Mellody Hobson Answers Your Student Loan Questions

April 27, 2010— -- It's a common problem facing many students and recent graduates -- the weighty combination of student loans and credit card debt.

Mellody Hobson, "GMA" financial contributor, traveled to San Francisco to tackle these tough questions and to school students in the ways of financial life after college.

It is never too early, especially if you have a little extra money at the end of every month, Hobson said. She recommended investing in a mutual fund.

"Even if you could put away $25 a month or $50 a month in a mutual fund, that would be a really terrific thing and there are a lot of mutual funds out there that will let you invest for very little money," Hobson said.

What is the Best Way out of Credit Card Debt?

It is easy for students to accumulate credit card debt because they start to use credit cards to extend their lifestyle, Hobson said.

"The problem is that balance really does cost them over the long term, in terms of the interest that they pay. So, for every item that they buy, for every pizza that they pay for, they end up spending a lot more money than they end up spending," Hobson said.

In certain cases Hobson recommended working out a payment plan with the collections agency, and once you pay everything off make sure you get a letter from them stating you no longer have a balance.

"If you get into trouble with credit card debt…make sure that you get proof of payment in writing…you might need that for proof for everything from buying a cell phone to getting a job," Hobson said.

Hobson said building a credit history in college can be a good idea, but she recommends parents make their children authorized users on their credit cards so they can keep track of the spending.

If that is not possible, then students should only have one credit card, not multiple cards, Hobson said.

What are the Best Places to Find Good Grants and Scholarships?

The Internet is a great resource for scholarships, Hobson said, and suggested the site scholarships.com.

"A lot of scholarships actually go unclaimed because people don't apply," Hobson said.

There are scholarships available for very specific interests, such as bag pip playing or veganism, Hobson said, adding that you can't afford to not scout the Web sites.

Also note that there is good news for students who have a Pell grant, goverment funds for college that students do not have to repay. The amount of money handed out is increasing this year and will continue to do so until 2017, Hobson said.

How Can I Pay for Grad School?

There are a lot of people in this tough economy who think they should return to school, especially if they are having a difficult time finding a job, Hobson said.

"One of the things that I absolutely would think about, what field are you going into and is that field in demand," Hobson said.

If you decide to return to school, Hobson recommended using federal loans because the rates are the lowest.

"There's a new initiative…there will actually be a sunset provision to their debt," Hobson said. "Meaning after ten years whatever debt that they still owe to the U.S. government through federal loan programs is forgiven."

For more information on this initiative CLICK HERE or HERE.

Web Extra Tips from Mellody Hobson for Students

Hobson recommended getting in the habit of budgeting. Know exactly where your money is going and what money is coming in. There are a lot of financial tools on Ihe internet that make it easy. Try and develop a financial plan, so you can properly manage your salary from your new job.

As soon as you start your new job, start contributing to your 401(k), at least to the company match.

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