It doesn’t make much sense until you realize that the government is using education to pay for health care.

 According to SmartMoney.com, “The most crucial part of federal student aid reforms includes a transition to 100% federal student loan funding from the direct loan program – directly from the government – while eliminating banks and private lenders as the middle man.”

 The Congressional Budget Office (CBO), says this will help the government save $61 billion over 10 years – savings that will help pay for health care reform and go toward reducing the national deficit. In fact, it is largely thanks to these savings that health care reform is even possible.

What can students expect?

•  They will see increases in the Pell grant. However, those increases may be smaller than expected. The new provision averages to three-quarters of a percent under the inflation rate—not even keeping up with the Consumer Price Index.
•  There will now be one way to receive federal loans: the direct loan program. This may help students by providing lower interest rates and more favorable terms. The direct loan program is run by the Department of Education—the department sends money to colleges and the colleges issue the loans to students.
• Beginning in July, 2014, students can start taking advantage of the changes to the income-based repayment (IBR) plans. These IBR plans base a borrower’s monthly payment on income rather than debt.

Higher student loan debts and higher unemployment, means a record number of college students defaulting on their student loans. The default rate is almost 7 percent—twice what it was in 2006. According to NPR, “About a quarter of a million people who were supposed to start paying their student loans in 2007 still are not.”

With no jobs and no job prospects, recent graduates are taking whatever they can get. They’re working as temps, waiters, in retail, and even fast food. They are barely making enough to get by, and no where near enough to pay off their student loans.

What happens if you default on your student loan?

You can be:

• turned over to a collection agency
• your credit score goes down
• the government can garnish your wages
• Social Security can be withheld

Get help to pay off student loans
The Income-Based Repayment Plan is a program that borrowers can sign up for that will limit their student loan payments to 15 percent of their incomes. A three-year deferment is also possible if graduates can prove they are hardship cases.

Even if you do get a deferment, chances are you’re going to have to pay it back at some point. Even if you defer for a few years the time will come when your loans comes due. The federal government guarantees most student loans and over a third of American students take one. Therefore, federal law makes it really had to discharge a student loan debt. That means, you can’t get out of paying it through declaring bankruptcy.

Luckily, there are many services to help you manage your money. PayOff Live is a web-based application that determines how you can pay off your debts quickly—often in less than half the time. You save money by paying less interest. As long as you’re make more money than you’re spending, you can use PayOff Live to become debt free—without major changes to your lifestyle, refinancing or lines of credit.
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Find a college scholarship or grant.

You probably wouldn’t start a road trip without knowing where you are going and the best way to get there, so why jump into a student loan repayment strategy without the same level of planning and preparation?

For Spring 2009 graduates, November marks the end of the six month deferment period for student aid. And while the full payment of student loans may seem daunting, a few simple and timely steps, along with knowledge of your options, can make for an easier journey.

Think of it as your repayment roadmap from PNC Bank, N.A., one of the nation’s top student lenders.

Find the Right Route

How long you take to pay your loans will impact the amount of money you pay back overall. An aggressive approach will probably save you the most money in the long run, but what is important is finding the option below that best fits your funds and lifestyle.

Standard Repayment– Generally a fixed monthly payment of at least $50 over a period of up to ten years. Extended Repayment*– Reduce your monthly payment by extending the repayment term for a period of up to 25 years.
Graduated Repayment – Payments start low and increase over time. This may be the right choice if you currently have limited income but expect higher earnings in the future.
Income Based Repayment (IBR) – Payments are based on income and family size – usually, 10 percent of your income or lower – and adjustable annually. A new repayment option as of July 1, 2009, you may qualify if your loan payments exceed 15 percent of your income.
Loan Forgiveness - Those working in certain fields, such as public service, government or non-profit, may be eligible for loan forgiveness. Check with your state or U.S. Department of Education to see if you are eligible.

Lighten the Load

Always pay your higher interest or variable rate loans first. Wherever possible, pay down your principal to slow the build-up of interest. This can usually be accomplished with a written request. Be sure to check if you lender offers incentives for good repayment habits. For example, PNC offers a quarter percent interest rate deduction for taking advantage of automatic payments. If you are still in school, start repaying interest on unsubsidized loans now to save on interest expenses later. Think about opening an interest-bearing savings account and depositing the amount of your student loan interest accumulation on a quarterly basis to pay off at graduation.

Leave Breadcrumbs

What your lender doesn’t know can end up costing you…a lot.

Your lender is available to help make your loans manageable and to help you avoid default. If you are going back to school, are unemployed or are just going through a tough time, you may be eligible for deferment, so it is important to stay in touch with your lender and to alert them to any changes in your employment or contact information.

Before you embark on the road to repayment, it is important to sit down and map out the best strategy for you. In a world of GPS and navigation systems, let your lender, financial aid office and knowledge of the options available help you chart a course that will meet your needs every step of the way.

For more information, visit www.pnconcampus.com or call 1-888-762-1001.

This was prepared for general information purposes only and is not intended as legal or tax advice or recommendations. Any reliance upon this information is solely and exclusively at your own risk. • Available for example if you received a FFELP (Stafford Loan) after Oct. 7 1998 and have more than $30,000 in eligible loans outstanding. By Thomas Lustig, manager of Education Lending for PNC Bank PNC Bank, National Association. Member FDIC

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