“WITH VIDEO: College students feel pressure of loan debt” |
| WITH VIDEO: College students feel pressure of loan debt Posted: 18 Oct 2010 05:28 AM PDT Gurbaksh Shergil of Troy, talks about student debt at Oakland University in Auburn Hills. The Oakland Press/TIM THOMPSON It's been said that the college years are the best times, but after the diplomas have been collected and the caps have been tossed, some graduates have the burden of carrying student loan debt for decades. Recent reports by the Wall Street Journal indicate that Americans owe more on student loans than they do on credit cards. Americans owe $826.5 billion on revolving credit, which is mostly credit card debt, where outstanding student loans today total $829.785 billion, said Mark Kantrowitz, publisher of FinAid.org and FastWeb.com. Student loans are generally considered good debt, because it's an investment that creates value and can earn graduates with a bachelor's degree more money. Adults with bachelor's degrees earn on average $2.1 million during their lives compared to those with only high school degrees who earn on average $1.2 million, according to U.S. census studies. But with the rising cost of tuition, it's becoming harder for many students to afford college without taking on debt. For some, the burden of taking on loans is a constant dread. Blaine Zuza, 24, of Clawson, transferred to Oakland University in the fall of 2009. Before that, he attended Ferris State University and Oakland Community College. Zuza is a health science major, and said he's focusing on a health-care related career. Although he is optimistic about his future, he said he worries constantly about his accruing student loan debt. Since starting college in 2004, Zuza said he estimates his student loans to equal about $40,000. "The deadline and the time you're supposed to pay worries me," Zuza said. "It's scary thinking about having a job, getting a house, planning trips and having that student loan debt looming over your head. "I think there's a lot to worry about... It really racks up the debt and gnaws at you when you're out of college, and even in college." He also said he thinks that universities should lower the cost of tuition, and improve the education students receive. "I'd like to see more one-on-one assistance with teachers and more quality education with the amount of money you're paying." Sitting cross-legged on a bench in the middle of Oakland's fall-colored campus Kelsy Flores said her parents are paying for college, but that both parents experienced problems themselves with student loan debt. "My mom's dad didn't pay for her tuition," Flores said. "He wanted my mom to go to Iowa State and only offered to pay for a public university, but she went to a more costly private school, so she took out a lot of loans and got into debt. "I've asked how much debt they have or had, but they don't want to talk about it; they're very secretive and don't want us to worry." Flores said she would like to go to graduate school, but it scares her to think about the loans she would need to pursue a master's degree. "I'd like to see more scholarships to help pay for school," she added. For those graduating in a public service field where the pay may be low compared to student loan debt, there is a program set up designed to help lower the cost of monthly repayments. Under the Income-Based Repayment program, most borrowers will have a monthly payment that is less than 10 percent of their gross incomes. This includes single borrowers with less than $50,000 in income and married borrowers with two children who have less than $100,000 in income. However, income-based repayment can cap monthly payments at 15 percent of monthly discretionary income. And income-based repayment is only available for federal student loans, such as the Stafford, Grad PLUS and consolidation loans. Also, the maximum repayment period is 25 years under IBR. After that any remaining debt will be forgiven. Gurbaksh Shergill, 17, of Troy, is majoring in Biology and Spanish at Oakland. She said scholarships paid for 90 percent of her tuition this year and the rest is paid for with loans. "After all my scholarship money, I only got unsubsidized loans, so that's kind of a bummer," Shergill said. "I want to go to medical school so I'm terrified about the cost." Stafford Unsubsidized Loans are federally guaranteed loans that are not based on financial need and the interest does accrue from the time the loan is disbursed. The Stafford Subsidized loans, however, are based on need, and interest does not accrue while students are enrolled in school at least half time. The government subsidizes, or pays, the interest while the student is enrolled. After students graduate, leave school, or if they go below half-time status, they will have a six-month grace period before they must start paying back the loans. The financial aid website, FinAid.org, offers some tips to help minimize debt and to reduce the cost of financing education. It says to borrow federal loans first. Federal loans are less expensive, have lower interest rates, are more available and have better repayment terms than private student loans. For interest rates for students taking out loans this school year, if the first disbursement of the federal subsidized loan is between July 1, 2010 and June 30, 2011, the interest rate on the loan is fixed at 4.5 percent. The interest rate on subsidized loans first disbursed to undergraduate students between July 1, 2011 and June 30, 2012 will be fixed at 3.4 percent. For private student loans from banks, the interest rates can be much higher and is generally based on credit scores. PNC Bank, for example, offers private student loans based on the LIBOR index (the interest rate banks charge other banks on loans) plus a margin of 4 to 10.75 percent based on applicants' credit scores. Students can submit a Free Application for Federal Student Aid at www.fafsa.ed.gov to apply for federal and state grants and search the Fastweb scholarships database to find scholarships that students are eligible for. And as for Zuza, he said his goals are just to keep pushing himself to get his degree and work in the healthcare field and eventually become a pediatrician regardless of his rising education costs. "The whole debt situation — how everyone's in debt — it's got to change," Zuza said. "How we as a country deal with money has got to change." This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php |
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