Financial planner offers reality check on student loans

This past week, the big controversy in Congress was over newly issued government subsidized Stafford Loans, which were scheduled to double from 3.4% to 6.8% on July 1.

Some argue the increase would hurt those who can least afford it.

$10,000 loan for 10 years at 3.4% = $98.42

$10,000 loan for 10 years at 6.8% = $115.08

Monthly difference = $16.66

Certified Financial Planner Terry O'Grady offers some prudent advice for parents and students considering student loans to pay for an education.

Parents should not co-sign for student loans.  Why do you think the lender requires a co-signer?  There's a good chance the student will default on the loan.

Federal student loans do not require co-signer, only private student loans may require cosigners.

Student loans are difficult to discharge in bankruptcy, in order to do that you must petition for undue hardship.

Make sure the asset you are buying (the college degree) has value in the marketplace.

"Racking up $100,000 in debt to work in a field where top pay is $30,000 is insane," emphasizes O'Grady.

The solution that makes the student loan discussion a moot point:  DON'T BORROW TO PAY FOR COLLEGE.  Instead, go to a cheaper school if need be.

There are a variety of ways to save for college, including a Coverdell Education Savings Account, 529 Plans, a Prepaid Plan, and Scholarships/Grants.

Another option is to pay as you go, according to O'Grady.  "Some evidence suggests that students who work their way through college have better grade point averages and real world experience that is attractive to employers."

Certified Financial Planner Terry O'Grady can be contacted via email at

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