Relief for those struggling with student loans

Many people who decide to pursue higher education end up paying the price for years. Without scholarships or other assistance, just one year at a private institution can cost upwards of $50,000. The only option many students have is to take out large loans.

Effective July 1, however, a new plan will allow lower income graduates to make smaller monthly payments.

This relief comes in addition to a plan the government already offers to forgive some of the debt of students who pursue public service career paths. After a graduate makes 120 payments, the remainder of the loan is forgiven. The only loans that are eligible for forgiveness, however, are the Federal Direct Stafford Loan, the PLUS loan, the graduate PLUS, or the Federal Direct Consolidation loan.

"Typically, it is projected that a borrower who performs public service under this program will repay only about one-fourth to one-half as much money as a borrower who does not," Peter Mazareas, vice chairman of the College Savings Foundation, a Washington-based advocacy association, says to The Boston Globe.

Some loan forgiveness programs are also based on the state in which the graduate lives, and Massachusetts, for example, offers additional programs. For graduates who pursue professions related to teaching young children or other forms of childcare, there are forgiveness opportunities available.

In addition, the federal government has discussed increasing its involvement in helping graduates handle the burden of student loan debt. Loan forgiveness or assistance could become available to those pursuing a wider range of professions. For more information on Massachusetts loan forgiveness, click here.

--Bridget O'Sullivan

Younger generation not big on saving

According to research done by Fidelity, younger generations are less likely to save as much as their older counterparts. The Boston Globe reports that the research could reflect an increasing dependence on credit to make purchases when past generations would have saved enough to pay for them in full.

“Debt prevents saving in older generations as well, but it's especially a challenge for [Generations] X and Y," the Globe reports that Pamela Norley, executive vice president of Fidelity Consulting Group, said in a statement. "Our research revealed that younger generations are more likely to use credit than save for short-term purchases, which results in an ongoing struggle with debt management."

One relatively new issue to affect these generations is the high number of those still paying off student loans. These payments decrease the amount of money that members of these generations can save or put toward their big purchases. In turn, they must turn to credit to finance something they couldn’t save for.

The study also reports that concerns over money are the biggest worries facing these two generations. Money is not, however, the primary factor members of these generations consider when making choices about their careers.

As access to credit grows increasingly scarce, borrowing can become more expensive, especially for those who do not have the savings to make sizeable deposits on their purchases.

Senators address student loan crisis

On Thursday, July 31, a group of 39 state senators signed a letter urging Governor Deval Patrick to act quickly to assist the Massachusetts Educational Finance Authority, the quasi-public lending concern that this week announced it has no money for private student loans this fall.

According to reports released last week, more than 40,000 students will be unable to acquire loans this fall.

The Massachusetts Educational Financing Authority is a nonprofit lending authority that has been granting loans to students for 26 years. Last year the authority gave out $510 million dollars in student loans. The loans have a low fixed rate, which is optimal for students attending school in Mass.

This year, 40,000 students will be out of luck because the authority is facing fiscal difficulties. A month ago the authority thought they would be able to find money for private loans, but a bond insurer faced a possible downgrade in its credit rating, causing the loan rates to increase.

Thousands of families are nervous, and are running out of options. The authority is currently contacting the families impacted by the news urging them to seek federally backed loans, then shop for private loans based on the school's recommendation.

Lois Rosenthal of Winthrop adds, "I'm a little dismayed to hear that they won't have money, because it's a jungle out there, getting private loans."