Thursday, December 10, 2009

Can you take online courses to defer student loans?

One of my readers passed this Wall Street Journal article to me about a young pilot who earns about $32,000/year and receives a cost-of-living allowance. Evidently, the pilot has decided to defer his student loans (totaling $130,000) by taking online courses. (What is he thinking?!) I feel as though the pilot needs a Suze Orman intervention. Here's why:

1. Yes, it is possible to receive a deferment on student loans by taking online courses if you have a Direct Loan from the Federal Government. BUT, you've got to be enrolled at least "half time" which probably means at least 6 credits or 2 classes. Do you have time for this? Will those courses pay off later by leading to a higher salary?

2. If the Direct Loan from the Federal Government is subsidized then interest will not accumulate while you're taking classes. If the pilot has $130,000 worth of loans then he probably has some loans that are not subsidized. Therefore, interest will accrue even while taking classes.

3. I just checked the cost of taking an online course at my local community college. Each class is about $70 a pop. Two classes makes $140. If you took online courses through a private university or state school there's a GOOD chance two courses would cost WAY more than 140 bucks. Why not just roll that money into paying off the student loan? Why not just pick up an extra job with your extra time and roll that extra money into your student loan payment?

4. It's more than the online course enrollment fee, folks. Will you have to buy books too? (Wake up to the textbook racket.) Do you have a stable computer and internet access? Do you have time for the course? (Or, would it be better for you to spend that time working a second job to pay off the loan?)

5. Deferring your student loan will cost you and it's not a long term solution. You can't run forever. It is okay to admit that you're having trouble paying off your loan. There are people who can help.

6. Confused about how much you're going to eventually pay? Try out this student loan calculator to get an idea of how much money you will owe.

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