OBSERVER Staff Writer
With tuition costs rising in recent years, many students are turning to loans to pay for college leaving many in debt. Student loan debt surpassed credit card debt in 2010. More and more students graduate with student loans.
An article published in the New York Times entitled "A generation hobbled by the soaring cost of college" states that about two-thirds of bachelor's degree recipients borrow money to attend college, either from the government or private lenders. That number does not include money borrowed from family members.
According to the Times, for all borrowers, the average student debt in 2011 was $23,300, with 10 percent owing more than $54,000 and 3 percent more than $100,000.
While the national student loan default rate for students not repaying their loans is over 13 percent, not all borrowing is bad according to Dan Tramuta, associate vice president for student enrollment for SUNY Fredonia and former president of the New York State Financial Aid Administrators Association.
"It is important that people understand that borrowing isn't the devil. The student loan program is a terrific loan program. It's been a vehicle for many students and families to be able to access higher education and not only gain an undergraduate degree but a post-undergraduate degree," he said. "Borrowing irresponsibly is the devil."
To encourage responsible borrowing, SUNY Fredonia provides a financial literacy guide to students. This 28-page guide was honored by New York State Higher Educational Services Corporation as being the best in the state about six years ago, Tramuta said. The guide is something the college sends to every accepted freshman and transfer student.
"We do a tremendous amount of outreach with our students," Tramuta said.
Students also participate in fireside chats on campus as well as access to a loan servicing center for help with questions. The campus also has entrance and exit counseling for all students who take out loans. The school has been chosen for a new SUNY initiative to help students not go into default on their loans. The SUNY Smart Track Initiative is a program that Fredonia has been chosen as one of six pilot schools to participate in.
"I'm really excited about this track initiative. It's about smart borrowing and about awareness early on the moment students walk on our campus. It involves not just the financial aid office but many other student offices on campus which is really critical. It's not just one area, it takes a whole campus to address this issue," Tramuta said.
The program will engage students from before they enter onto campus as well as follow them throughout their college career. As incoming freshmen, students and families will be given information on how to piece together working summer jobs, scholarships and loans to help pay for college. This campuswide effort will track students through undergraduate and past graduation. Tramuta says the campus looks for indicators that students may default on loans.
"We know the pivot points and the factors that would indicate borrowers who might have a high risk for going into default. That could be low income borrowers, borrowers that drop classes. What the engagement piece will do we will begin immediately engaging our freshman borrowers, our returning undergraduates and separated borrowers," he said.
Students will know how to borrow responsibly and to not over borrow. Tramuta said sometimes students will borrow more than they need to cover tuition giving the student a bigger refund back in the spring. Tramuta said if students need extra money during the semester, a campus job is an alternative to borrowing more than is necessary. Through the new initiative, students will also take online quizzes while learning about financial literacy, the importance of budgeting and how to be responsible with credit cards. He wants students to understand borrowing and what smart borrowing is.
The loan service center on campus will use email, snail mail, phone calls and is looking into a smart phone app to keep students informed about their loans as they go through college. Upon graduation the college will also be able to track students with their repayment as well as educating them on repayment options through the smart track initiative.
"Many times students don't know what their options are once they leave us. They don't know there are options that can keep them out of a delinquent default status," Tramuta said. "The student is not going into default intentionally. They may be underemployed or unemployed. Helping students understand their repayment options can make a huge dent in an institutional default rate.
"Our president, President (Virginia) Horvath, has been talking to me about financial literacy the moment she walked on campus in the role of vice president. She's very committed and I think with the smart track initiative we're going to engage borrowers more so than we done in the past," Tramuta added.
The student loan service center will contact graduating seniors and talk to them about knowing their rights and responsibilities as a loan borrower as well as knowing when repayment starts. Typically, loans start repayment six months from graduation unless the student is attending graduate school. Tramuta said students can avoid default status by making the minimum payment. There are other repayment options including income-based, income-contingent and extended repayment. Students can make payments based on what they currently are making or extend the terms of repayment past the typical 10 years.
"A student might have $25,000 in debt which would be $250 a month for 10 years. They may right now be underemployed so maybe all they can afford right now is $40 a month. There's ways to do that until that student gets over that underemployment status and gets more money," he said.
Loans may also be forgiven if a student enters into a teaching position in a low-income school or other service related fields. If a student cannot find a job following graduation, Tramuta said the college will work with the student to offer additional resources to help out students.
A college score card is provided for all colleges in the nation and provides information on how many students defaulted within three years of repayment on student loans, among other information. SUNY Fredonia has a 7.3 percent default rate while the national average is 13.4 percent. If colleges drop below a certain default rate, their federal Title IV funding may be cut. To see Fredonia's score card visit www.collegecost.ed.gov/scorecard. For more information on student loans and repayment options, visit www.studentloans.gov.
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