Student loan debt is plaguing many new and not-so-new college grads. Total outstanding student loan balances are roughly $1.16 trillion, up by $77 billion from last year, according to the Federal Reserve’s fourth quarter Household Debt and Credit Report. Consequently, delinquencies are on the rise. Roughly 11.3% of all student loan debt was more than 90 days past due during the fourth quarter of last year, up from 11.1% in the third quarter.
Although there are repayment assistance programs available, some borrowers are not aware of them or don’t know how to gain access. That’s where Andrew Josuweit, CEO of Student Loan Hero, comes in. Josuweit knows firsthand what it’s like to struggle with student loans. He was dissatisfied with the service he received from student loan servicers, so he made it his mission to do something about it and help others navigate the choppy waters of financial life after college.
In 2009, Josuweit was a newly minted graduate of Bentley University’s managerial economics program. With a bachelor of science degree in hand, he was ready to conquer the world. But there was one tiny roadblock in his way — he had accumulated more than $100,000 in student loan debt.
“I graduated with a mix of 16 different private and federal student loans.” Josuweit told The Cheat Sheet. “The way the payment cycle works in higher education is typically per semester. The average college student needs to apply for additional student loans every semester. Each semester, I would max out my federal loan limits before subsidizing the difference with private loans.”
When asked why he borrowed so much, Josuweit says it largely had to do with school choice. Unfortunately, not paying enough attention to the price tag proved to be a painful mistake.
“I, like many young adults, went to an expensive school that I simply couldn’t afford. Unfortunately, I graduated during the country’s worst economic recession in a decade and I was unable to pay my loans once I got out of school,” he says.
The high cost of tuition
Josuweit is not alone when it comes to managing high tuition costs. The average cost for tuition and fees plus room and board at a private four-year college was $42,419 during the 2014-2015 school year. The college grad says he feels student loan servicers often provide poor service on both their websites and over the phone. He believes part of the problem is due to lack of training.
“The people working in their call centers aren’t financial advisers who are equipped to provide different financial options, strategies, or advice to borrowers who are overwhelmed by their student loans. When I first graduated, I would call my servicers and tell them I couldn’t afford the payments, and they would say there wasn’t any other option. In reality, there are over 70 different repayment programs for federal and private loans and plenty of options for grads who can’t make their payments,” says Josuweit.
The entrepreneur was inspired to start Student Loan Hero based on his experience. So far, Student Loan Hero has 20,000 users and helped borrowers refinance more than $130 million in loans last year. He says he was inspired to educate other borrowers about their options and empower them to get out of student loan debt once and for all.
“Every day we get phone calls from people who have had such a bad experience working with other student loan servicers, and who are calling us as a last resort. I wish this weren’t the case, but most of those people tell us that by providing free and unbiased advice, we’re providing a service that no one else they’ve gone to for help has been able to do,” says Josuweit.
Student Loan Hero provides an array of resources, including debt calculators and advice on repayment options. Josuweit says he is not that surprised by students’ lack of knowledge when it comes to student loans due to what he says is a “broken and complicated system.”
“We talk to financial advisers looking for advice and strategies for their clients’ student loans. What’s surprising is that the Department of Education has made this repayment process so difficult for borrowers to navigate and understand. The downfall of this complicated system is that scores of young adults feel paralyzed and overwhelmed with managing different debts, and therefore don’t take any action,” he says.
Navigating the student loan process
Josuweit says figuring out the best plan for repayment can be confusing and that the process can be further complicated by the fact that some federal servicers will not offer advice about other student loans they don’t manage.
“At Student Loan Hero, we don’t just look at part of a graduate’s student loan situation, but we also take into account their socioeconomic situation, job, residency, and other factors when we provide a comprehensive strategy for paying off their student loans,” says Josuweit.
Borrowers with federal student loans have the option of tracking them through the National Student Loan Data System. However, Josuweit notes that NSLDS is just for federal loans, while Student Loan Hero is able gather all of a user’s federal and private student loan data in one place.
“The NSLDS also doesn’t make recommendations on the smartest way to repay your student loans. We provide deeper financial analysis and insights — for example, we can calculate how much interest will accrue over the life of a student loan,” he says.
Seeing the light
Josuweit is closer to seeing the light at the end of the student loan debt tunnel. He says he currently has about $80,000 to go. He is hoping to pay it off by the end of this year. As far as a long-term plan, Josuweit says he wants Student Loan Hero to become the go-to place for anyone with student loan concerns. He also hopes the company will branch out to assist those with tax, mortgage and investing issues.
“My ultimate vision for Student Loan Hero is that it becomes a comprehensive, all-in-one financial adviser for young adults,” says Josuweit.
Andrew Josuweit’s Advice:
1. Pay attention to tuition cost
Says Josuweit, “I would advise students to analyze the ROI of the school you want to attend, the major, and the degree type (master’s, bachelor’s, associate’s, etc.) and weigh that against the cost of the school.”
2. Don’t take the first loan you’re offered
“If you do decide to take out loans, keep in mind that you don’t have to take the first loan you’re offered. You can shop around for a good rate — especially if you’re receiving an advanced degree,” he says.
3. Be realistic about post-graduation job prospects
Prepare for the reality that you may not find employment right after graduation. It will likely take a few months before you are stable enough to earn a living and make it on your own.
“Keep in mind that no one is guaranteed a high-paying job when they get out of college, which I learned the hard way,” says Josuweit.
Starting this month and throughout the year, The Cheat Sheet will be highlighting individuals who are making waves within the financial education community. Stay tuned for more financial inspiration.