When going to college many students tend to worry about academic courses, living arrangements, and cool activities that can be found in their area. However, according to recent data, students should be worrying about student loan debt as they are likely to have a whole lot of it after graduation that can very well affect the rest of their lives.
They are several different ways to fund a college education from scholarships to taking up a full-time job but taking on some form of student loan is one of the more common ways with 71 percent of students doing so.
There are several different loans ranging from the Perkins loan to private loans and each can be beneficial or detrimental depending on the student. All student loans can be split into federal government funded loans and private loans. Federal loans are typically seen as more beneficial to students due to more options for reduced payment, deferment, and possible forgiveness programs. The most common federal loans are:
Stafford Loans ($669.7 billion; 32.1 million borrowers)
These loans are the most popular, offered on both subsidized and unsubsidized levels. They also can be used. whether or not a student shows financial need.
Perkins Loans ($8.1 billion; 2.8 million borrowers)
Perkins Loans are for students with extraordinary financial need, so not many students will be eligible. The interest on these loans is paid by the government while a student is still enrolled in school.
PLUS Loans ($117.9 billion; 4.3 million borrowers)
PLUS loans can be taken out by students or parents in order to fund whatever costs that are not met by other financial aid. PLUS Loans tend to have higher interest rates and can add on origination fees of up to 4 percent. They also require good credit.
Private loans can be taken out by local and national banks but some of the most common lenders are Sallie Mae, Wells Fargo and more.
Student loans are not inherently bad and do not always lead to extreme debt, however, they often do. Recent reports have shown that over 43.3 million Americans have student loan debt all equating to approximately $1.3 trillion dollars. With these numbers being so high, student loan debt is second highest only to mortgages in consumer type debts.
“It really makes you start to think that school isn’t worth it”, says Sarah. Sarah Carey, 18, is a second-year college student at the University of Denver and though she reports that her academic experiences have been pleasant, she hates that she knows that she will graduate in debt.
“Having a college education is essential to having a good, well off job in the future”, says Carey,”but college is priced as such a luxury that you have to take out loans to even scrape by.”
Only .3 percent of students are able to meet 100 percent of college cost and this is often only available at the most elite schools such as Harvard University where the school can offer full rides based on need. For students who do not attend those elite universities, they are more likely to find a financial aid package that will offer them $29,916 when tuition and board total out to $40,580 and that is if they are lucky. Even with this scenario, U.S News Reports that this wouldn’t be enough for a student to leave college with no debt as this is only 73 percent of need met and approximately 86 percent of need would have to be met by the educational institution with the remaining 14 percent being made up by federal grants in order for students to graduate essentially with a full ride- but this full ride would still include loans.
This 86 percent scenario is not that of most students, most educational institutions are not even offering 73 percent of financial aid. Most financial institutions are offering closer to 60 percent. That means that most students will have to take the federal loans and also seek out private loan assistance. Due to this common scenario, the average Class of 2016 student will graduate with $37,172 in debt, and this number is steadily rising.
“It definitely sucks that I already know that I am going to graduate with about $40,000 I owe in loans” ,Carey states,” it’s really disheartening to know that I will start off in the workforce with debt to worry about,”
Carey along with 90 percent of college students feel unprepared to tackle student loan debt according to Money Matters on Campus, a survey of 90,000 college students across the United States.
Nashwa Bolling, 33, is the Associate Director of Budget, Research, and Analysis at the University of Denver says that she understands student concern about loan debt and that it is a rising concern of hers.
“I am not in any way shocked by the fact that students are stressed about financial aid and loans, all of it is really daunting and can change their life.”
Bolling says that the students that she has worked with are often unaware of the severity of taking out loans and that contributes to the problem.
“So many students just take out student loans and do not realize the importance of that action until its kind of too late. They find themselves with private loans that horrible interest and less than favorable payment options.” Boiling advocates that students take time out to fully understand financial aid. “Talk to your financial aid office, try to get more grants and scholarships. If you have to go to loans, really look into them because they can easily affect the rest of your life.”
Student loans do often have effects on people past the point of graduation actually, that is when most of them become most apparent in your everyday life. Though federal loans are often put on a 10-year track for repayment the average student does not pay off those loans for approximately 21 years. A survey by Citizens Financial Group, a private loan lender, said that of 518 former students surveyed 23 percent were unable to make loan payments, 43 percent have entered deferment and 8 percent have refinanced.
Based on the status of your student loan payments, you could be turned down from buying a home or car due to bad credit. Student loan default stays on your credit report for 7 years and can lead to garnished wages and even garnished social security.
Even if a graduate does not go into default, According to the Student Debt Crisis, the average student debt will still end up costing students an additional 5 years on buying a home, a loss of $500,000 in retirement savings and, a luxury car, a dozen vacations or half a child’s college savings over the course of their lifetime.
“I spent years in college, I am still paying back debt”, says Mako Miller, “that’s why I spend my time trying to prevent that same debt from accruing with others.”
Mako Miller, 34, is a post-secondary coach for Kauffman Scholars, a mentor and last dollar scholarship program in the Greater Kansas City area. As part of her mentoring high school students about, she helps to facilitate an FAFSA Frenzy event every year to help students better understand and easily apply through the Federal Application for Federal Student Aid (FAFSA).
Miller goes on to state,“We can’t just cut out tuition cost right now and unfortunately, scholarships are not always plentiful. However, too many people do not understand student loans or financial aid in general. When we start educating people about that then we will see a decline in student loan debt.”