It pays to be smart about student loans
Do your students know what happens if they donít pay the interest on unsubsidized student loans during college?
If not, staff members from Westernís Student Accounts office would be happy to enlighten them. Soundings recently asked Jenny Hebert, interim bursar, and June Fraser Thistle, student accounts supervisor, for some tips for families on how to best manage student loan debt.
Are there any common mistakes students and families make?
Thistle: Not paying interest on unsubsidized student loans while theyíre students. If they havenít paid the interest yet six months after they leave school, it capitalizes and gets added to the principal on the loan. They end up paying more money in the long run. I tell students, think of it as a living expense, like rent and food.
Hebert: (Pictured at left) It can be deceiving, because the notice doesnít look like a bill. It may even say at the top, ďThis is not an invoice.Ē And remember, if you fall below half-time status, or cease to be a student Ė even if you havenít graduated Ė youíve entered your six-month grace period before loan payments begin. This is something to consider before taking a year off school.
Should students get a job to avoid student loans?
Thistle: Statistics say students who work 20 hours or less actually do better in school. More than 20 hours is too much, though. Try to find a job where theyíll accommodate your needs, so if you have a heavy quarter you can cut back on your hours. Most places in Bellingham are very accommodating. Some students become so independent, they donít even get help, but there are free tutoring and all kinds of things they can get into if they need help.
Hebert: Just because a loan is disbursed, you donít have to spend it all. If youíve got some left over, pay it back. You donít need it.
Any advice for families who make too much for need-based aid, but still struggle to pay the bills?
Hebert: Talk to your financial planner. Parents have to be watchful of money that they have sitting in an account that is not invested. And start early. Thereís nothing saying you canít start filling out the FAFSA to see what your unmet need looks like when your student is still a freshman in high school.
Scholarships are nice, but they can count against need-based awards. Start talking early to your financial aid officer about how scholarships could affect your financial aid package.
When do you typically start talking to students about debt management? Do students wait until itís too late?
Thistle: (Pictured at left)Normally, freshmen have their blinders on, sophomores start to think about it but still donít come in, and juniors are quaking in their boots. Thatís when most students come in. But some graduate and still donít now how much they owe. The National Student Loan Data System allows you to keep track of exactly how much student loan debt you have, even if youíve been to more than one school. (www.nslds.ed.gov) Itís critical to keep monitoring it.
Which are better, student loans or parent loans?
Hebert: Student loans have a better interest rate. And if parents want to help pay those off, kudos.
Any other advice for families?
Thistle: Have your student take charge so theyíre fully aware of the cost of attending. Itís amazing how much better many students do, once they realize how much it costs to go to school. So forget that whole micromanaging thing. Hand it over.