Degree of debt: Are colleges educating students enough on student loans?

Degree of college debt
(Source: KAIT)
(Source: KAIT)
(Source: KAIT)
(Source: KAIT)

JONESBORO, AR (KAIT) - To get a higher education means some students have to take out student loans.

As colleges across the nation continue to lose federal funding, tuition increases make it much easier to click the Accept button when offered federal aid.

Because it happens all across the nation, many say the country is approaching a "student loan crisis."

The Student Loan Debt Clock shows students in the U.S. owe more than $1.4 trillion. That number grows every second.

Students who fall into default, or who have stopped making payments on their loans, may face penalties such as having their wages garnished, having low or ruined credit scores, or having the government take their tax returns.

"You do not want to fall into default," said Terry Finney, assistant vice chancellor of enrollment services with Arkansas State University. "Falling into default could make your life difficult when trying to buy big items such as a house or a car."

Students are not the only ones who could face penalties for falling into default.

"If 30% of our student borrowers fall into default then the university could lose our other federal programs which is why we try our best to make sure students are graduating and are paying their loans back," said Finney.

Finney said the national average of students falling into default is 11.3%, but Arkansas State University's average is at 7%.

The U.S. Department of Education shows each year fewer students are falling into default, but an issue national experts are discovering is that fewer students are educated about the loan process in general.

"As a first-generation college student, I had no knowledge of the student loan process, but I needed them because that is the only way I could afford college," said Dominic Williams, an A-State senior.

Williams said even when signing up for the loans, the information he received was not helpful.

"I took a little test before accepting the loans, but even then, there was no counselor or anybody there to tell me what I was really getting myself into," said Williams. "I just knew I was going to have about $16,000 in debt after college and while trying to attend grad school after that, it is a bit stressful to think about."

Williams said he feels like the student loan process is a trap.

"I feel like it is just very disingenuous like I feel like they are providing us with this 'opportunity, bachelors' but it is disingenuous because it backfires on us in the end," he said.

Jessica Moore, an A-State graduate student with a 4.0 GPA, felt she wasn't educated enough on student loans before she had to take them out. Moore attended college in central Ohio in 2010 for a bachelor's in psychology.

"There was never a talk of are you sure you want to take out these loans," said Moore.

She took out loans to afford college. When she transferred to A-State during her pregnancy, she took out more loans. Now, she has more than $80,000 in debt while trying to raise her five-year-old daughter.

"It makes me just nervous about even graduating because it's like now I am at a point in my career where people are actually talking about loans," said Moore. "During my freshman year it was like live on campus, you're going to get this dream job and live a dream life. Unfortunately, it is not this happy ending."

Finney said by law, A-State is required to offer the maximum loan to eligible students, especially to pay college living expenses.

He said students like Moore fall into this category, but he warns others to borrow less if they don't need the full amount.

"If you need all of it then that is what it is there for," said Finney. "Don't take it out because you need some extra money or you need to buy a new cell phone or do this or that. Because that is money that you are going to pay back and some of those items you buy with it you are not going to have four years from now."

Finney also said the ultimate responsibility falls on the person taking out the loan.

"Students need to be aware of how much they are borrowing and what their amounts are adding up to as they go through the process and they need to ask those questions," said Finney. "We try to provide as much information as we possibly can as well as the federal government. They need to be careful but again it all comes down to borrow what you need."

Finney said at Arkansas State University, students have three checkpoints to go through before accepting a loan. First, they have to go through their student account and accept the amount they need. Then they have to go through interest counseling that educates them on interest rates and other factors dealing with student loans overtime. Finally, they have to sign a master promissory note, which says they know they have to pay this loan back.

Finney also said at A-State, first-year students undergo financial literacy in their First Year Experience Course.

Even with those resources available to students, Finney said there are still more options available regarding student loans. If they need help exploring these options, he said they should contact their financial aid adviser.

Copyright 2016 KAIT. All rights reserved.

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