By Jim Donovan
PHILADELPHIA (CBS) — On Capitol Hill this week, panels are looking at the looming crisis of student loan debt. With a new graduating class facing their tabs, 3 On Your Side consumer reporter Jim Donovan looks at ways to manage college debt wisely.
Graduation season has put U.S. student loan debt back in the spotlight, even on Capitol Hill.
“The treasury secretary remarked the student debt is hampering our economy across multiple sectors of society, and the federal reserve identified student debt as a risk to aggregate household spending,” said Rohit Chopra with the Consumer Financial Protection Bureau.
According to a PEW research study, about 37 percent of young U.S. households carry student debt.
And in a uncertain job market, the pressure to pay back can be overwhelming. College graduate, Brittany Jones told her story to a senate committee.
“The numbers did not add up. I worked as many as three jobs at once just to make the monthly payments,” said Jones.
In those tough financial situations, skipping payments may seem like the only option, but that short-term decision, can have long-term consequences.
“One of the mistakes often made – the default rate on student loans is as high as 30 percent. Don’t ever think that that loan isn’t going to impact your credit score,” said Susan Bruno with the American Institute of CPAs.
A poor credit score can dash hopes of buying a home, a car, and even a chance at certain jobs.
Often, lenders can work out a plan that allows for smaller monthly payments.
“The problem here, is that you’re paying more money in interest over the life of the loan. So you’re trading that short-term relief for some long-term pain. Nonetheless, if you can’t afford the monthly payments, this might be your only option,” said Scott Gamm with HelpSaveMyDollars.com
So if grads have loans with grace periods, they should use it to research every option — from repayment plans, to federal loan forgiveness for certain professions like teaching or public service — to be prepared when the first bills arrive.