Loans force students into debt

Loans can be great reliefs that become headaches for students who are not well-informed about their finances.

Applying for a private loan can be a necessary evil for some students attempting to find alternative ways to finance education. Weeding out the good from the bad becomes a daunting task that students must often tackle on their own.

“I think that students should research, just like you’re doing anything else,” said Heather Hunsberger, assistant director of Student Financial Services. “It’s an investment in yourself. You should research your loan.”

The best place to find information on loans is the Internet. A simple Google or Yahoo search for private loans or student loans produces a “plethora of information,” Hunsberger said.

Unlike government loans, private loans are commonly based on the applicant’s credit score. Lenders encourage applicants to apply with a cosigner to help lower the interest rate.

Interest rates for private loans vary and can range from as low as 5 percent to as high as 13 percent. The better an applicant’s credit score, the lower the interest rate.

Interest for the federal Stafford subsidized loan is 6 percent, while interest for an unsubsidized Stafford loan is 6.8 percent, both at fixed rates.

Hunsberger said students should first fill out the Free Application for Federal Student Aid.

“They shouldn’t take out their private [loan] until after everything else has been exhausted,” she said, adding that this includes grants and scholarships either through Temple or outside the university.

“As a rule at Temple University, when we process aid for all students we maximize their eligibility from the beginning,” Hunsberger said.

Once students assess their award letters, private loans can be requested if federal aid is not enough.
Students should consider the benefits of taking out private loans and fees associated with them, as they vary among lenders and can have interest rates as high as 9 percent.

Speaking with loan company representatives is also a useful measure students can take, Hunsberger said.

“I went into the branches to talk to the associates just because I felt more comfortable hearing it from them,” senior finance major Christopher Evan said. “Sometimes they have small print hidden somewhere, or they word it funny to sort of lure you in.”

Evan has taken out an unsecured personal loan from PNC Bank each semester since he started at Temple.

His first year, he filled out his FAFSA form but was only awarded $2,000, forcing him to apply for an alternative loan.

Since Evan received so little aid, he did not reapply through FAFSA. Currently, the interest rate on his loan is nearly 7.5 percent.

Sydni Grant, a junior broadcast journalism major, has yet to apply through FAFSA for financial aid and currently has a Sallie Mae loan without a cosigner.

Grant said her mother cosigned for her loan her first year at Temple, but she was denied the second year. She was accepted without a cosigner when she reapplied. Her interest rate is 10 percent.
Through an episode of 60 Minutes, Grant and her parents learned about Sallie Mae and looked it up.

“We went with it because I don’t think my parents and I had any idea what we were doing,” she said.
Due to the current economic climate, Grant said her parents insisted that she file for FAFSA for the next school year.

“I don’t know how much FAFSA is going to pay, but I can take a lot less out with Sallie Mae,” she said.
Reece McCann, a freshman BTMM major, said he also intends to take out less with his Citibank loan next year. Along with the financial aid he received through FAFSA, McCann has a $10,000 loan at an interest rate of 12.5 percent.

“My grandfather and my mom own stocks and trading,” he said, adding that his mother suggested he take the loan from Citibank. “She helps me out with a lot of that stuff.”

Students generally take private loans to cover the cost of tuition and other expenses that come with attending a university including books, housing and other perceived expenses.

Grant uses her Sallie Mae loan to pay for housing, utility bills, groceries and tuition.

“The preference [is] the less you take out, the better, but I think at the time students aren’t thinking about that,” Hunsberger said.

Repayment options include immediately paying off loans, interest-only deferment and both interest and principle amount deferment. Most private loans boast flexible repayment options.

McCann also deferred payment on his loan but said he intends to start paying them off during the summer. Evan pays his off during subsequent semesters.

Grant is deferring her payments until graduation.

“I know in my head, ‘You’re going to pay it off,’” Grant said. “[I] just don’t focus on it right now.”

Amanda Fries can be reached at

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