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Thu, Feb. 20

How much student loan debt is too much?
As students’ college loan debt grows, ways to manage it become important

Four-year colleges and universities 2015-16 total cost of attendance:

Embry-Riddle $48,992

Prescott College $39,991

University of Arizona $25,743

Arizona State University $25,704

Northern Arizona University $25,340

Source: Institute for College Access & Success

Like many of her classmates, Noelle Hutson has built up student loan debt to get her college education. The Prescott Valley resident is attending Northern Arizona University to get an advanced degree that will allow her to become a school psychologist.

She’s nearing the end of her time in school and is now facing repaying back about $60,000.

“I feel like loans kind of set people up for failure,” she said. “People I know are worried about it, but when we’re in school, we kind of just push it out and say, ‘We’ll worry about this once we’re working.’”

With more students attending college, and taking on debt to do it, the nation’s outstanding student loan debt grew by 2.1 percent, to $1.41 trillion, from $1.38 trillion at year-end 2017, according to the Federal Reserve Bank of New York.

That number is greater than the total U.S. auto and credit card debt, according to the Fed, and students who earn a bachelor’s degree are wrapping up college owing an average of $37,712.

Arizona’s students fare better — they have an average debt of $23,447, according to the Institute for College Access and Success, and half of students have student loan debt.

Rising interest rates on federal undergraduate student loans are partly to blame. They’ll go up 13.5 percent starting July 1, for the 2018-19 school year.

Loans for graduate students will also increase about 10 percent.

Loans can have some unexpected benefits, said Raymond Ceo, director of financial aid at Yavapai College. “I used my student loans as an incentive to complete my degree. I knew as long as I was enrolled in school at least half-time I wouldn’t have to start making payments on my loans, and I’d get a six-month grace period to find a job,” he said. “Federal student loans can be your best form of credit, as it is an amount owed to Uncle Sam. Paying your student loans off as the payments come due alone can help you get that car loan or house loan later on.

“One of the biggest default indicators are students who take out loans but don’t complete their education,” Ceo said. “Federal student loans should be more of a last resort, but they are available to help a student to pay for educational related expenses including housing and transportation. Students can manage their debt by budgeting and only borrowing what they need.”

In an effort to help ensure the loans are paid back, Rebekah Salcedo, director of the University of Arizona Office of Scholarships and Financial Aid, said her school has “created a series of loan repayment workshops that we offer to graduating students to help them to understand the different repayment options that are available.”

She said that, if a former student gets into trouble and can’t pay back the loan on schedule, “in every case, we encourage the students to speak to their loan servicer, because there are options to get out of loan delinquency or default.”

Another option may come from Gradifi. This company facilitates a system by which employers help pay off their workers’ student loans as an employment benefit.

Gradifi’s Meera Oliva said, “A company might structure a benefit offer for their employees, say, a hundred dollars a month, and that contribution is made directly to the loan.”

Oliva said over 400 employers around the country are participating, from PriceWaterhouseCoopers to small businesses with only 10 employees.

Having the debt looming over them “causes young employees to feel stressed, and delay purchasing a home, and put off contributing to their 401(k). All of those things make them at-risk employees who are likely to leave for just a little bit of extra pay,” Oliva said.

Hutson is fortunate, she said, because her career field includes partial loan forgiveness. “It has to be an income based repayment plan,” she said, but ultimately looking at the repayment bill “definitely scares me.”

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