It's no secret that today's college students are taking on heavier debt loads to get a diploma.
In fact, the Consumer Financial Protection Bureau reports that student loans have surpassed credit cards as the biggest source of unsecured debt in America, according to a recent Associated Press story.
"It's definitely a growing problem," says Brittania Morey, director of communication at the Iowa College Access Network. "It's really hard to get a student to understand the weight of the decisions they're making when they're 17 or 18, and how it's going to impact the rest of their life."
Now, more than ever, it's critical for college-bound students to educate themselves on the ins and outs of financial aid. ICAN, a nonprofit that provides support to students applying for financial aid, offers these tips:
- Borrowing should always be the last option. Look into grant and scholarship options. Find out whether there are work study opportunities. Talk to the college's financial aid office to find out whether they offer a payment plan. "Not every college offers one, but it's always a good question to ask," Morey says. "There are lots of other options prior to turning to student debt."
- Before college classes even start, be involved and be aware of the true cost of your education and the salary you will earn as a result of that education. "One of the biggest problems is over-borrowing for careers that won't have the capability to repay the amount they've borrowed," Morey says. Take a realistic look at the starting salary of the career path you're interested in. Aim to keep your total borrowing at a maximum of 8-12 percent of that first year's starting salary. That will keep your monthly payments at a feasible level when you enter "the real world."
- Only borrow what you need. "You don't want a 'Just in Case Fund' when it comes to student loans because you're paying interest on that," Morey says.
- Fully understand the debt you're taking on. As you research your loan options, ask plenty of questions: What fees are associated with the loan? What does the repayment plan look like? When is the first payment due? "Some students sign on to a loan and didn't read the fine print, so they're unaware of how much they actually borrowed," Morey says. "Make sure they are fully aware of all of the terms and expectations of the loan before they accept it."
By Emily Kittle