The Federal Reserve recently reported that student loan debt has exceeded credit card debt and reached 1.6 trillion dollars. According to financial aid expert, Mark Kantrowitz, one in six graduates has debt exceeding their income with the average student graduating with $37,000 in debt which can require over 20 years to repay.` Borrowing excessively is like having a mortgage without owning a home. Borrowers suffering the most are students who leave school with no degree or a degree worth little in the job market.
There are 44.2 million Americans with student loan debt with average monthly payments of $381.00. For every dollar you borrow you will pay back two dollars. Students who graduate with excess debt are more likely to be depressed, delay getting married, having children, buying a car, buying a home and saving for retirement. Many have to return home to live with their parents in order to make ends meet.
The consequences of defaulting on a loan are garnishment of wages and income tax refunds; a negative affect on your ability to get a job or a house and exclusion of student loan debt from bankruptcy. You need to educate yourself and be an informed consumer about the loan process.
It is important incoming freshman understand that their freshman year is the beginning of getting into debt with the Federal Government. All incoming freshman who apply for aid (FAFSA) are offered $5500 in loans. You don’t have to take it or you may only need to take a portion. I encourage my students to find at least $5500 in scholarships so they can begin their freshman year debt-free. The loan amounts offered in their next three years will only increase. Students should continue to research and apply for scholarships during college.
Tips
- Do not borrow more than you need.
- Continue to apply for scholarships throughout college and apply them to your loan balance to decrease your debt. Follow @scholarshopmom on Instagram and Facebook
- Consider attending a community college to reduce costs particularly if you are interested in transferring to a four- year college.
- Get a work-study job on campus.
- Find out the requirements to become a Resident Assistant (RA) on your campus. Colleges may provide a discount on tuition and meals.
- Try to maintain a 3.0 GPA for additional institutional scholarships available at the college.