Loan Program would also be eliminated, except for the auto-debit incentive.

For the Future

The bill calls for the creation of a 12-member Joint Committee to report legislation by November 23, 2011 that would propose to reduce the deficit by an additional $1.5 trillion through 2021.  The Committee would be composed of six Democrats and six Republicans coming in equal numbers from the House and the Senate.  Although other programs of student financial aid were not immediately impacted, there is an opportunity for future reductions in programs based on where the cuts are taken.  

SAVE PELL: On July 25 supporters across the country will band together for 'Save Pell Day,' an online day of action to petition lawmakers to protect the Federal Pell Grant program. If Congress reduces funding for Pell Grants in the 2012 budget, it would cut awards for the nation's neediest students in 2012-13.

Learn more and 'Like' the Save Pell Facebook community page today.

http://www.facebook.com/savepell?ref=ts&sk=wall