Ways to avoid costly student loan mistakes

File Photo (Pixabay)

COLUMBUS, Ohio - Millions of students graduating from college this year will have the shadow of student loans hanging over their heads. The burden has grown to an all-time high. Within Ohio, an estimated 62-percent of graduates leave college with an average of just over $30,000 in loans.

Consumer 10 talked with experts about finding better college loan options. Chairperson of Franklin University's Department of Accounting and Finance, Dr. Martina Peng, talks with students regularly about college debt. However, she hopes parents talked with their children first.

"Going to college brings so many changes. It is the perfect time for kids to be financially responsible," said Dr. Peng.

In the last 10 years, total student loan debt more than doubled in the U.S., overtaking both credit card debt and auto loans. Right now, 44-million Americans are dealing with student loan debt.

"I feel pressured to do really well and get a job right out of college to pay back my loans," said Ohio State freshman Teri Jones.

Peng is familiar with that sentiment and highlights a few steps to take, beginning with looking around for what she calls 'free money.' Not all scholarships are for high grades. Dr. Peng says sometimes a little-known skill or talent is the basis for a gift. A declared major can also open the door to possible scholarships.

Peng said students should also remember to continue applying for scholarships beyond their freshman year.

"One of my finance major students, she applied for three scholarships last semester and she was awarded all of them," said Peng. "It made a huge difference and gave her an extra $4,000 that semester."

When turning to loans, Peng said it is best to start with federal student loans. "Federal loans typically have much better interest rates than private lenders, and they are more flexible on repayment options, like capping the monthly payments based on the amount of money you make."

Peng said she has seen local students graduate with little loan debt after choosing a combined pathway. By taking the first two years of classes at a less expensive community college then transferring to their preferred university, she says some students have saved thousands of dollars.

"Get those electives out of the way while paying a much lower tuition rate," said Peng.

Some students need to turn to private loans to help cover tuition. Peng said it is wise to look at the interest rates but advises not to get hung up there. She said sometimes the lowest interest rate comes with hefty up-front fees. It is important to also look at the repayment demands, especially any grace periods if the borrower were to find a timeframe of unemployment. With private loans, parents are sometimes asked to co-sign, which could leave them responsible for pricey loans if a student would default.

Lastly, Peng said to only get what you need; avoid building in a financial cushion for house projects, tech gear or other items into a student loan.

"Don't overborrow. A debt is a debt," said Peng.

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