Ask Brianna: When a student debt becomes a lot of trouble

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Ask Brianna: When a student debt becomes a lot of trouble

2018-10-02 22:02 Last Updated At：22:10

"Ask Brianna" is a column from NerdWallet for 20-somethings or anyone else starting out. I'm here to help you manage your money, find a job and pay off student loans — all the real-world stuff no one taught us how to do in college. Send your questions about postgrad life to askbrianna@nerdwallet.com.

Stories about student loan borrowers with six-figure debt loads might shock us, intrigue us or appeal to our deep-seated sense of financial schadenfreude. But borrowers with very high balances, for the most part, are not the ones to worry about.

Those who owe less than $5,000 are.

That's because they're most likely to fall behind. Almost a third of them who began repayment between August 2011 and August 2012 defaulted within four years, according to an analysis by the Urban Institute, a nonprofit research organization. Just 15 percent of borrowers who owed $35,000 or more defaulted on the same timeline.

Borrowers with a small amount of student debt are more likely to have left school without degrees, affecting their employment options, earnings and ability to repay. Attending for-profit schools with poor job placement rates and having other, non-student debt to manage also put borrowers at risk.

Simply keeping your student loan balance low isn't a defense against default. All your education-related choices — what school you go to, what you study, what you do after graduation — affect whether you'll get those loans off your back. Here's how to keep a little debt from turning into a lot of trouble.

CHOOSE A SCHOOL CAREFULLY

Defaulting on student debt means you've missed nine months of payments on federal loans — often fewer than that for private loans.

Avoid default at all costs.

It can wreck your credit and, for federal loans, lead to withheld paychecks, Social Security checks and tax refunds. With poor credit, you'll have a harder time qualifying for a mortgage or auto loan; you may even have to pay a deposit to set up utilities in your home.

One of the biggest steps in achieving the financial stability needed to avoid default is simply to graduate — and your chances of graduating are much worse if you go to a for-profit school. Compared with students at two- and four-year public and private colleges, those at for-profits are the least likely to get a degree within six years, and they earn the least 10 years after starting school, according to an analysis by the now-closed Center for Analysis of Postsecondary Education and Employment.

Almost half of students who started attending for-profits in 2004 defaulted on their student loans within 12 years, according to a report from the Brookings Institution, a nonprofit public policy organization.

When researching colleges, use resources like the U.S. Department of Education's College Scorecard to view graduation rates and average salary after attending. Steer clear of schools that aren't forthcoming about whether they're accredited or licensed to operate, pressure you to enroll, or advise you to take out private student loans or borrow up to the full cost of attendance without sharing other options.

TIE YOUR DEBT LOAD TO YOUR MAJOR

Your chosen major will also affect how much money you earn. Make sure the school and the specific program of study will prepare you for a well-paying job in your industry. Ask students and alumni at the schools you're considering how much job-search support they received.

Finally, borrow the least amount you can manage while still covering your expenses while in school. Dropping out due to financial stress can also hurt your chances of getting a stable job.

The Bureau of Labor Statistics' Occupational Outlook Handbook is a good place to start researching your likely salary after graduation. Use that expected salary to determine how much to borrow. An affordable monthly loan payment is 10 percent or less of your after-tax income once you start working.

Payments you can handle will keep your bills on track — and won't leave you asking whether college is worth it .

This column was provided to The Associated Press by the personal finance website NerdWallet. Brianna McGurran is a writer at NerdWallet. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.

Hong Kong rings in 2026 without fireworks after deadliest blaze in decades

HONG KONG (AP) — Fireworks are typically a celebratory centerpiece of Hong Kong's New Year celebrations. Not this year.

The territory will ring in 2026 without spectacular and colorful explosions in the sky over its iconic Victoria Harbor after a massive fire in November that killed at least 161 people.

The city’s tourism board will instead host a music show Wednesday night featuring soft rock duo Air Supply and other singers in Central, a business district that also is home to the famous nightlife hub Lan Kwai Fong. The facades of eight landmarks will turn into giant countdown clocks presenting a three-minute light show at midnight.

Fireworks have long been part of the city’s celebrations for the New Year, Lunar New Year and National Day. The pyrotechnic displays against Hong Kong’s world-famous skyline of skyscrapers typically draw hundreds of thousands of people including many tourists to both sides of the promenade.

Rosanna Law, the territory's secretary for culture, sports and tourism, acknowledged Tuesday that having no fireworks would affect some hotel and restaurant businesses.

The financial hub’s worst blaze since 1948 broke out at Wang Fuk Court, in the northern suburban district of Tai Po, in late November. The apartment complex was undergoing a monthslong renovation project with buildings covered by bamboo scaffolding and green netting.

Authorities have pointed to the substandard netting and foam boards installed on windows as contributing factors in the fire’s rapid spread. Thousands of affected residents have moved to transitional homes, hotels and youth hostels, struggling to recover from the loss of lives and homes that took them years to buy. The casualties pained many residents across the city.

Past tragedies in Hong Kong have forced similar cancellations of fireworks. They include the 2013 National Day festivities following a vessel collision that killed 39 people on Oct. 1, 2012, and the 2018 Lunar New Year celebration after a bus crash that left 19 dead. During the 2019 anti-government protests and the COVID-19 pandemic, multiple displays also were scrapped.

The origin of fireworks is believed to date to China in the second century B.C., when someone discovered bamboo stalks exploded with loud bangs when thrown into fire, creating the first natural “firecrackers,” according to the American Pyrotechnics Association, a U.S. trade group.

The Guinness World Records organization says the first accurately documented firework, the Chinese firecracker, was created by Li Tian, a monk from China’s Tang dynasty dating to around 618 to 907 C.E. Li discovered that putting gunpowder in enclosed hollow bamboo stems created loud explosions and bound crackers together to create the traditional New Year firecrackers to drive out evil spirits, Guinness said.