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Watch Out For Those Student Loans!

By Sherri Sheridan

April 27, 2009

 

 

How Not To Set Up Your Financial Life For Filmmaking

The first time a graduate animation student burst into tears about their student loans during a chat with me over their thesis story I was surprised. Then it happened again and again. Horror stories kept unfolding about how once they started their college program, they could not leave, even if they did not like it, or they would have to start paying back huge student loans right away. Or they could not get a job after graduation and had to cover thousands of dollars of debt each month on credit cards, and student loans, just to keep their financial heads above water.

Student loan debt follows you your entire life and cannot be discharged even in bankruptcy! If you miss a loan payment, your interest rates will skyrocket like a credit card with many additional fees. A $50,000 loan can easily turn into a $150,000 loan with a 20+% interest rate. Your wages can be taken up to 15% each pay day, along with your tax refunds, and social security benefits to pay back student loans.

Most great filmmakers have natural talent and ability and just need a few nudges in the right direction to bloom. Be very careful of filmmaking programs that will leave you with a big pile of debt and no real film to sell.

Avoid Big Student Loans! Just Make A Great Film

If you need the structure of a class to learn things like software, check with local community colleges for digital arts programs. Community colleges will teach you the same types of skills the private colleges do that charge lots of money in tricky student loan deals. You do not want to come out a two year digital arts program with $70,000 worth of student loans at 5-20% interest to start off your career in debt.

When visiting potential schools keep in the mind that the staff people "helping" you to make a big decision, are actually sales people who's job it is to get you to sign up for a student loan. Media people and companies hire based on great demo reels and the ability to produce professional looking work. Some companies will not even look at your reel if you put a media school on your resume they do not like, or think produces graduates they do not want to hire.

If you want to make other people's films, and have the time and money, you should go to a top notch film school. If you want to write, direct and create your own ideas get this DVD workshop and make a great film fast! Many people who have gone to film school email me saying their school never covered the types of things I talk about in Developing Digital Short Films and how important these things are when actually making the film yourself. Most film schools will leave you in debt to the tune of $40,000 -$100,000 with no film to sell, competing for a very small number of film or animation jobs available each year to graduates. If you were to take this story class from me at the art school I use to teach at on the graduate level, it would cost about $2500 and you would not be getting any DVDs.

You can now make a digital feature film for about $3000 worth of equipment. We will be posting a list of the types of equipment we use soon. To make a feature film even a few years ago you had to come up with $100 per minute just to pay for film stock and processing. DV tapes cost about $4 for 60 minutes. It is very easy to hit the record button on a modern digital video camera, point it at something interesting, capture the footage into your computer, edit and output to DVD in a snap. The hard part is coming up with a great idea or story to shoot. Writing A Great Script Fast the new DVD workshop, will help you to think in a completely new way about creating stories by seeing, hearing, reading and participating in a fun to watch animated TV show storytelling workshop. The first person to buy the new DVD workshop sold his first script a few months later for $600,000.

I always tell people asking about film schools to just get my story workshop, that covers the top 20 film and animation books, and make a great film. Story is the one area you will fall down in and need help developing if you are new to filmmaking. Digital films are much easier and cheaper to make than 35mm ones.

Create a film idea that you would stand out in the rain for hours just to get a ticket to see! What film idea would that be for you?

Make sure the film has a market and that you can sell it, then create it for as little money as possible. Viewers will watch an indie film with a great story and low budget looks, but they will not watch one with a bad story.

Use online social networking sites for marketing and sales (YouTube, Twitter, Facebook, MySpace). CreateSpace is great to manufacture and ship your film, CD, or novel.

Read the article from CNN "Student Loan Fugitives"

Read the article from MyFlik "How To Set Up Your Financial Life For Filmmaking"

Read the new article from the WSJ "The $555,000 Student-Loan Burden"

 

The following is yet another recent article on the dangers of student loans:

In Grim Job Market, Student Loans Are a Costly Burden

By TARA SIEGEL BERNARD

New York Times
Published: April 17, 2009

They bought into the notion that if they went to college — never mind the debt — their degree would lead to a lucrative job. And repaying their student loans would never be a problem.

Growing Burden of Student Debt

But the economic crisis has turned those assumptions on their ear as thousands of recent graduates have been unable to find jobs or are earning too little to cover the payments for loans that are sometimes as high as $50,000.


The result has been rising default rates for student loans. And unlike other debts, student loans cannot easily be renegotiated.


“You often hear the quote that you can’t put a price on ignorance,” said Ezra Kazee, who has $29,000 in student debt and has been unable to find a job since graduating from Winona State University in Minnesota last May. “But with the way higher education is going, ignorance is looking more and more affordable every day.”


About two-thirds of the students graduating from college next month, or an estimated 1.8 million, have taken on student loans to pay ever-rising tuition and room and board. The average cumulative debt among graduating seniors is about $22,500, according to FinAid.org, a Web site that specializes in financial aid.


