With increases in college tuition outpacing the inflation rate and Massachusetts’ colleges failing affordability, more and more students are taking out loans to foot the bill for a college degree.
Last year, the average senior stepped right into a debt of $18,612, according to Lori Zarkower, associate director of financial assistance, leaving students nationwide, including at Boston University grasping for the best ways to pay for the past.
Jennifer Whalen graduated from the School of Education last year with a degree in elementary education. She got a job right away, teaching at Silver Hill Elementary school in Haverhill, but still had to find a second job to help pay off her $35,000 in student loans to pay.
She said living outside of Boston helps because the cost of living is less than in the city, but her job working at Cedarville Gym in Bradford, Mass., helps to dent her monthly payments, which are usually $300.
“Maybe if I was in the business world making more money I probably wouldn’t have to scrimp,” she said. “I try not to eat out as much as I did before and I buy generic brands in the store if I can.”
Scimping and saving whenever possible is a reality for many graduates. According to a report posted by Nellie Mae, a national provider of student loan services, the average debt accrued at a four-year private university is $15,300.
“People take out loans to help meet their expected family contribution,” said Kathleen Gibbons, editor of Nellie Mae. “Unless you’ve saved a lot of money over the years, most people have to use a combination of current income, previous saving and loan aid that they’ll pay back in the future.”
Gibbons warned against using credit cards to pay off loans, noting the problem has recently began to escalate.
“[Students] overextend on credit card usage,” she said. “For some, it goes into a vicious cycle where students need more student loans to pay off credit card loans.”
Gibbons added that credit card companies strongly target students as “good credit risks.” The companies assume that college students will be able to keep up with payments upon entering the work force after graduation.
“If students can avoid having credit cards, they should,” Zarkower said. “The interest rates are so much higher on credit cards than on loans. [They should use credit cards] for emergencies only.”
There are ways for students to simplify the payment process. Zarkower recommended consolidating loans if students have borrowed money from several different lenders. She said it eliminates confusion and can sometimes give students an interest rate reduction.
“[Students should] sign up to have their checking account auto-debited,” Zarkower said. “They will get a quarter percent taken off the whole loan and they’ll make payments on time.”
“My advice is to be aware of what you’re borrowing,” Gibbons said. “I’ve seen parents help students apply and handle financing and students are less concerned [when they are in school]. They become much more concerned when reality hits six months after they graduate and they have to start paying it back.”
Despite hefty commitments reaching beyond their years of schooling, the Nellie Mae study, “Life After Debt: Results of the National Student Loan Survey,” reported 66 percent of borrowers said while repaying loans is unpleasant, the benefits of a college education are worth it.
“Even though I have loans, it’s worth it to me,” Whalen said. “I’m glad I did it that way, because while I was in college I had a good time.”