By LENNY GRAY
As tuition costs increase, more students are seeking loans to help fund their education.
Careful budgeting of post-graduation income may help students plan their debt rather than face penalties in the future.
Steve Olsen, federal program compliance officer on campus, said that helping students manage their debts will help to avoid future complications.
The Nellie Mae Foundation, located in Braintree, Mass., is one of the nations largest providers for student loans. Last spring they completed a four-year study and found that student loan debt is higher than ever.
Lawrence O’Toole, president and chief executive of NMF said, “While student loans have helped millions of students gain access to a post-secondary education, higher debt, incurred from borrowing to cover the cost of college, is becoming more of a burden for students.”
“While most students are able to repay their loans successfully without significant impact on their lifestyle, that number is getting smaller over time,” O’Toole said.
Students who are not able to pay off their loans in the allotted time are defaulted. Defaulted students become ineligible for any other loan or consumer credit. The federal government also withholds wages and tax returns until the loan is paid in full.
The nation’s average default rate is around 15 percent according to NMF. BYU’s default rate is only 1.5 percent, but Olsen said his goal is to have a 0 percent default rate.
Last year, the federal government issued BYU its highest amount of student loan money. However, Olsen said the amount of money will more than likely decrease in the next few years.
“I expect that students will want to continue borrowing money, but in the next few years loans will start to level off because of a reduction in the number of borrowers,” Olsen said.
The NMF reported that more than half of all college students are borrowing money to fund their education. Currently, over 50 percent of BYU undergraduates are also funding their education through student loans.
The average student loan for BYU undergraduates is approximately $7,000 below the national average. However, in each of the past five years the amount of loan money has increased $1,000. The NMF found that the average student loan debt in 1997 was $18,800.
Students who borrow less than $5,000 typically have five years to pay off their loan. Students who borrow over $5,000 follow a ten year repayment schedule. Even though private lenders give more time to repay loans they typically charge a higher interest rate.