Â Â Education comes at a heavy price but are students paying more than they need to?Â If private loans are involved, the most likely answer is, â€œyes.â€Â Private loan interest rates can be so expensive, a student can end up paying back more than five times the original loan after graduation.
Â Private loans, like the ones advertised on television usually have high interest rates as well as high monthly payments. Angie Beam, assistant director of financial aid, said private loans, like the ones advertised on television, are often more expensive than Federal student loan programs and have less favorable repayment terms than government loans.
Â For example, a $10,000 loan from Sallie Mae that is disbursed Fall 2007 will begin repayment Dec. 2011 at $156.93 a month.Â After 300 payments, the loan will be paid-off but the 12 percent interest rate made the grand total payment $47,079.63, and that total is without any late fees or deferments.
Â After learning about the high interest rate, junior Trisha Steele regrets her Sallie Mae owned $14,000 loan.
â€œI thought there was only a Stafford loan so when it wouldnâ€™t cover my whole education I didnâ€™t know what to do,â€ Steele said. Someone eventually told her about a loan that would give her money right away and she wouldnâ€™t have to pay it back until she graduated.Â She immediately signed up for the Sallie Mae loan so she could continue towards her degree.
â€œI wish I would have known about other loans because I felt like Sallie Mae was my only option,â€ Steele said. â€œI canâ€™t see why companies would do that to people.â€
Beam said to avoid loans all together, students need to prioritize when pursing their degrees and determining how to finance their education.Â First, students need to determine a degree as soon as possible to be able to determine a timeframe for schooling. After that, students need to evaluate the way they live.
Â â€œStudents need to live like a poor college student while they are in college so they donâ€™t have to live like one when they are out,â€ Beam said.Â Beam says budgeting is very important to college students.Â Students should avoid brand new cars with high insurance, cable television, and brand-new electronics.Â Also, Beam says food can be a hidden money thief.Â
Â â€œYou donâ€™t have to eat out daily,â€ Beam said. â€œThere are many things that we can give up or choose less expensive options to reduce cost.Â College is a time of being broke.â€
Being able to reduce the amount of money a student uses in their daily lifestyle can help them avoid taking private loans.
According to Lisa Siudym, the director of financial aid, students should fill out their Free Application for Federal Student Aid (FAFSA) and apply for all scholarships and grants available before the priority deadline of March 1.
â€œThe March 1st deadline date is crucial for our students as some of the funding is available on a first come, first served basis.â€ Siudym said. â€œWe start processing award letters in April so students who meet the deadÂline date can be assured that we considered them for any and all aid programs they are eligible for.â€
If all scholarships and grants are accounted for along with employment funds and a student still is unable to pay for their education, then loans are a great source of funding.
Beam said students should know not to borrow more than they need for school expenses. â€œIf students are there just to go to school then loans are there to help them, but they shouldnâ€™t be their only resources,â€ Beam said.
When loans become a necessity, then federal loans should be a studentâ€™s first choice.
Beam and Siudym both agree that the Missouri Higher Education Loan Authority is a fortunate option for loan funding.
For many students, part-time enrollment will allow a student to focus on one or two classes while working full or part time.Â Beam said it is a practical way to reduce costs and still work towards completing a program objective.Â
â€œWorking full-time during the summer and holiday breaks can allow students to build savings that can be applied towards tuition cost,â€ Beam said.
Another option available, is for students to look at military options to gain access to educational funding, though this is a serious decision and requires a commitment.
â€œMOHELA offers industry leading benefits such as the Rate Relief program in which the studentâ€™s interest rate is reduced by 3% for making electronic payments,â€ Beam said. â€œStudents who obtain their degree in a Public Service career and work in Missouri can also receive interest rates as low as 0.25%.â€Â
After all other sources of income and aid have been assessed, then private loans will still be available.
â€œWhen a student applies and receives an alternative loan, we caution them to â€˜read the fine printâ€™ so there are no surprises,â€ Siudym said. â€œAlso, these loans should be a last resort. If they are needed in order to pay for their educational goals then the loan is definitely an investment in themselves. Once you have earned your degree, no one can take that away from you!â€