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Brandon Stone, Fall 2008

Looking For Loans in All The Wrong Places

By Brandon Stone

Nicole Hughes watches the numbers from her college loans pile up, and can’t figure out how to factor it all.

“This is a pretty stressful situation for anyone to face,” Hughes said. “I am very worried about how I am going to be able to pay for college, and I know that I am going to be incurring a massive debt.”

The 20-year-old political science major at Santa Barbara City College wants to go to a major university and law school. Money stands in the way of her dreams.

“With the economy the way it is I do worry about the repercussions to schools, loans, banks, and what that means for students,” Hughes said. “People are turning to credit cards, which they can’t afford, and banks are holding on to everything they got, afraid to give it out.”

More than 50 percent of students will face loan debt for at least 10 years, according to a recent survey by CollegeGrad. As prices and interest rates rise, more students are abandoning college, working more hours, or finding new ways to work with schools to get money and sustain their education.

“Our colleagues care very deeply about the students, and we all have to work together for students to be successful,” Chris Collins, associate director of financial aid and scholarships at San Diego State said. “If we don’t work together, something is going to fall apart and that won’t be very helpful to the student’s advantage.”

Loans are hurting in both the private and public sector. Due to the credit crunch, banks can’t loan out money they don’t have. Since private institutions claim from several different banks to make up the sum of their loan, it makes it even harder for a student’s application to be accepted unless they have credit history or a co-signer. Many students wonder how to get short term loans if they cannot get accepted through the school.

Hughes receives a private loan from the Scholarship Foundation of Santa Barbara worth $1,300 a year. Hughes’ debt may not seem like much now, but her future aspirations will raise the bar.

“When I am just done with a four year, [I owe] the SFSB $5,200,” Hughes says. “It is not at all unreasonable to believe that I will need more then that at a four year … At law school, its going to be easy $50,000 to pay for three years at a law school. Its not cheap, and that includes everything, so if I get no scholarship money, that will be $80,000 that I could potentially have to owe.”

San Diego State’s financial aid office only deals in federal loans through the Federal Family Education Loan program, mainly utilizing the Stafford loan where the government pays the 6.8 percent interest during school.

“It’s much easier to administer,” Collins said, “It’s easy for students to get their loan funds, dealing with one entity … and what we’re finding now is that it was a smart decision because a lot of the [lenders] don’t have the power to stay in that program.”

“We can tell a student exactly where their loan is in the process because we know from A to Z when it was submitted, when it was sent off to the servicing center, when the funds were authorized, when they were returned to San Diego State, and when we were able to return them to the student.”

Issues with loan payments do not start with students. If a student depends on family to pay for school and home care, and that family is injured by economic concerns, the problems trickle down to the student.

“There’s a number of pressures on families, and all of those things contribute as to whether the student has enough money,” Collins said. “Everybody’s feeling those combined pressures, and that would mean more of the responsibility is left to the student to find the cost of education.”

One solution to alleviate pressure for students down the road is shutting down payments if the students can pay regularly over an amount of time. Graduate loans will eliminate pay if the fees are completed over a 25-year period. Hughes’ program has a deal like this.

“After you are completely done with school, if you starts making payments within the first six months of graduation, they will “forgive” half the loan as their gift to you,” Hughes says.

Collins would like the government to embrace more grants and loan forgiveness to help ease student’s worries.

“I’d like to see the government have a greater commitment to grant programs, so that students don’t have to pay it back,” Collins said. “We should understand that that’s an investment in young people and in the future. It’s short-sighted to say ‘We’re not going to give grants because we have all these other economic problems …’ Ultimately, they’re going to be the people that are going to be running this country.”

Private or public, pay now or pay later, students are facing a cloudier future than ever deciding how to fund a college education when they don’t have the money.

“I don’t know what that means for me when I get to that stage,” Hughes says. “All I know is that by the time I am done paying off my student loans I am going to have to start paying for my AARP membership.”



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