Imagine $1 million that’s how much college graduates can expect to make over their lifetime in comparison to a high school graduate, according to Pamela Yip of the Dallas Morning News. The road to a college degree isn’t always an easy one, especially when it comes to finances.
“A college degree is a good investment and becoming increasingly necessary,” said Luke Swarthout, higher education associate with the State Public Interest Research Groups, a consumer organization. “But more of the cost of college has been pushed onto the shoulders of students. For a whole set of borrowers, this debt could affect their choices after college.”
Boise State University’s Financial Aid Office strongly recommended all students with subsidized or unsubsidized student loans to consolidate before June 30, 2006. Encouragement came from the interest rate increase of nearly three percent. The opportunity to consolidate is not available as of the June 30 deadline.
According to a new report released by the research arm of the Campaign for America’s Future, Idaho students will have to pay $1,980 to $2,382 more in college loans beginning July 1, 2006.
“Among college graduates in the class of 1992-93, 49 percent reported taking out student loans, and for them the average debt burden was $10,179. For the class of 2003-04, 65 percent took out loans, and the average debt burden had risen to $18,887, according to the College Board,” said Yip.
Comparing two scenarios, the interest rate increase can impact students differently.
Scenario one: A student consolidates $20,000 in Stafford Direct Loans while still enrolled at Boise State during spring semester.
The interest rate for consolidation would be 4.75 percent. The monthly payment would be $129/month. Total amount repaid would total $31,017.
Scenario two: A student consolidates at the current interest rates after going into repayment of the loan.
The interest rate would now be 7.25 percent. The monthly payment would be $158/month. Total amount repaid would total $37,939.
Differences reflect the obvious $29/month with the default payment option of 20 years, or 240 payments; however, the difference in the total amount repaid over the entire life of the loan is $6,922.
According to a news release from Campaign for America’s Future, tuition at the average four-year public university has increased by 40 percent since 2001, and nearly two-thirds of all four-year college graduates now have student loans.
“I think I’ll more than likely be going to school part time in the fall due to the fact that I can’t afford it. Even with taking out loans, it’s still getting more and more expensive, making it more difficult to attend full time like I’d like to,” said BSU student Trent Cutler.
Financial Aid Counselor at BSU Dwight Berreth doesn’t think the interest rate change itself is going to significantly impact students at BSU.
“Most were graduated and headed into repayment. It’s still a little ways down the road,” Berreth said.
According to Campaign for America’s Future, student loan debt already causes 14 percent of young graduates to delay marriage, 30 percent to hold off on buying a car, 21 percent to postpone having children and 38 percent to delay buying a home.