The Stats on Financial Aid

San Francisco, CA (CollegetoCareers.com) – For many students, it is nearly impossible to obtain a degree without going into debt.

According to Forbes, student loan debt surpassed credit card debt for the first time this year. While federal loans typically provide students with low-interest rates, as many as 10 percent of college students continue to default on their loans.

Forbes writer Tim Chen reports that a subsidized Stafford loan charges 4.5 percent at the time of writing; the Parent PLUS Loan, 7.9 percent; and the Discover private student loan, a varying interest rate, which stops at 18 percent. Interest rates, other fees and a large principal force almost 10 percent of college students to default on their federal loans.

College tuition rates exceed the national rate of inflation and, according to Forbes, now play “Road Runner to the median wage’s inert anvil, post-cliff drop.” The bottom line: more and more students graduate with debt as high as six figures, and many default on their federal loans, sometimes as a result.

The Forbes writer recommends that students look for options that would allow for loan deferment. Most offer a long list of acceptable reasons for deferment, which all prudent and cash-strapped students should review.

Still, if you have money, it is suggested that you pay it off now. Students sometimes wait for decades to pay off their loans, and the sooner, the better.

Student loans are sometimes more difficult to pay off, because students are unable to pay with credit cards. Defaulting on a federal loan can also lead to the seizure of income tax refunds until the loan is repaid. Other possible consequences: the loss of social security benefits.

Although it isn’t possible to pay off the loan via credit card, loan consolidation remains a possibility that can help lessen the burden of monthly payments. When loans undergo consolidation, students usually pay a weighted average of their interest rates on existing loans, which stop at 8.25 percent. Consolidation only decreases interest if it is above the cap, but it can help extend the pay period and potentially reduce monthly payments.

If possible, you should avoid taking out a student loan in the first place. Financial aid and college scholarships always offer the best and most preferable alternatives.

For more information on paying for college, visit our college grants page.

What are your thoughts? Feel free to leave any comments below.

 

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Tags: college grants, college scholarships, federal loans, Financial Aid, grants, parent PLUS loans, pell grants, scholarships, stafford loans

One Response to “The Stats on Financial Aid”

1. Essay for College says:

   April 4, 2011 at 12:42 pm

   I took out many student loans when I was in college, most of it I needed, some I didnt. Looking back I wish I would of only took what I needed, but interest rates were lower then. I dont think this will be the case when my kids are in school!