In an effort to finance a college education, many students find themselves burdened with mounting debt well after graduation.
Last month, the U.S. Department of Education released the official fiscal year 2010 two-year and fiscal year 2009 three-year federal student loan cohort default rates. A student loan cohort default rate is the rate of a group of students who went to school at a certain time who did not pay their loans, said Jonathan Eaton, a Penn State economics professor .
For the fiscal year 2009 three-year rate, there was a decrease from 13.8 percent nationally in 2008 to 13.4 percent in 2009, according to a press release issued by the U.S. Department of Education.
Addressing the situation at the university, Melissa Kunes, senior director at the Office of Student Aid said Penn State has the highest cohort rate among its Big Ten colleagues.
Kunes said Penn State is working to create a broader range of financial literacy programs.
The average student loan after graduation was $35,101 for spring 2012 graduates awarded a four-year degree and 80 percent of Penn State students have some kind of loan in order to attend, she said.
But there are financial decisions students can make that can help them after they graduate college, such as financial aid, scholarships, loans and banking options, which many college students utilize to help pay for school.
“Students should shop around for financial products,” said Divya Raghavan, a researcher and analyst at NerdWallet. “A little research goes a long way.”
NerdWallet is a website that provides several tools for students financially, including a scholarship search tool, a college comparison tool, a student-checking tool and a student loan calculator to assist students when considering financial options in college.
Raghavan also said that it is important that students pay attention to their financial habits to limit the amount of debt accumulated over college years. For student loans, she said students should be sure to maximize federal borrowing before looking into private or commercial loans.
Donald Hossler, professor of Educational Leadership and Policy Studies at Indiana University-Bloomington, said some students resign to defaulting on their loans due to a lack of commitment toward the signed loans, while others realize at some point that the “school is not right for them.”
Hossler also underlined the importance of prudent money management.
"We don’t want students using financial aid like an ATM machine,” he said. “They should be borrowing money for educational expenses [and not] things that may not be essential to their college experience.”
Bob Snyder, senior manager of student aid at Penn State said making informed decisions is important when looking at financial options, and also said that the interest rate on loans is 7.9 percent currently.
“Borrow what you need,” he said. “But keep in mind that the more you borrow, the more you have to pay back at a later date.”
When trying to accommodate their finances, Snyder said there are many options students should consider.
First, he recommends students to complete the free application online to be considered for financial aid, known as the FAFSA. Applications can be submitted starting in January, but Snyder said it is better to wait until April, as it is after taxes are due.
The FAFSA, Snyder said, is a student’s first option. The amount of money given through the FAFSA is limited based on grade level, and first-year students can receive up to $5,500.
“There is the option where you can pay out of pocket, which most students can’t do,” he said. “So you can go look at other loans.”
Snyder said that students and parents should consider the Federal Direct Student PLUS Loan, which is based off of a parent application. The loan is based off of parents’ credit, so it’s under the parents’ name.
There are also private loan and student loan options, which are available to students since they don’t have credit, Snyder said. Information on different types of loans can be found at the Penn State Student Aid website.
Snyder said to also to consider scholarship options, including receiving scholarships from a student’s college or by looking at outside scholarship.
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