Why are banks getting rich and richer off college financial aid and student loan profits? Unfortunately, students are not having the same experience. I keep reading articles stating that student – loan debt average is $26,000.
This appears very low, because whenever I hear a forum on television or radio they suggest most graduates have much higher school loan debt. According to most media projections, the national school loan debt is edging toward a trillion dollars, and may crash soon.
Also, when I speak, I always have several attendees tell me they have a much larger debt than $26,000. The real average seems to be more like $50,000.
If you use a realistic breakdown, including private versus public school, and public schools in the south versus public schools in New York and California; you can reach better averages.
There are 12 major factors I have come up with that will determine how much you will owe after college. If you understand each of these factors before you choose a college, you can keep your school loans to a minimum.
THE 12 FACTORS TO STUDENT LOAN PROFITS:
- The total college costs for the following college items — tuition (in-state & out-of-state), fees, room, board, books, transportation & incidentals.
- The total available for a Pell grant is only $5730. for 2014-2015 school term.
- The total available for a work study grant is limited, but determined by many factors, including
part-time work hours and total financial package.
- For an expensive school, most of your financial aid award will be in loans.
- If you are of low income or moderate income, you may get federal subsidized loans.
- If you are of middle income or high middle income, you may get expensive unsubsidized loans.
- If you go to college in the South versus the North, West or East, prices differ.
- If you go to a public in-state college versus a private college, prices differ.
9. If you live at home or on campus.
10. Whether you plan to stop at a 4 – year degree or go on to graduate degree.
11.Financial aid is limited, no matter what your income — It works best for low or moderate incomes.
12. This can leave you with a financial gap in your ability to pay total college costs each year.
You may not be hired for a college level job
Because school loan costs can skyrocket with the misunderstanding or lack of knowledge of the 12 factors above, it is important to understand college costs and the severe limitations of financial aid.
You should research and ask questions about these 12 factors before you decide on a college or university. The research can be found on the colleges websites and by calling the school financial aid office and registrar’s office.
UNDERSTANDING ALL 12 FACTORS ABOVE WILL ASSURE TWO THINGS:
- That you finish college,
- That you finish with a minimum of student loan debt.
- That you will contribute minimally to student loan profits for banks
Below I listed the actual cost of several colleges; this will give you an idea of the differences of cost, and your ability to NOT pay, even if you have financial aid – all of these values are in the ballpark of cost, but only a rough estimate:
A PUBLIC UNIVERSITY IN THE WEST~ $125,000 (IN STATE RESIDENT):
Example; The University of California in 2014:
In State Student — Tuition, fees, room & board, miscellaneous: – 4 years $125,000
Out of State Resident — Tuition, fees, room and board, miscellaneous – 4 years $160,000
Because Pell grants max out at $5730., and work – study grants are limited; a realistic loan balance after graduation could easily be $80,000, bear in mind, this is for in the in-state student.
A PRIVATE UNIVERSITY IN THE WEST~$280,000:
Example; Stanford University:
Tuition, Room & Board, Books, Fees, miscellaneous: ~70,000 per year; 4 years $280,000 total
School loans here could easily total $150,000. – 250,000
A PUBLIC UNIVERSITY IN THE SOUTH~ $94,000 (IN-STATE RESIDENT):
Example; The University of Virginia (In-state student):
In State Tuition, fees, room & board, and miscellaneous –4 years ~ $94,000
Out of State Tuition, fees, room & board, and miscellaneous –4 years ~$200,000
For the in-state student school loans could total $50,000.
A PRIVATE UNIVERSITY IN THE EAST~ $270,000 – $300,000
Example; Harvard University:
Tuition, fees, room & board, and miscellaneous –$68,000–4 years ~ $270,000-$300,000
Harvard claims that if your parents make under $65,000 parents are not required to meet costs or what I call the “gap”. All costs can be satisfied with some form of financial aid. The problem is, if you don’t have a full scholarship — what will your total school loan balance be after graduation? Perhaps $150,000 – not good.
