Understanding student loans

By Evan Herbison

Horizon Reporter

Student loans are almost inevitable among today’s college students. The average Whatcom student will accumulate nearly $8,000 in debt within two years, and the average undergraduate leaves school with nearly $20,000 in debt.

Dealing with debt is hard enough for experienced adults – the trouble it creates for inexperienced students is alarming. However, what comes as a surprise to many students is that it can be managed.

Whatcom’s Business club held a seminar on June 4 which illustrated some key ways that students can alleviate some of the common problems with debt.

“It’s important to understand your loans,” said Karen Yackley, who works in the Financial Aid department at Western Washington University. She explained that many students get loans without thoroughly thinking through the responsibility.

“Be an informed borrower; ask a lot of questions,” she said.

For example, what’s the difference between a subsidized and unsubsidized loan? The main difference is that subsidized loans are awarded based on need, Yackley said, and have their interest paid for by the government while the student is in school. Unsubsidized loans, on the other hand, are awarded regardless of need, and accrue interest throughout the life of the loan.

“Know what you’re signing onto,” said Yackley. She strongly cautioned students not to take their loans too lightly, after having seen all too many students find themselves in serious trouble when they wind up with more debt than they had been counting on. Many graduates, she said, get out of school and have so many things on their mind that they simply forget about their debt.

“It’s easy to let them slip,” said James Austin, 19. “They’re an easy thing to put behind your other priorities, because they seem further away.”

A good way for students to avoid this and get ahead is to work while going to school and start paying the loans as early as possible. Even (perhaps especially) with subsidized loans, which don’t accrue interest while the student is in school, working to pay off some of the loan early can save students considerable time and money down the road.

Another point that Yackley strongly emphasized was the importance of scholarships. She said that scholarships are more abundant than many students realize, and surprisingly, relatively few students even apply for them.  In fact, there were fewer applications for scholarships in the first year after the economic downturn than the years before.

In closing, Yackley reiterated many of the points from her presentation in a short list of dos and don’ts which concisely summed up what separates a smart, informed borrower from one who is headed for some real financial hardship. Some of the less obvious points included signing up for automatic withdrawal to avoid missing payments, keeping personal information up to date with lenders, and using deferment options if necessary.

Also, open communication with lenders is key, said Yackley. Most lenders are willing to be quite flexible with payments, as long as they eventually get their money. She also encouraged students to explore the resources available from both Whatcom and Western’s Financial Aid offices.

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