Going to College With Student Loans Can Make You Poor; Avoid it

Going to College With Student Loans

In the past 30 years as the priorities of states have shifted away from a public college education to for-profit government contract companies, the cost of college has skyrocketed and an increasingly huge number of students are being forced into student loans. College costs have soared far in excess of inflation. Thirty years ago a middle class family could easily send their child to a state funded college if they lived at home, and for some even living on campus was an affordable option. But, with today’s cost, the choice of which college to attend should be a well-researched and lengthy decision process, with cost your number one consideration. Because college cost are so high, students and parents who do not research college cost and financial aide well, find students going to college for 6 years( for a 4 year degree), or dropping out due to unmanageable cost. In-depth research and planning early in the students’ high school years can avoid these tragic problems. Get crucial information about college and student loans here.

The College Boards Research
According to the College Board, tuition and fees have increased from an average of $600 per year in 1976, to $6000 per year in 2007, for public colleges. The tuition increases are $2500 per year in 1976 to $22,000 per year in 2007 for private colleges. These numbers do not include room and board, books, lab fees, registration fees, car expenses, plane tickets, computers, clothes, bus tickets, or other hidden cost that colleges do not list.

The Real Cost of College
The total cost of college including room and board, tuition and fees, books, lab fees, registration fees, and bare necessities could easily range from $120,000 for a public college to $300,000 for a private college. This range could leave a middle class student with student loans (after Pell grants, Work Study, Summer Jobs, and Parents contribution), as much as $40,000 for a public school, to $150,000 in school loans for private schools. Many private schools have large yearly increases in tuition every single year, this must be factored in as you add up your total expected cost. If you do not qualify for government assisted subsidized loans, you may have to take out unsubsidized student loans that charge interest on loans while you are in school.

The College Acceptance Letters
College acceptance letters and financial aid information will soon be available. The average college tuition alone is $17,000 today. Most financial aide packages do not cover all of your cost, even for the poorest student. You are usually expected to come up with as much as 20-30% of the cost, after your financial aide award. Some students don’t find this out until they have traveled across the country to go to college and find themselves without enough money. Most financial aide packages don’t cover books; registration fees, lab fees, car expenses, computers, plane tickets, and other necessary items.

Do Your Research
Do your research when it comes to college cost and available financial aide. Most schools have a maximum amount of financial aide they will give to each student. For instance, if you are an out of state student, who attends a state school, your financial aide will be based on the cost for an in-state student. Therefore, you will have large gap that you will have to fill in, in order to pay all cost, no matter what you financial status. Know all of your colleges costs, this is difficult information to find, especially with private schools. Many schools hide some cost to keep students coming. Navigate the colleges’ website for cost; and also call the colleges’ registrations office, financial aide office, and housing office, and if possible talk to past alumni. It will literally take every single one of these inquiries to find out the true college cost. Most private schools will be off limits to middle income and low income students, unless they receive a full scholarship with many guarantees. Learn to Save Money here.

Keep Student Loan Amounts Low
Choose a college where you can keep loan amounts very low. There is no guarantee a graduate will be employed before school loan payments become due, or that they won’t become sick or disabled at some time during their loan repayment period. Know the difference between private loans and federal loans. Federal loans come with more safety nets. Private lenders such as Sallie Mae charges students when their loans are in deferral. With federal loans, if you are unemployed or suffering an economic hardship, you will not be charged to defer your loans. A rule of thumb is that your total loans should not exceed your expected beginning salary. For example, if you plan to go into teaching, a beginning teacher can expect to make about $21,000 a year, so your loans for 4 years should be capped below $21,000. Since many students change their major many times during college, and no one actually knows when they will be hired, or what their salary will be, it is wise to keep total college loans as low as
humanely possible.

How the Current Administration is Helping
President Obama has made it easier to navigate the oftentimes complicated maze of college and financial aide. He has required colleges to be more open about their cost, and the financial aide available. In the past many colleges hid some of their cost to prevent parents and students from making an informed decision, as I mentioned before.

President Obama made changes in Pell Grants so the amount awarded per student is greater, and the number of students who qualify per income is greater.

Effective January 2012, if you’re someone who has different kinds of loans’ guaranteed and direct-you’ll be able to roll them both into one direct loan and bring down your interest rate. You’ll only have to write one check a month, and you’ll see a discount. This switch saves money for taxpayers across the board and it helps pay for the second step President Obama announced in October 2011.

As a part of 2010’s student loan reform, borrowers’ loan payments could be no higher than 10 percent of their disposable income. This is a big deal-but it wasn’t going to go into effect until 2014. The President announced that he’s speeding up this program so it will affect students in 2012-two years early. This will have huge consequences for people struggling to make their student loan payments.

Federal Financial Aide Website
To get financial aide for college you can obtain a pin, and start your application process at the Federal Financial Aide Website. When all of your information is in, (check the site regularly), they will send a financial aide award letter to the colleges you submitted. Make sure you place every single college you are interested in on your FAFSA application. You will choose only one college at the end, and FAFSA will forward your information there. Read the FAFSA website carefully so you are well-informed before you start.