Knowledge Bound: The RSC Blog



Visit the Knowledge Bound Blog regularly for news analysis, editorials and facts about education and financial aid.

Posted on Dec 09, 2013 - 10:25 AM | Financial Aid | Comments (0)

Most colleges and high schools don’t offer classes in student loan debt, so we’ll offer a primer.
 
·        The average college graduate in 2011 had $27,000 in student loan debt.
·        Two-thirds of graduates had more than $34,000 in debt.
·        10% had more than $40,000 in debt.
·        College graduates, or far less than half the country, owe more in student loans than the entire country owes in credit card debt.
·        Total student loan debt passed $1 trillion this fall.
 
And for the pop quiz: If you’re a high-school freshman today, you can expect to owe $49,000 in loans when you graduate.
 
Of course, there are steps you can take to reduce your student loan debt.
 
What Schools Should Teach About Student Loans
 
  1. Types of Student Loans. Students should know the difference between federal and private loans, subsidized and unsubsidized, PLUS vs. Stafford, etc. Such terms are commonly found in college financial aid offers.
  2. College Options. Colleges don’t all structure their financial aid the same way. Students need to know their options, and how state, private, community, for-profit, and other college choices work.
  3. Top Financial Aid Colleges. Students could really use a list of colleges across the country that offer the best financial aid. We can tell you from personal experience that students are often surprised who makes the list.
  4. College-Cost Estimates. Just as all student loans are not created equal, neither are college-cost calculators. Families need estimates that take into account their personal financial situation, not ones that generate estimates based on your expected family contribution alone. Your EFC is only one part of your expected college cost. There’s a lot more to it.
 
Graduate Level Classes in Student Loan Debt
 
After Financial Aid 101, students may need a graduate-level class on student loan debt, or perhaps Financial Aid 102. For instance, what’s the formula for compound interest?
 
Answer: A=P(1+r/n)nt
 
Banks will figure out the interest on your loan for you, but it helps if you know how they’re charging it. And that if you fall behind on your student loan payments, you could face fines, fees, and increased compound interest.
 
Banks and colleges can actually make more money if you fall behind or even default on your loans.
 
It’s a crazy system.
 
You need to take out fewer student loans. Less debt makes it more likely you’ll graduate, live on your own (and not move back in with mom and dad) and spend your life not stressed out paying back student loans until you’re 40.
 
One way to improve your student loan picture is to not make a single mistake on your FAFSA, CSS Profile or other form. You stand to gain more gift aid, cutting down on the amount you need to borrow. The government and colleges don’t make it easy on you. They’re looking for you to make a mistake. Even little ones can set you back.
 
After all, 30% of FAFSAs are audited by law. They will catch you. (You might want to know that for the pop quiz, too).
 
RSC doesn’t offer classes in financial aid, but we have a great text book on the subject with information on terms, types of investment plans, top financial aid mistakes and more.
 
High schools and colleges should offer classes in student loans. Your final exam could be how to avoid them. Until then RSC is all too happy to provide you answers!
 

 
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