For many students, the college loan process is their first substantial financial experience

For many students, the college loan process is their first substantial financial experience

Where Do You Stand?

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Today, the average college student graduates with a staggering amount of accumulated debt. Very few students, less than 20%, are able to complete their post-secondary education without amassing some level of student loan debt. While college loans make higher education more accessible to a greater number of students, they also come with a fair amount of risk, and students should approach them with a degree of caution.

Consequently, they may not fully understand their responsibilities as borrowers, and may be unprepared to successfully manage their outstanding student loans. Defaulting on a student loan is never an option, and borrowers will be responsible for full repayment, plus interest, of the loans they have received.

To help students better manage their college loans, many lenders now offer financial tutorials that explain the loan process from issuance to final repayment. These tutorials are designed to ensure that student-borrowers fully understand their rights and responsibilities, and are prepared to fully repay all loan monies received. In some instances, student-borrowers will be required to complete a loan tutorial before any student loan can be issued.

College = Debt

A college education is a costly proposition and, like it or not, most students will need to rely loans to make that education a reality. The costs of college continue to rise, and show no signs of leveling off. College equals debt, and if you are planning on the former you must be prepared for the latter.

Depending on your career goals, and on the availability of grants and scholarships to help offset your unmet need, you may be looking at an accumulated student loan debt of anywhere between $26,000 and $100,000. Consider the following statistics:

  • Students graduating from a 2-year vocational school or technical college will amass an average of $10,000 in student loan debt. These are students who are working towards certification programs that will help them to transition directly into the workforce.
  • The current average student loan debt for graduates from a four year college or university stands at $26,600. That figure can rise significantly for students attending a private, for-profit college or university. These are students who have received a Bachelor’s or baccalaureate degree.
  • Graduate students will be faced with an even greater amount of student debt. On average, students earning a graduate degree will leave school with an average of $43,500 in accumulated college loans. Again, this amount will be significantly greater for students graduating from a private for-profit university. Students studying medicine or law can easily amass a student loan debt that tops six figures. Taking into account loans for residencies and bar exams, they can easily find themselves with loans in excess of $100,000.

Student Debt Trends

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Obviously, the rising levels of student loan debt are a direct response to the ever increasing costs of college tuition. This is in part due to inflation, though college tuition costs are rising at a significantly higher rate than can be accounted for by standard inflationary adjustments. These increases in college costs, including tuition and all related fees and expenses, show no signs of slowing. Consequently, students pursuing a college education must be prepared to incur a significant degree of debt in order to complete their education.

Federal vs. Private Loan Costs

There are two major sources for students loans, the Federal government and the private sector. Federal student loans should be every college students first choice. Federal loans have lower interest rates than their private sector counterparts, and offer much more student friendly repayment options. Many Federal loans also offer deferment plans, which allows for a grace period following graduation before the borrower must begin repayment. That being said, not all college-bound students will qualify for a Federal loan. Federal student loans are determined on the basis of financial need, and not all students will meet the criteria. Even those students who do qualify for Federal loans ount of unmet need. That’s where the private, or alternative, loan comes into play.

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