While students across the country are getting back into the swing of things for the fall semester, their worries and stress factors include a lot more than studying for exams.
Student loan debt has officially exceeded credit card debt in the United States and an increase of the default rate on federal student loans continues to rise.
In an interview with The New York Times, Education Secretary Arne Duncan said the default rates at public, private and for-profit institutions are increasing steadily.
Cynthia Van Pelt, the director of financial aid at Eastern Michigan University, said a number of factors have contributed to the rise in student debt.
“This is at least particularly due to the decrease in credit card debt, which has been falling for the past two years,” she said. “Consumers accepted fewer credit card offers in 2010 after the Credit Card Reform Act.”
Van Pelt said the number of student loans has increased year after year because of the poor economy and fewer jobs available.
“They’re easy to apply for and students are borrowing more when they can’t find jobs,” she said. “Also, with so many parents losing their jobs, they’re using their savings for living expenses rather than their son or daughter’s college costs as they had intended, so we have more students taking out loans.”
Here at Eastern, approximately 75 percent of EMU students receive some type of funding from federal, state, institutional or private sources. The financial aid department processed federal student loans for about 12,000 students during the 2009-10 school year.
Ashley White has tried to avoid taking out student loans at all costs.
“I would rather work crazy hours at my job and be on a payment plan,” she said. “I was lucky enough to find a job in the area, but a lot of my friends weren’t and they had to take out a crazy amount of loans.”
According to Van Pelt, her department is trying to combat the number of students taking out student loans by discussing other ways that can minimize the cost of attending college.
“For several years, we have received approval from the President Susan Martin and the Board of Regents for increases in our institutional grant and scholarship funds to help the increasing number of needy students,” she said. “We participate in high school and campus events to present information about financial aid and recommendations for applying. We send reminders to students every two weeks if they need to submit documents or complete forms so they don’t lose out on aid by missing deadlines.”
One silver lining is the decrease in the interest rates on subsidized loans and for the federal Pell Grant, the maximum award increased slightly for the 2010-11 aid year.
Van Pelt said it is possible for students to avoid getting into debt, but it takes a little bit of research.
“Research academic scholarships on our website at emich.edu/finaid and fastweb.org,” she said. “Scholarships and grants are the best money source for college because it is money that doesn’t have to be repaid.”
Students should resist the temptation of borrowing the maximum amount of money offered through their student loans and only borrow the minimum amount needed. Van Pelt said students should try to accept only the Subsidized Stafford Loan because it is interest free while the student is in school.
Sara Wilson said she couldn’t avoid taking out loans and fears she will be repaying them for years.
“I’m embarrassed to say the total amount that I’ve had to take out, but I will say it’s a lot,” Wilson said. “My parents tried to help me out as much as possible, but they could only do so much and I couldn’t handle working 26 hours a week plus a full load of classes. I just hope I find a job and make enough money to live off of and pay on my loans.
“Pay the interest on Unsubsidized Stafford Loans while in school if possible,” she said. “Students should keep track of their loans on the National Student Loan Data System at NSLDS.ed.gov.”
Van Pelt said filing the FAFSA early every year to receive the most aid possible, knowing the differences of all the loan programs such as the Perkins, Private or PLUS loans can eliminate a lot of stress down the line for students.
“Not all loans are the same,” she said. “Students who are unsure of which loan to accept should contact us.”
Students should also map out graduation requirements when they first begin college to minimize the amount of time and money wasted on taking classes that are not needed to graduate.
Keeping class withdrawals and repeats to a minimum can decrease chances of debt she said.
“They are wasted credit hours and tuition costs and only delays progress towards graduation.”
James Taylor, a junior, said he isn’t looking forward to repayment, but the loans were necessary in order for him to complete college. Taylor said if the option to receive them wasn’t there, it wouldn’t have been possible to complete school.
“I know it’s going to be a headache, but if loans didn’t exist, I wouldn’t be here.”