A recent survey revealed college students are not too knowledgeable when it comes to borrowing loans to pay for their higher education.
The study by Young Invincibles, a U.S. national organization representing current issues of 18 to 34 year olds, found nearly two in three student loan borrowers were surprised by some of the terms of their student loans.
Public lenders and private lenders have differences. Public lenders, such as the Perkin’s Loan, limit how much money students can borrow. Private lenders, such as Sallie Mae, do not have a limit and are not very forgiving when it comes to interest rates.
According to FinAid.org, some borrowers are misled by loans that come with variable interest rates, which indicate a loan can become more expensive to pay back. Most students don’t realize this when taking out a loan.
Rohit Chopra, the student loan ombudsman for the newly created Consumer Finance Protection Bureau, said the student loan debt marker is now “too big to fail.” Student loan debt in America now exceeds $1 trillion, which is a record high.
Another frightening aspect is if Congress does not prevent the federal program from keeping the interest rates from going up by July 1, the interest of Stafford Loans will go up by 6.8 percent. The current low rates of 3.4 percent will expire if the change is not prevented.
While I have not borrowed any private loans to pay for my education, I admit I am one of those students who is not fully aware of what the terms are for my loans. I wanted to educate myself a bit more on what the terms of my government-funded loans. If interest rates on new subsidized student loans double, the average student loan borrower on a standard 10-year plan will need to pay $2,800 more over the life of the loan, according to the U.S. Public Interest Research Group. Students who borrow the maximum $23,000 will have to pay $5,000 more under the 10-year plan and $11,000 more under the 20-year plan.
I sure don’t want to pay back anymore than I have to. When I graduate, it’s likely I won’t have a steady job within the first six months. I would love to say that I will, but I doubt it with the way the job market is right now. I’m not being cynical; I’m just trying to be realistic.
So read the fine print before you decide to take a loan – any loan. It’s bad enough most of us are going to be leaving college with enormous amounts of debt, but some of that debt is avoidable if you take the correct measures.