Over three-fourths of Baker University students anticipate two important documents after graduation.
The first, of course, is a diploma.
Then, six months later, the first federal loan bill arrives.
Last week, the Consumer Financial Protection Bureau announced that U.S. student loan debt has reached $1 trillion, which is more than national credit card debt.
This statistic, along with the 8.3 percent national unemployment rate, has many students concerned about being able to manage their loan payments.<br/>
Few Baker students are immune from the pressure of loan debt.
Jeanne Mott, director of financial aid, said that 78 percent of the class of 2011 had federal student loans and the average student debt was $27,280.<br/>
However, Mott said there are some statistics that are encouraging for future Baker graduates.
In 2009, the cohort default rate, the percentage of graduates who defaulted on their loans within two years, was 8.8 percent. Baker’s cohort default rate is just 3.4 percent.
“What that means is Baker students, based on just statistics, have a better track record for paying off their loans than other private schools, which are at 4.6 percent,” Mott said. “And that’s definitely better than the national average… It shows Baker grads are getting jobs and an education they’re willing to pay for.”
Mott said there are some ways for students to decrease their loan debt before graduation.
First, she said, pay attention to outside scholarships and fill out the FAFSA early to increase the likelihood of receiving state grants.
Knowing what kind of loan you have is important, Mott said.
Federal unsubsidized loans accrue interest while the borrower is still in school, and interest is charged on that interest.<br/>
Paulette Schwerdt, instructor of business and economics, said after graduation, smart budgeting can save borrowers a lot of stress.
“Determine a loan payment your budget says you can afford based on your current monthly income and expenses, and use that to determine the length of your loan period,” Schwerdt said. “This will improve the likelihood that your loan payments are affordable, given your income level now and in the future.”
Schwerdt said that consolidating loans, being aware of the various payment plans available and minimizing the amount borrowed helps to pay off loans more efficiently and quickly.
“Since incomes typically raise over time, the payment amount you initially set should become more comfortable over time and allow you to pay extra on the principal you owe without obligating you to do so,” Schwerdt said. “This will shorten the length of your loan.”
Mott and Schwerdt agreed the best way to avoid debt problems is to plan ahead.
“Think strategically and operate in your long-term best interest,” Schwerdt said.