You can control student loan debt, ironically enough, through education.
There is a foreign world of student aid waiting for the hundreds of area teens entering their first year of college. In North Carolina, the average debt amount was $20,800 among graduates of four-year private and public colleges in 2011.
While reports show nearly 70 percent of college-bound students in North Carolina rely on financial aid, including scholarships and grants, loans and work study, local student aid administrators say there is a way to limit debt upon graduation — and it starts now.
Before: Limit
Rachel McGlew, the senior guidance counselor at Kinston High School, said senior students should become familiar with the various loans, grants and scholarships different colleges offer.
“What I find a lot of students in financial trouble is not knowing what they are signing up for and/oraccepting in their financial aid package,” she said. “One of the most important things students can do to limit their student loan debt when they go to college it to be knowledgeable about financial aid and all it entails.”
She cited the two most common government loans distributed to college students: federal subsidized and federal unsubsidized loans, which most every student is offered.
McGlew said an unsubsidized loan, “can get the student in serious debt because the minute it is accepted, interest starts and the student is responsible for this interest.”
Although it isn’t necessary to begin paying on an unsubsidized loan until after graduation, the amount can triple by the time graduation comes, as long as four years later.
Subsidized loan interest starts once the student graduates, so the amount is the same as when he or she borrowed.
“If students are fully aware of the difference between the types of loans and other financial aid,” said McGlew, “they will be more likely to keep themselves from getting into student loan debt.”
North Lenoir High School guidance counselor Martha Wade said North Carolina collegesrequire students to pass a financial aid literacy class before taking out a loan.
The school hosts events for parents and students to prepare them for that next academic step.
“We hold senior parent night, (and) we hold financial aid nights so that they understand what all the loans are and what they have to pay back,” Wade said. “(Students) also need to make sure they have completed their FAFSA (Free Application for Federal Student Aid). A lot of the colleges are already awarding money, so it’s getting kind of late in the process for that. They need to make sure they have done it.”
The FAFSA is the form current and prospective students complete annually to determine how much federal and state aid they can receive for college.
But some students are still working to complete their financial aid process, but McGlew said students should keep applying for scholarships throughout the school year.
Shaquana Outlaw, 18, was accepted into Fayetteville State University and will study nursing; she said it’s been the trend for all the women in her family.
The Kinston High senior is still applying for many scholarships to help pay her tuition of nearly $3,000.
“I’m hoping that when I do get all my financial aid stuff right, it will work out right for me to go,” Outlaw said. “I think it’s great that we can get financial aid to help us, because a lot of people can’t afford college.”
Though applying for scholarships, Outlaw may have to use loans to cover some of her pending tuition, but she said her mother warned her about borrowing.
“I could be graduated from college and owe the loans; it depends on the amount it is,” she said. “My mom told me try not to do a lot of loans because I have to pay them back. She said try to stay away from getting loans from the schools because I could be paying it back for the rest of my life.”
After: Avoid
Luckily for Lenoir Community College students, the school is set up for them to get their associate’s degree debt-free, according to Financial Aid Director Brandi Massey.
“For our students, because the cost is so much lower, they don’t really have to take the loans,” she said. “We’ve not seen a need to have to offer student loans here.”
Massey said most LCC students can get a scholarship or type of federal and state financial aid to help them before opting for a loan. If they wish to take one out, they have to do research independently since the college cannot direct them to any agencies.
Community college grants based on the Extended Family Contribution will be extended in the upcoming year. Massey said the aid will reach more middle-class families as students can receive up to $8,500, when the maximum was previously $5,000.
Massey said students coming into college should closely examine their federal student aid options before trying to borrow.
“A lot of students will think they have to go straight for the loan and that’s not necessarily the case,” she said. “All students need to start applying for aid early.”
While LCC is ideal for someone looking for an associate’s, Rachel McGlew said even when students start college at four-year schools, they should be still apply for scholarships and grants to avoid loans.
Sallie Mae, the largest private loan lender, reported in 2011 a 29 percent in loan application processes, according to Projectonstudentdebt.org.
McGlew said it is possible for colleges and universities to raise the amount of a student’s merit scholarship based on grades if the student needed more money.
“The worse thing the college can say is ‘no,’ and that the merit scholarship offered to them stands as is,” McGlew said. “Overall, I think it is all about being knowledgeable, prepared and realistic.”
Jessika Morgan can be reached at 252-559-1078 or at jessika.morgan@kinston.com. Follow her on Twitter @JessikaMorgan.
North CarolinaAverage Student Loan Debt 2011 Graduates
n $20,800 average debt per borrower
n 54 percent proportion of graduates with debt
Types of financial aid:
1) Scholarships or Grants: Money that does not have to be repaid or earned.
Scholarships and grants are available based on the student’s financial need (need-based) or based on the student’s academic achievements or special talents (merit-based).
2) Loans: Funds that must be repaid either in cash, usually with interest, or through service.
Loans made with a service option usually require that the student repay the loan after graduation by working a specified number of years in a specific field. Loans that must be repaid with cash usually begin repayment after the student is out of college.
3) Work study: Funds that a student earns through a job on or off the college campus.
The student has the opportunity to work and earn money to assist with the expenses associated with college.
Source: projectonstudentdebt.org, College Foundation of North Carolina