Weighing Student Loan Debt in the College Search

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Higher education is pivotal in landing your dream job in many fields. Although it’s possible to get a good paying job with technical training or even just a high school diploma, it’s far more likely to be in a sector you enjoy if you have a 4-year degree in a practical field.

Private and U.S. Department of Federal Student Loans can help you cover costs while attending college and give you a gradual repayment plan over ten or more years. You don’t have to make monthly payments while you’re enrolled full-time, so you can take a break from your career if needed to focus on your studies.

However, college tuition costs are rising, and it’s essential to keep your expenses manageable—government agencies like the U.S. The Department of Education Consumer Financial Protection Bureau helps students avoid being overwhelmed with student debt.

However, you’ll still need to make wise choices to keep your outstanding student loan debt manageable. You can weigh the pros and cons of colleges by taking a realistic look at how much value a college provides compared to its annual cost. Although a college degree can provide a huge boost in earnings throughout your life, it’s essential to choose a school that’s a balanced investment.

How Much Debt is Normal?

Including federal student loans and private loans, the average student loan debt is now around $30,000 per graduate. The increase in student loan debt has steadily been on the rise for the past decade, raising the burden of student loan debt on all college students, especially black students and low-income students.

Graduates with higher federal student loan repayment amounts also have higher outstanding student debt. The average student loan debt amount means that some student loan borrowers are paying upward of $460 in monthly payments. These payments reflect increasing student loan balances for grad students.

Some students graduate without federal student loan debt. This is usually only possible if they live with their parents while attending school or receive a full scholarship. Some students have $100,000 or more in average student loan debt, especially those who attend a private university.

The increase in outstanding debt is partly because of tuition increases, even at public four-year institutions. Many state university systems have increased tuition faster than the rate of inflation and local wage increases, making it harder for students and their families to pay for college on their own without turning to private loans or federal student aid.

Universities still provide some grant-based financial aid offers and scholarships, but it can be challenging to qualify for these if your family is moderate- or high-income. Even merit-based grants and scholarships are uncommon, especially in selective institutions, and students who receive them usually won’t receive the total cost of tuition.

Calculating Tuition and Other Costs

Your annual cost of attending college varies depending on whether you’re full-time or part-time. Most colleges charge tuition per credit hour if you’re part-time and charge a flat fee if you’re taking above 12 credit hours.

Full-time students may also incur additional tuition fees if they take more than 18 credit hours, making it harder to get the best value possible each semester.

Books and class fees may also be costly in some majors. Science and fields tend to be the most expensive, but math textbooks and art supply fees can also add up. Many students turn to credit cards to pay for these extra expenses. When looking at the cost of attending a particular university, research additional fees for specific departments, and ask an admissions officer or advisor from the school if it’s unclear.

While a part-time job can help cover rent or on-campus housing fees, it usually won’t be enough to also cover food, utilities, and transportation costs. Rent tends to be especially expensive around college campuses since the convenience of living nearby naturally increases demand.

The Brookings Institution reports that, on average, students borrow nearly $30,000 to cover tuition plus the cost of living. You will need to make a realistic estimate of how much a part-time job will cover based on the local minimum wage and apartment rents.

Once you have compiled research on an individual university’s cost per year, record it in a spreadsheet or another document so you can refer back and make adjustments later. Comparing universities side-by-side makes a difference in your decision-making process later.

Comparing Colleges’ Value

There is much debate around whether private or public universities provide a better education. Public universities tend to be large and have many enrichment activities and multiple fields of study. Public colleges may also be subsidized by tax revenue, making it a cheaper option for private or federal student loan borrowers.

Private universities offer smaller class sizes and a more individualized approach to education, but they often cost more because of these amenities. Federal student aid and private loans can be used to pay for private university tuition.

One element to consider is just because a college charges more for tuition doesn’t mean they provide more valuable education. Even elite colleges aren’t strong in every department, especially in math and science fields. A school with a stellar engineering department might not be as strong in biology or chemistry.

