If you have watched the news, read the paper or browsed online in the recent months, you have probably heard something mentioned about student aid and student loans.  It is frequently reported that college graduates are deeper in debt than graduates who have come before them.  It is estimated that Americans have borrowed over $1 trillion in student loan funds and 79 percent of first year students who apply for aid borrow loans to cover college costs.

Loans make up 65 percent of student aid funding at Penn State.  This figure includes federal loans from the Stafford loan program and the PLUS loan for parents, and private alternative loans for education.  At Penn State, we recommend exhausting federal student aid options before pursuing private alternative loans.

Here at Penn State York we encourage students to be smart borrowers.  Students should do their research on the loan types that are available.  There are major differences between the federal loans offered by the government and the private alternative loans that are offered by banks. Students should compare the interest rates, repayment terms and credit criteria.  Some loans offer benefits while in school and repayment incentives after graduation.   Students need to evaluate all of the options available and choose what loan type is best for them.  Students also need to review their student aid summary and know the amount of loan money they have borrowed, and keep track of how much they borrow year after year.

Once a student borrows a loan, they will receive important information about the loan either through the mail or email.  Please read your mail! All materials that are received by the student need to be reviewed carefully.  Some loans have additional paperwork that must be completed by strict deadlines.  Students will receive information about their rights and responsibilities as borrowers during entrance counseling, which is required by the federal Stafford loan program for first time borrowers.  This same information is reiterated during exit counseling, which is completed before graduation.  Private loan borrowers should read all materials sent to them, including the loan disclosure statement.

Some loan types offer in school deferment, which means the student is not required to make any payments as long as they are enrolled at least half time in school.  During this deferment period, some loan types have accruing interest.  One way to keep student loan debt low is to pay interest on the loan while the student is still in school.  These payments may be small, but they will reduce the amount of overall debt of a student upon entering repayment.  If you pay the interest as you go, it does not get added to the principle balance of the loan.

While students are borrowing loans to pay for their education, they must also be careful about getting into further debt.  According to data provided by Clearpoint Credit Counseling, 84 percent of undergraduates have at least one credit card and the average number of cards is 4.6!  Seniors graduated with an average credit card debt of more than $4,100 in addition to their student loan debt.  Student should identify their needs versus their wants and only borrow for what they really need.

Preparing students for financial success during college will help them be successful after college. Penn State York’s Office of Student Aid is here to help.  If you have questions about the different loan types that are available or if you receive something in the mail and you are not sure what it is, please don’t hesitate to give us a call!