The collective student debt of American students has grown rapidly over the past decade.
From tuition to housing and rent, student loans are designed to help students pay for expenses related to post-secondary or higher education. However, according to Federal Student Aid, approximately 45.6 million students owed a total of $1.6 trillion in student debt by the end of 2021.
“There are different types of student loans you can receive,” said Gustavo Castillo, financial education counselor for San Mateo Credit Union. “They are for the purpose of funding your education.”
Students can apply for two types of student loans before they graduate: federal and private student loans.
The federal government funds federal student loans, which have fixed and lower interest rates than private loans. And they enter two different shapessubsidized loans, which allow undergraduate students to borrow a total of $57,500, and unsubsidized loans, which allow undergraduate and graduate students to borrow a total of $138,500.
For subsidized loans, the government covers payments for undergraduate students in financial need who are enrolled in school at least half-time, during a deferment period, or during a six-month grace period after graduation. graduation.
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The idea of having debt harms people. This creates a psychological urge for you to really push and try to pay off your debts, which negatively impacts your future growth. It also impacts your education, which is ultimately what the debt was for. ”
— Ethan Ng, a senior
Unsubsidized loans are available for undergraduate and graduate students, although borrowers are fully responsible for interest when repaying loans.
On the other hand, private lenders fund private student loans, such as banks and credit unions. Unlike federal student loans, many lenders require repayments to be made while students are still in school and offer fixed or variable interest rates, which can fluctuate.
According to Education Data Initiative, average federal and private student loan debts are $36,510 and $54,921, respectively. It is therefore important to make sure you have a loan repayment plan.
“As soon as you graduate, you have to start making payments to that [federal student] to lend. But by then you already have your degree and you are able to find a full-time job,” Castillo said. “The best bet for a private student loan would be when you already have a degree you’re looking to attend grad school or when you already have a full-time job.”
Ideally, the researchers think borrowers should take ten years to pay off their debts. However, this is usually not the case, because most take 20 years repay their loans in full, depending on how much money you borrowed, when you started repaying your student loans, or your repayment schedule. Such a long period can be frightening and tiring for some.
“You can go years and years with this debt in your life for your education,” said sophomore Victoria Lehman. “It’s a tough thing to balance because education is really important, but at the same time managing your money is just as important as being an adult.”
Fortunately, some questions can be considered before applying for a student loan.
Scholarships and grants are common tools for reducing college costs. The scholarships are merit-based, which means that the awards would be given based on academic achievement, extracurricular activities, and more of the students. Grants are distributed on the basis of financial need and do not need to be repaid if their conditions are met.
There is a misconception around the Free Application for Federal Student Aid (FAFSA), which helps students who need financial assistance to receive government grants.
“Students think they won’t qualify for federal student aid, based on their income,” Castillo said. “It’s really not about income; it’s a lot of things that can differentiate or change your status.
Some may not qualify for grants and some federal student loans, but specific scholarships may require a Expected family contribution (EFC) and FAFSA information to apply.
Students can also apply to a local community college for the first two years of undergraduate studies and then transfer to a four-year university to reduce college costs without taking out student loans.
“There is a lot more flexibility in [going to a community college first] and a lot less pressure,” said Kayla Hogan, a senior. “I think people, especially in the Bay Area, feel a lot of academic pressure and often get caught up in big name schools, and some even look down on community colleges, when really there are community colleges quite surprising in our region. who can provide you with an excellent education or serve as a stepping stone to your future goals.
Overall, student loan debt can significantly affect a student’s life, depending on their circumstances and path, as it can make or break their career and financial aspirations.
“There’s no guarantee your education will pay off,” Hogan said. “You’re kind of betting that you’ll be able to pay it back in a timely manner, but if you can’t, the consequences are quite significant.”
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