You may even find that an inexpensive local public university or community college provides an excellent education in a particular subfield and helps you save money. Some of the best universities provide value through their location, especially in a major metro area with many nearby job and internship opportunities.

Paying for out-of-state tuition may cost you an additional $40,000 or more for a 4-year degree, which may increase the size of your monthly student loan payment.

In-Person vs. Online

Thanks to improvements in internet speeds, video conferencing software, and computer processing power, online college classes are more accessible and convenient than ever.

Online courses allow you to complete coursework from anywhere with an internet connection, and many courses don’t even require you to attend online at the same time as the instructor. The average cost of online education is usually cheaper than in-person coursework.

However, certain skills are easier to learn in person, and some students can’t concentrate in an online environment. Some online courses don’t make good use of video lectures and real-time small group discussions, contributing to students’ overall feeling of isolation. At a minimum, you want to read other students’ reviews of a university’s online programs before committing.

If you’re not good with technology or don’t focus well on online tasks, consider going to school in person, even if it costs a little more. Future employers want to see that you have a solid knowledge base, and getting mediocre grades in your online classes could get in the way of your job search later.

For-Profit Colleges

There has been an uptick in interest in small, specialized for-profit colleges in recent years. Many of these for-profit schools offer online classes and flexible degree programs that are attractive to working adults with high school or associate degrees. They usually focus on technical skills, but some offer liberal arts bachelors’ degrees.

However, some for-profit schools have come under scrutiny for their relatively high costs compared to the quality of education they provide. Traditional public and private colleges offer significant grants and allow federal loans that won’t cover the cost of for-profit colleges.

A school that appears to be a good deal at first glance may end up costing you more, especially if it doesn’t provide enough training to land you a job after graduating.

It’s okay to attend a for-profit college if it has a specialized program that meets your needs. Ask the admissions officers about the school’s overall accreditation, the instructors’ certifications, and the percentage of students who find full-time work quickly after graduation.

Considering Graduate School

When planning your student loan borrowing, the final aspect to consider is whether you plan on attending graduate, medical, or law school. Although your undergraduate college or university may make a small difference when applying to graduate school, your choice of university for graduate school is more likely to influence your eventual career trajectory.

If you are confident you will attend grad school, it’s often wise to attend an inexpensive public university for your undergraduate degree and then go to a more selective school for graduate school. This is because employers are more interested in the quality of your more specialized graduate school classes than those of your undergraduate degree.

This is true for law school and medical school admissions as well. Your LSAT or MCAT scores usually matter more than your choice of undergraduate school, so it’s okay to go to an inexpensive school for undergrad as long as you take the necessary prerequisites, get good grades, and do well on your exams.

The cost of graduate school can add thousands of dollars to the outstanding balance on your student loans. Although you may be able to take out direct loans, subsidized loans, or private student loans for graduate school, you must consider whether this extra increase in future student loan repayments is worth it.

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Financial Aid for Your Dream School

Once you decide which school to attend and calculate the expenses to become a school grad, it’s time to pursue financing for your education. There are several loan options for students, each with benefits and drawbacks.

Federal Student Loans

Federal loans are one of the most common college-funding options for American students. There are four types of direct loans when it comes to federal loans, each based on a different student need and education situation.

Federal loans carry an average balance of $37,113. Student loan debt statistics report that graduate students owe an additional $71,000 in federal student loan payments.

You must fill out an application with FAFSA and input your school and family income information to apply for federal loans. The U.S. The Department of Education determines your eligibility and loan amounts and provides you with requirements you need to meet to continue receiving financial assistance.

Federal student loan repayments begin after post-graduation, typically six months. Graduates with student loans may then work with the U.S. Department of Education to develop income-driven repayment plans to pay off their outstanding student debt.

The plus side to federal loans is that they are a good option for first-generation college students and graduate students who need a direct, subsidized loan with a low interest rate.