Mark Kantrowitz, publisher of FastWeb.com and FinAid.org, recommends that students follow a simple rule of thumb. “Do not borrow more than your expected starting salary for your entire undergraduate education,” he said. “If your starting salary is going to be $40,000, then you should borrow no more than $10,000 a year for a four-year degree.”

Gregory Westby, a 27-year-old designer who graduated from the School of Visual Arts in New York last May, is caught in the student loan trap. He has $150,000 in debt. He hasn’t been able to find a full-time job in graphic or set design, but is using his earnings from low-paying freelance jobs and working weekends at a fitness club to pay his rent. And he’s in the process of deferring his loans, which, together, cost $1,500 a month.


“Right now I’m surviving, but who knows when I’ll be able to start paying my loans back?” he said.


While Mr. Westby has found a temporary solution, many others are in default. The most recent default rate on federal loans was 6.9 percent, the highest rate since 1998, according to preliminary data from the Education Department. But this statistic illustrates only a piece of the picture. It tracks only the students who started to repay their loans between October 2006 and Sept. 30, 2007, but who had defaulted by September 2008. And it doesn’t include loans in deferment or forbearance even though those borrowers are unable to make payments. Nor does it include loans not backed by the government.

Perhaps seduced by the idea of graduating from a well-respected university, many students tend to overlook the consequences of graduating with debts that are likely to far exceed their starting salaries. And as many borrowers have learned, student loans are among the most ironclad debts, on par with child support, alimony and overdue taxes. They stick with you no matter what.


Bankruptcy usually doesn’t provide relief, except in the most dire of circumstances. Even death isn’t a good enough excuse for discharging some private loan debts. And the government can wield a heavy hand to collect what it is due: If you fail to repay your federal loans, it can garnish up to 15 percent of your wages or take your tax refund or part of your Social Security benefits.


But if you are having trouble paying back what you owe because you’ve lost your job or have some other financial difficulty, you have options. Of course, it’s always best to take corrective action before you’re officially in default. For federal loans, it generally takes about nine months of missed payments. But you can go into default on a private loan as soon as one payment is missed, though the rules vary by lender. And collection charges are usually steep.


“The good news on the federal loan side is that there are a lot of options for borrowers, particularly those who are in shorter-term financial trouble now,” said Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “The private loan side is where we don’t have or are unable to give a lot of general information because there just aren’t as many rights.”


You first need to figure out what types of loansyou have: federal, private or a combination of both. You can find out by calling the lender, accessing the National Student Loan Data System of federal loans, or FinAid.org’s Web site. Below are several options for both loan types.


Federal Loans


Defer or Forbearance

All federal loans have a grace period of six months after graduation. But an unemployment or economic hardship deferment and forbearance can each buy up to three years, for a total of six years of relief. Deferments are preferred because the government generally pays interest on subsidized federal loans, though you’re still responsible for interest on unsubsidized and PLUS loans. With a forbearance, you are responsible for all interest (even on subsidized loans), which is added to the loan balance.


“Students may not fully appreciate just how much that increases the size of the loan,” Mr. Kantrowitz said. “That’s why deferments and forbearances should mainly be used as a method to solve a temporary problem.”


A six-month deferment is reasonable: it would add $345 to the balance of a $10,000 loan with a 6.8 percent interest rate.


Extend Term

If you have taken a lower-paying job but expect to find a more lucrative one later, you may simply extend your loan’s term from, say, 10 to 20 years, though doing that may double your interest costs. You can go back to your original term the next year and there’s never a penalty for paying off principal early.


Alternate Repayment

If you have taken a low-paying job and don’t expect your salary to jump significantly, experts suggest one of the alternate repayment plans. Starting on July 1, all federal loan borrowers will be able to consider the “income-based repayment” program, which limits your monthly payment to 15 percent of discretionary income (or income above 150 percent of the poverty line) and forgives the remainder after 25 years of payments. For government or nonprofit employees, any remaining debt will be forgiven after 10 years. And if you earn less than 150 percent of the poverty level, you won’t owe any money — and it will count as a repayment, said Lauren Asher, acting president of Project on Student Debt. To qualify, your debt needs to be high enough relative to your income.


The income-contingent repayment plan is a similar program, but the payments are usually a bit higher.


There is a major caveat for both plans. If you do find a higher-paying job, and your payments didn’t cover all of your interest, those costs are tacked onto the loan amount.

For help in figuring out your best options, start by calling your lender. The Education Department’s Student Loan Ombudsman can also assist.


Private Loans


There are fewer options with private loans, and borrowers are generally at the mercy of their lender and the loan contract.


Ms. Loonin said that some lenders might offer flexible repayment plans if you’ve encountered hard times and you’re not too far into trouble. Most private loans will also provide forbearances, but with a one-year limit. Many lenders will charge about $50 for each loan for the privilege.


Private lenders don’t have as much power as the federal government to collect, but your credit will be damaged.

 

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