Rising cost of tuition increases risk of maxing out on loans

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    With the costs of tuition rising at an uneven rate compared to income levels, students need to talk to financial advisers before taking out loans, Melet Leafgreen, the assistant director of financial aid, said.

    With need-based undergraduates at TCU taking a total of about $22 million out in loans, Leafgreen said she was worried students may run into trouble in the future.

    “It makes it very easy to borrow money by doing it all online,” she said. “Students borrow the maximum they can get and it increases their total debt.”

    However, borrowing the maximum amount of money was not recommended, Leafgreen said. In most cases, it was not necessary to max out on a loan to cover tuition and fees.

    Senior graphic design major Cameron Jones also said students need to be aware of what taking out a loan does to credit scores.

    Jones said he took out multiple smaller loans to lower the interest he had to pay, but in turn his credit was shot. He said he wished financial aid would have informed him as a freshman about the problems and consequences that came with borrowing money.

    Leafgreen said students sometimes had to adjust their spending to accommodate for the payments they needed to pay back.

    Kat Lewis, a senior fashion merchandising major, said her family changed their spending habits after experiencing the challenges that came with paying off loans for her sister’s college tuition. Saving more and spending frugally along with Lewis working at the TCU Yearbook helped lower the amount of money she and her family has to pay back after graduation.

    Also, Leafgreen said students needed to know how to borrow money wisely by knowing the differences between different types of loans.

    The best type of loan was a federal loan and the worst was a non-certified loan, Leafgreen said. The difference between the two is who regulates the loans — the government regulates federal loans, while non-certified loans usually are regulated through a bank.

    While the financial aid office does not have specific programs designed to inform students about loans and debt, Career Services provided a senior conference in January, Executive Director of University Career Services John Thompson said. At the conference, financial advisers talked about the best ways to pay off loans.

    Thompson said the same workshop was posted on the Career Services website under Online Resources for those who did not attend the event.

    Even after college, students received help from financial advisers at TCU, Leafgreen said. About 40-50 percent of graduates took advantage of the counseling services the financial aid department provided.

    She said these students were informed about what they should do in the six months between graduation and when they have to start paying off their debt.

    Thompson suggested students pay 10 percent of their loans during those six months if possible.

    Jones said if he receives a job straight out of college, he will start paying off his debt before the six-month grace period ends.

    Lewis also said she hopes to receive an income after graduation to help pay off her loan payments.

    Thompson said if students had to pay $120,000 in loans and paid 15 percent ($18,000) of the loan every year, it would take about seven years to pay it off. However, he said each lender is different and the definite amount of time it would take for graduates to pay off debt depends from person to person and lender to lender.

    According to the National Association of Colleges and Employers, the national starting average salary for college graduates is $50,462.

    A 2009 report from the Education Sector stated that the cost of tuition continues to rise. Students have to pay more for college than ever before, which may result in more problems than an individual’s debt.

    More students graduating with debt may result in a ripple effect, Leafgreen said. The housing market may be the main candidate that will be affected because of the graduates’ credit problems.

    “It’s a perfect storm,” she said. “The job market’s bad and debt’s increasing. It’s a scary place to put graduates.”

    Types of loans TCU suggests for students

    Federal Loan

    State Loan

    Certified Loan

    Students and numbers

    Total number of students at TCU

    7,853

    Number of students with financial aid 3,195

    Number of students whose aid was fully met

    799