Graduation Debt, Student Loans & Expert Reassurance
You know CliffsNotes. Heck, you've probably relied on their quickie takes of "Crime and Punishment," "Moby Dick" and "The Scarlet Letter" to get you through finals weeks during your own college days. We may act snobby about this series of books with the signature yellow and black covers, but when you're wading through Hester Prynne at 2 a.m. the night before the final exam - and you've only gotten as far as the A on her puritanical dress - there's no room for elitism, just gratitude.
That's the exact emotion I felt browsing the pages of CliffsNotes' "Graduation Debt: How to Manage Student Loans and Live Your Life" (Wiley, 2010). It's written by Reyna Gobel, an MBA whose columns on "financial fitness" appear regularly on Yahoo!Finance. When those student loans start coming due, six to nine months after graduation, the paperwork alone is enough to induce panic. Hester Prynne's tribulations pale in comparison with the specter of Staffords and Perkinses, subsidized and unsubsidized, and the big question: How did those little loans add up to so darn much?
Gobel's book gives new grads and their parents the CliffsNotes version - summarizing what it all means and offering insights in clear, concise layman's terms. Best of all, it starts with a "let's find out where you are" quiz that helps new graduates figure out what they owe and to whom, and how to fill in the blanks. That may sound like a no-brainer, but just wait. Each semester's loans may be owed to a different entity, with different rules and payment options.
There are chapters devoted to defaults - including inadvertent defaults, which is what happens when a new grad doesn't know the answers to the question above and ends up paying off seven loans when he actually owes on eight. Consolidation, loan forgiveness, credit and myths, it's all here and it's presented as part of an overarching philosophy: That you can't put life on hold while you pay off debts. Your kid may be paying $300 a month for the next 30 years, but here's how he or she can consolidate loans and devise a budget that also will eventually include a wedding, babies and a mortgage.
Practical Tips and Miscellaneous Fun
The book is divided into chapters on evaluating, organizing and consolidating student loans, as well as budgeting not only for now but for the future. One chapter is devoted to "debt meets relationship" and what happens when you marry and mingle finances. Another discusses cars, commutes and other financial realities of daily, working life. And a third delves into budgeting for the current, economically-challenged age: layoffs, pay cuts and career changes.
But Gobel is nothing if not realistic. She compares a too-frugal financial plan to "the really horrible diet you tried that required flexing all of your discipline muscles all at once." Just like the all-cabbage diet, a too-austere budget cannot be maintained. There must be, she says, a safety net account and a "miscellaneous fun" budget line too, and she offers concrete tips on how to build up those funds.
In short, Gobel's approach may be just the thing your 20-something needs, not only to understand, organize and pay off student loans, but to budget for financial fitness over the coming decades. It's a great book to give any new graduate. It may feel a bit like getting socks on Christmas Day, but hey, everyone needs socks. You might consider avoiding sock-gift-syndrome by tucking in a special bookmark, perhaps a check for that first loan payment or a contribution to the "miscellaneous fun" account.