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news
Students turn
to loans, finance education
By Andres Cardenas
Summer Forty-Niner
With more students
enrolling in universities, more students are turning to student
loans to help finance their college education.
"There has
been a definite surge in terms of the people who are going
to school," said Molly Sullivan, spokesperson for Sallie
Mae. "That of course increases the amount of the number
of people taking out loans for education."
In 1970 there were
an estimated 8.6 million students enrolled at the university
level. Today there are 16.7 million students, an increase
of 94 percent. Outstanding debt on the college loans in 1999
totaled $178 billion, Sullivan said.
The average amount
owed on Stafford Loans according to the U.S. Department of
Education from 1995-1996 for undergraduates completing their
education at a public university is $11,950. At a private
university that amount rises to $14,290. For those that continue
on to get a master's degree those numbers jump from $15,000
for public and $21,410 at a private college.
Recently, Cal State
Long Beach students borrowed an average of $6,200 when they
graduated in the 2000-2001 academic year, according to Financial
Aid Director Dean Kulju.
Students at CSULB
could qualify for up to three types of loans to pay for their
college education depending on their need: the Stafford Loan,
a work-study loan and the Perkins Loan.
The Stafford Loan
can be disbursed to any student wanting assistance for college.
"Basically it is a federally sponsored loan program where
there are two categories, subsidized and unsubsidized,"
Kulju said. "Subsidized meaning while the student is
in school, the interest is paid on their behalf by the government,
that is if the student has financial need." The government
will continue to pay for the interest up until a six-month
grace period after the student either graduates or withdraws
from school.
"The unsubsidized
loan is for a student that does not have the financial need,"
Kulju said. "While the student is in school they are
responsible for the interest."
Under the Stafford
Loan, an undergraduate student can borrow up to $46,000 for
school, but can only have $23,000 subsidized, Kulju said.
Work-study loans
are allocated to CSULB, Kulju said. The $1 million amount
given to CSULB is only enough to where 600 students participate
in the loan program due to their financial need. Students
will work to pay off their loans while in school.
A Perkins Loan
is also allocated to CSULB and a maximum of $1,500 can be
given to students who qualify per academic year. "The
Perkins Loan is a good program because it is a fixed interest
rate where as the Stafford Loan is a variable rate,"
Kulju said. The Perkins Loan rate is fixed at five percent
and students are given a grace period of nine months to begin
repaying the loans.
Kulju said that
the loan could also be deferred or cancelled if you become
a policeman or teacher for example. This loan is also being
done through the campus instead of a bank like with the Stafford
Loan.
With an increase
in the amount of loans given to students the U.S. Department
of Education released a report called Debt Burden Four Years
After College last year on the burden student loans had on
bachelor's degree recipients from 1992-93 and how the loans
are affecting them four years later.
The study found
that half of those receiving bachelor's degrees in 1992-93
borrowed money to help pay for school owing an average of
$10,142. Of those that moved on to graduate education, 28
percent continued to receive loans for school.
Undergraduates
that did not further their education owed an average of $7,100
left paying an average of $151 a month. Those that continued
on to earn a master's degree owed $17,200 paying an average
of $246 a month. Only 16 percent of all borrowers from 1992-93
were able to pay off or have their loans forgiven by 1997.
In 1992 the Reauthorization
of Higher Education Act raised the loan limits. This group
of students being studied would not benefit from the changes
in the borrowing laws. The total amount of money borrowed
that year was $17.2 billion. That amount would increase 38
percent to $23.8 billion a year later.
When students either
graduate or withdraw from college they can choose from many
types of options to repay their loans.
"One of the
common (plans) would be over a 20 year span and they would
divide the payments up of that span," said Joshua Henry,
information specialist for the Federal Student Aid Information
Center.
At Sallie Mae the
average time of repayment is lower. "The typical (repayment)
term is done in 10 years," Sullivan said. "But we
have various repayment options depending on what is in the
best interest for each borrower."
Henry said that
there is also a different type of plan called an Income Contingent
Repayment Plan. "That is where you send in some sort
of documentation as to how much you make and your repayment
will be based on that, instead of putting all the payments
in a certain time period. After 30 years, if you still owe
money on that student loan because of regulation of the government
you don't have to pay anymore on it."
Students can also
consolidate their loans to simplify their loan repayments.
The interest rate will never exceed 8.25 percent by law. Loans
can be consolidated during the grace period, once a student
enters repayment or during deferment or forbearance periods.
A lender cannot refuse to consolidate a loan due to the number
or types of loans, the school attended, the interest rate
you would be charged or the different types of repayment schedules
available to them.
While students
are borrowing more than they ever have before they are also
under control of their loans and not defaulting on them. The
number of defaulted loans has dropped dramatically since 1990,
Sullivan said. The main reasons for the drop in defaulted
loans is the various types of repayment options and education
given to students taking loans out.
"If a student
defaults on their loans what they should really do is contact
their lender and come up with some kind of negotiation with
the lender as to how they can begin repayment of the defaulted
student loan," Henry said. "After a certain number
of on-time payments, the loan will be taken out of default."
"They do withhold
tax returns," Henry said.
CSULB is required
to teach students about their loans through counseling. "We
are required to what is called entrance counseling, which
means when a first time a student borrowing here at Cal State
Long Beach they have to attend a session explaining their
rights and responsibilities," Kulju said. "Then
when a student is leaving campus, we do what is called exit
counseling where we get more into detail." During the
exit counseling session a student is shown how much is owed
and what a typical monthly payment will be in the future.
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