In Depth: Economic woes and student debt
Despite the struggling economy, students can still fund their education with student loans, said Steve Sharp, director of financial aid.
“Student loans are still as available here at USU as they have ever been,” he said.
Because student loans at USU come through the Utah Higher Education Assistance Authority, UHEAA, a government-based, nonprofit organization, they are federally guaranteed and haven’t been as affected by the plunging stock market as other types of loans, he said. Some partners through UHEAA have dropped out, he said, but others have stepped in to take their place.
USU’s partners through UHEAA, including America First Credit Union, Deseret First Credit Union, Key Bank and USU Charter Credit Union, are able to offer lower, fixed rates because of the federal guarantee, he said.
To enter into a student loan through UHEAA, a promissory note must be signed and the rates stay the same throughout the entire loan, according to the financial office’s Web site. The loan is obtained from a specific partner so processing fees and repayment terms and benefits vary, and the partner institution from which a student borrows can be changed to another partner at any time, it states.
These loans, called Federal Stafford Loans, currently have a fixed rate of 6 percent for subsidized loans. Unsubsidized loans currently are set at 6.8 percent, according to the UHEAA Web site, uheaa.org. These loans have a six month grace period after a student drops below enough credits per semester to be considered “half-time,” leaves school or graduates to begin making payments. Unsubsidized loans, however, will still charge interest during this time.
The maximum amount a student is allowed to borrow throughout their lifetime differs depending on a student’s tax dependence status and whether the loan is used for undergraduate or graduate education, it states. For example, the dependent undergraduate student has a lifetime cap of $31,000 while the independent undergraduate can borrow as much as $57,500. For a graduate or professional degree, that amount is kicked up to $138,5000, it states. These amounts differ, too, for subsidized versus unsubsidized loans, with the maximum amount for a graduate or professional subsidized loan set at $65,500. However, most students are not likely to borrow this much as the loan will only cover tuition and fees for their particular institution once any other aid, such as scholarships, grants, veterans benefits, other student loans, etc., is deducted, it states.
But while UHEAA and other government-backed programs like it haven’t suffered, the failing economy has made it harder to get a private loans, Sharp said.
According to a study conducted in March by the National Association of Independent Colleges and Universities, NAICU, 45.6 percent of institutions dealing with student loans in the private sector have found stricter credit requirements and 43.2 percent have found lenders leaving their institution. Other affects of the financial crisis on private lending companies include a reduction or elimination of borrower benefits and an increase in interest rates, it states.
Because private lending companies and private loans aren’t federally backed, private companies are harder not to default on should a student have a hard time making enough to pay back the loan, Sharp said, as these loans don’t have as good of terms as loans made through organizations such as UHEAA. If a student comes across a hard time while trying to pay off their student loans, he said a federal loan has more options for deference or other solutions.
Finding a place from which to borrow shouldn’t be a student’s only concern. Regardless of what lending institution a student goes through, all students are encouraged to borrow as little as possible, Sharp said. Students at USU have been pretty good at this, he said.
“For the most part, USU students are quite conservative in their borrowing,” he said. “We encourage you to live like a student now instead of living like a student later. It’s got to be paid off sometime.”
Although Sharp said he hasn’t yet seen many students having a harder time paying off their loans, he said they expect to be seeing that in the future.
“The significant drop in employment will make it harder to pay off (those loans),” he said.
Stephanie Hebert, senior in print journalism and psychology, said she has concerns about how many students with loans will pay them off after graduation.
“I don’t know how people with student loans are going to make it,” she said. “You’re starting out with this much debt. How are you going to buy a house or something?”
However, Herbert said after graduating in May she will not worry about paying off her student loans, planning, rather, on continuing to graduate school. She said she feels staying in school a little longer, even though it means racking up more debt, will be worth it in the end.
“I don’t think coming out with just a bachelor’s degree is going to be worth it,” she said. “Bachelor’s degrees are a dime a dozen – people just don’t care. If you’re going to stay with a bachelor’s degree, you might as well just stick with your high school diploma.”
Kaelee Jensen, sophomore in music, said she understands why people are concerned given the current financial crisis but she isn’t personally worried about repaying her student loans. However, she said, she acknowledges that not every major is created equal as far as giving the student the ability to pay their debts after graduating.
“An engineering major has a lot less to worry about than a music or education major,” she said. Engineering majors are practically guaranteed a high-paying position upon graduation while other majors will have to look a little harder, she said.
Jensen said she plans on continuing her education beyond her undergraduate degree, planning on getting a master’s and a doctorate in musicology.
“I’m not concerned because I plan to keep on going to school until I can get a really great job,” she said.
Herbert said she also thinks getting an advanced degree will help her get a better job with which she can more easily pay off her loans. But what a student does with their time at the university is more important in many ways than if they stick with a bachelor’s degree or go on to more schooling, she said.
If a student ends up in a field they don’t like, the education and the debt incurred to obtain it is useless, she said. She said she recommends not wasting any time if possible when getting an education. She spent four years between high school and entering college working in various places and trying to figure out what she wanted to do, she said, and encourages students to come to college with as much of a plan as possible.
“The best thing to do is have a plan so you don’t waste it,” she said.
–lisa.m.christensen@aggiemail.usu.edu