A downside to federal student loans is that typical student loan balances exceed what American students can repay. Federal programs allow students to take out a significant amount of money without estimating their future earnings. Many students find that they cannot afford the minimum amount when their loans are in repayment. This leads to the loans going into forbearance.

Forbearance allows you to stop making payments for a time due to financial hardship. Unfortunately, loans in forbearance continue to accrue interest, resulting in a higher payment and outstanding balance for graduates with student loans.

As a whole, federal loan borrowers who can’t pay their loans back suffer from the consequences of billions of dollars worth of federal student loans. Student loan debt statistics report a total student loan debt of $1.61 trillion for school graduates in America.

Private Student Loans

Private student loans are a fiscally responsible option for paying for tuition, fees, and living costs when balanced with the value provided by a college degree. Private student loans are offered by lending institutions and work similarly to personal loans for potential students.

To apply for a private student loan, you must first shop around for the right lender. This is one benefit to private student loans over federal student loans: you can look at several private student lenders to find one that offers you low interest rates and reasonable private student loan payments.

Once you find a private student loan lender with amenable terms, like T&I Credit Union, work with a loan officer to complete the loan application process. You may need a parent borrower as a co-signer, and you will need a good credit score and credit history.

The benefit to private student loan debt over federal debt is that private student loan debt is generally much lower. Student loan debt statistics say that private loans only make up 7.71% of America’s total outstanding student loan debt.

According to these student loan debt statistics, graduates with student loans from private lenders carry smaller outstanding student loan balances. This helps these student loan holders cover the cost of college without incurring mountains of debt.

Private loans at institutions are more restrictive than federal student loans. Unlike approval for federal loans, private loans require you to go through the typical loan application process.

You will need to show that you are a trustworthy borrower. Additionally, your approval amount will likely be far less than a federal loan. While this may be a downside for low-income student enrollment, it keeps those seeking advanced degrees or professional degrees from taking out more money than necessary.

For example, millions of individuals take out up to $30,00 to pay for their college education. This is why current borrowers of federal loans carry such high average debt. Private lenders are unlikely to lend you such a high amount; instead, a private institution will lend you enough to cover tuition and books, but not so much that you will have trouble paying it back. This makes it easier for degree recipients to pay off their private student loans after graduating and obtaining employment.

The biggest downside to a private loan is that there is rarely an option to implement an income-based repayment plan. The U.S. Department of Education services billions of Americans and offers several plans to help their borrowers repay federal loans.

Private institutions carry a bigger risk when they lend money, so they implement stricter repayment schedules. If you experience financial hardship after graduation, you may have a more challenging time changing your payment schedule and amount for your private student loans.

However, you can speak with your lender to rework your payment plan to avoid a negative impact on your credit and financial situation.

Credit Cards/Personal Loans

If you are pursuing an associate’s degree or trade certification with a smaller program, a credit card or personal loan may be a funding option. While incurring credit card debt is not ideal for larger tuition payments, a zero-interest card can help with educational attainment in the right circumstances.

Similarly, personal loans or lines of credit can help you pay for smaller, less costly programs. Unlike federal student loan borrowers, you will need a good credit score to get a decent loan interest rate if you obtain private funding. To be approved for this type of funding, the lender will pull your credit report and credit score to determine the approval amount and interest rate.

Apply for College Funding With T&I Credit Union

T&I Credit Union is proud to offer student loans, personal loans, lines of credit, and other financial products to families all over the Detroit Metro area. As a credit union, we are committed to serving college-bound students with the best interest rates possible so you can invest in your education.

We also offer savings accounts, car loans, and other essentials to get your life on track. Whether you’re fresh out of high school or a mid-life career-changer, we’re here for you anytime you have questions about loan repayment or taking out another loan.

Call us today to learn more about what we can do for you.

About Lynn Mayfield

Lynn Mayfield studied business at the University of Kansas and enjoys analyzing new economic trends and how they affect the banking industry’s future. Lynn has worked in loan processing and freelance writing. She enjoys traveling in her free time.

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