A couple of weeks ago, I made arrangements for payment of my fall semester costs. I was able to get some federal financial aid to cover these costs. Other costs of living are going to be addressed through work and scholarships. What caught my eye on the college aid website was that the icon and link for private loans were completely grayed-out, meaning that private loans were unavailable for anyone searching for funding. Across the country, students are making similar arrangements for the financial needs of the coming academic year. Yet at many schools, undergraduate and graduate students are running into difficulties finding the necessary funding to pay the basic costs of college attendance. We're not talking about financing a night of hanging out. We're talking about paying for things such as books and lab fees. Usually, there are a number of ways to deal with these costs but recently, those avenues have become fewer and more difficult to navigate.
Private loans have increasingly become one avenue for students to cover the costs of attendance. A recent report by the Berkeley, California-based Project on Student Debt revealed that more students are relying on private loans than just four years ago. In the year 2003-2004, 5 percent of undergraduate students acquired private loans whereas in 2007-2008, 14 percent of students took out private loans. As with any type of loan, these require a credit check to determine if you are eligible for the loan which now has more stringent requirements. Furthermore, many banking or non-profit student loan institutions or organizations often request a co-signor on the loan as a guarantee for its repayment. Parents oftentimes have chosen to help their children with this form of aid. Unfortunately, their own financial stability has taken such a downward turn that they are unable to cosign onto these loans. The parents' credit ratings are such that they are considered as much of a loan risk as their college kids. As noted earlier, at this time, private loans are unavailable to most students regardless of their (or their parents') credit rating. Other options are accessible but present their own challenges for fulfilling the financial needs of college students.
Parents' PLUS (Parent Loan for Undergraduate Students) or Graduate Plus loans are federally backed loans that cover education costs that exceed the limits of Federal STAFFORD loans. Parent PLUS or Graduate PLUS loans can be applied to the full costs of college or graduate school education including living expenses, books, etc. Financial aid offices of universities and colleges determine the actual costs of attendance. Students can borrow the difference between the overall cost of attendance and other forms of aid that they have acquired. This aid does allow deferment of repayment until six months after you have graduated. In order to access these loan options, you must meet certain credit requirements as set by the lending institutions. Additionally, there are origination and other fees that are tacked onto the "costs" of these loans. If parents of college students or the students themselves are unable to acquire these particular loans, the financial aid options narrow more.
Another choice presents a different set of requirements. The Sallie Mae's Smart Option Student Loan Program requires that a student begin to pay the interest on their student loan while in school. This payback option has existed for years with other federally backed loans and some students take advantage of minimizing their interest costs. Many have touted this strategy as very helpful to reducing the overall loan costs to the students. Additionally, there is a school of thought that it might serve as an incentive for students to act more responsibly about their loans. I would like to present another thought to the discussion. First, why is there an assumption that students are acting irresponsibly with their financial aid. And secondly, what the hell makes people think that students have any extra money to start paying off a loan? Students are already struggling to make ends meet. Nothing personal but the landlord's demands are going to take financial priority for most students. There are already a variety of factors that pulling on students' attention and adding stress to their lives. The prospect of another expense may serve as the final discouragement to those who are academically talented yet economically strapped. These are some very serious choices for students which they are making from a very mature perspective.