If was hard for me to find the total estimated cost for Stanford and Harvard, it is not something on the front of their websites, the administration does not seem to want to give this information freely, since you may not go further into the sites.
The question is, how far can you get on an average of $26,000 in school loans with these schools? Not far, you would not have nearly enough money to finish. Unfortunately, there are many students who start college and find this out after a year or two; that they can’t get enough financial aid, and are forced to drop out with no degree but they have school loans to pay.
They are told if they can’t come up with the “gap”, or the difference between total financial aid awarded and total cost for the past year, they cannot register for the next year.
THERE IS A WAY TO KEEP YOUR student LOAN profits for banks LOW, AND ATTEND A MAJOR UNIVERSITY:
If you choose to live at home and attend the University of California as an in-state resident, you could keep your school loans within reason, maybe $25,000 if you also qualify for a Pell Grant and Work study. Your parents’ income would have to be very low to qualify.
The other state college in that same area is San Diego State University; it is a bit more affordable, especially if you consider living at home. The academic requirements for incoming freshman for both colleges are very high.
If you made the mistake of choosing a college or university that will leave you strapped with unbearable debt, it is not too late to change to an affordable college after your first or second year.
FINANCIAL AID IS LIMITED
Because financial aid is limited, choosing a school according to cost may not matter how poor you are. Some schools have total cost financial aid packages, but many only give you about 80% of cost in financial aid. This is where you will experience a “gap” in your school account balance after you start.
Because financial aid is limited, if you are poor and dependent on a loan based financial aid package, you are better off going to your local state college or university, and staying at home. Another option is attending your first two years at a junior college, where costs tend to be much more reasonable.
In other words, you are better off going to a public school and leaving with a loan debt of $15,000, then going to a private school and leaving with a loan debt of $80,000. Targeting a low final loan balance is one reason that
cost consideration is crucial.
Poor and middle-income students have the best chance of affordable financial aid, since financial aid is need based. But, they must understand that there is a gap, which is between the maximum award given and the total cost.
Sometimes that gap is as much as $5000 per year in a private school or more and $2500 in a public school. That is a rough estimate, it could be much lower or much higher.
Do a thorough analysis of your college cost, and figure out your gap before you go. Upper middle-income students have a better chance of getting low quality financial aid, such as unsubsidized loans and parent loans — interest is charged to your loan while you are in school.
If you choose the option of not paying interest while in school, it will accumulate and could double your actual loan balance after you graduate.
Student LOANS ARE A BILL AND MAY BE DIFFICULT TO REPAY AFTER GRADUATION, KEEP THESE FACTS IN MIND:
- It is important to plan your studies carefully, get out of college in an optimal amount of time and keep school loan debt as low as possible. There are no guarantees as to income or when you will get a job. The grace period for not paying back your school loans after graduation is very small, like 6 months in most cases.
- It may take a while to find a job, and you want to finish paying your loans off in optimal time so you can buy a good car, buy a home, save for retirement and help your own kids go to college. Protect your credit rating by paying off your school loans in a timely manner.
- There are people who planned poorly, they went to an extremely expensive school or did not finish in due time or went part-time for too many semesters. As a result, they will have school loan balances at the time their kids are going to college.
- Some states also provide financial aid to supplement federal financial aid, others may not, or may only supplement with a small amount.
- Many schools do not cover financial needs 100%, even for the poorest students.
- If you have a high quality guaranteed academic scholarship, (these are rare), it may cover 100% of your costs.
- Students max out of financial aid and are asked to leave school, either after a few years or even after one year.
- There are many student loan forgiveness programs with the federal government, be sure you contact legitimate government sources only.
The current student loan profits have not been revealed for 2017 by the current Washington D.C. administration. But, hints are that the burden of financial aid and student loans will be shifted heavier to the student.
Consumer Financial Protection Bureau > Student Loans
School Loan Justice
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