FORT RUCKER, Ala. (May 31, 2012) -- Student loans can be a great advantage for some and a significant disadvantage for others. A loan can provide access to necessary education as easily as it can impair a person's financial future or hinder a military career.

"The obvious danger with any loan -- especially student loans -- really doesn't have anything to do with the loan itself, its interest rate or the term of the loan," explained Mike Kozlowski a personal financial readiness specialist with Army Community Service. "Allowing a loan to go into default -- either knowingly or through ignorance -- will have negative impacts on your ability to get credit or favorable interest rates on large purchases such as homes and cars."

It's not something you can "wish away" through filing bankruptcy either, he added.

According to Kozlowski and the Federal Reserve Bank of New York, about $870 billion is currently owed on student loans. The average outstanding student loan balance per borrower is $23,300 and 10 percent of borrowers owe more than $54,000.

This level of debt can cause difficulty for Families -- especially if a Family is already feeling the financial pressure of necessary living expenses, car payments or credit card debt, said Kozlowski.

"The addition of this heavy 'ball and chain' called student loan debt has the potential to transform wedded bliss into marital nightmare," he said, adding that money management is traditionally one of the most difficult topics for married couples to discuss.

In today's economy, the pressure on Families is even greater as college graduates struggle to find meaningful employment, Kozlowski said.

"Students are graduating and they can't make enough money to live and pay back loans," said Mike Burden, ACS financial readiness program manager. This causes many of them to return home to live with parents. These "boomerang children" can sometimes increase stress levels and financial responsibility of the parents.

According to Kozlowski, some graduates continue the sometimes lengthy search for a career position while others take part-time jobs or jobs that have little to do with their college major.

"This has resulted in a significant number of grads with past-due or defaulted student loan balances," Kozlowski said. "According to the (Federal Reserve Bank of New York), 5.4 million borrowers have at least one past due student loan account."

If a Soldier or Family is struggling to repay a student loan, a variety of assistance options are available to them, Kozlowski said. The first option to consider, a provision of the Servicemember's Civil Relief Act, can bring an interest rate down to a six percent floor.

The availability of other options depends on the type of loan -- whether it's a federal or private loan. For example, if a loan is eligible, the Army's Student Loan Repayment Program can contribute up to $65,000 toward the loan for enrolled active-duty Soldiers. Some funds are also available to the National Guard and Reserve through this program.

The William D. Fort Federal Direct Loan Program, also known as Direct Loans, is another program that "allows enrollees to consolidate their federal student loans and offers various payment plans which, in some cases, depending on the severity of economic hardship, are extremely affordable," Kozlowski said.

Information on both of these programs is available through the ACS Financial Readiness Program, he said.

Other Soldiers choose to have loans deferred under a military deferment option. This option usually gives the borrower a three-year break from making payments on federal loans, but regular payments will be due again at the end of the deferment period.

"My experience has shown that these arrangements are becoming increasingly more difficult to obtain from lenders," Kozlowski added.

One other option, called forbearance, is similar to deferment but Soldiers are encouraged to make monthly interest payments during the term of forbearance. If the interest is not paid, it is "capitalized" into the regular repayment schedule and increases the resulting monthly payment, he said.

Kozlowski advises Families and future students to do the research and consider all the options before applying for a student loan.

"Parents considering college in their children's future need to be proactive in their planning efforts," he said. "The earlier this is done the better."

If a Family has 10 years before the funds will be needed, he suggests creating an Education Savings Account.

"This option allows you to invest education savings in growth investment vehicles -- typically growth mutual funds -- all while growing tax-deferred," he explained. "The money is free from all taxes as long as it is used for the educational needs of your child."

By combining the average growth rate of high-quality mutual funds and consistent monthly contributions, a family could pay for most, if not all, of a child's colleges expenses through this account, Kozlowski said.

Other options for students include scholarships, grants and work-study program. Kozlowski recommends filling out the Free Application for Federal Student Aid. The website,, also offers detailed information about Stafford loans, Pell Grants and other forms of federal financial aid.

"Because of the variety of loan fixes out there, it can create other problems if one isn't too careful," Kozlowski said. "Debt consolidation companies and credit repair firms are out there and can do more to exacerbate already critical debt problems."

If a Soldier or Family member is concerned about student loans, Kozlowski recommends making an appointment with a financial readiness program representative to discuss the available options.

"We've had some flight school students carry their burden well into their flight training until they could not fully concentrate on their academic assignments or flying tasks," he said. Resolving the problem can give the Soldier peace of mind and help them avoid potentially dangerous distractions.

"We can work together to resolve the debt problem without interfering with training schedule," Kozlowski said.

For more information on student loans, call 255-2594.