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Financial Experts Offer Advice to Debt-Strapped Students

[Mar 10, 2008.]

 

As some college students look ahead to graduation, financial experts are offering them some tips for keeping their debt load under control.

Statistics show that an astounding 2/3 of college students graduate with student loans. The average balance on those loans is a whopping $19,237. Students who attend private colleges or out-of-state public universities face even higher debt loads.

In order to keep their debts as low as possible, college students are being urged to turn to the federal student loan program before taking out any private student loans. Federal Stafford loans that are unsubsidized have a fixed interest rate of 6.8%, while subsidized Stafford loans, which are designed for low-income families, carry a rate of 6% for loans secured after July 1st.

In sharp contrast, private student loans have rates which can vary from 6% to more than 14%. These loans are not backed by the federal government. Given the current credit crisis, rates for private loans are expected to rise in the months ahead. In addition, private lenders are tightening the requirements for loans. In fact, some student borrowers who do not have a co-signer may find that they cannot secure private student loans at all. Given the difficulty in obtaining private loans, some students may opt to attend less expensive public universities.

Meanwhile, in an effort to combat the student debt crisis, some colleges and universities are erasing student loans from their financial aid programs. For instance, Colby College in Maine is replacing loans with grants, a decision which should save the typical graduate nearly $15,000. To find a comprehensive list of colleges and universities that have either reduced or eliminated student loans from their aid programs, students can visit projectonstudentdebt.org.

Some consumer advocates complain that it can take students decades to pay off their loans, forcing them to delay major milestones such as getting married, having children, or buying a home.

Julie Ann Amos
March 10th 2008

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