My Student Loan Journey Pt. 1: Getting into debt

3 Feb

Casey Doten, Financial Aid Administrator – Purdue University

Like 44 million other Americans , I have student loan debt. Going into college I knew that student loans were necessary because even though my family cared for me, they weren’t able to contribute financially to my education. I regarded myself as one of the unlucky in-betweeners who wasn’t rich enough to have my family pay but not poor enough to have the government pay. I didn’t realize at that time even if I recevied the maximum Pell grant award it was $5,350 – much less than my costs for the year.

I knew some of the basics things I needed to do like fill out the FAFSA, which my dad did and I just signed at the end. Then I filled out and signed a few papers I realize now were my entrance counseling and master promissory note, probably one of the last before they became electronic. Like many others, I just paid minimum amount of attention needed to finish the process. My focus was on my upcoming classes and I’d pay back what I needed to later.

When my award letter from my college came there were three lines on it:

FFEL Stafford Subsidized:       $788
FFEL Stafford Unsubsidized:     $4,712
Work Study:                     $800

I declined work study since I already had a job lined up at a restaurant near campus (who ended up calling me the day before I started and let me know they didn’t actually need another worker for the year). I accepted the $5,500 in federal loans offered, but it wasn’t enough to cover the combined expense of my tuition and room & board costs which were all due at the beginning of the semester.

The answer to the question on how to pay? A private loan! Without much more thought, we took out what we could for a private loan to pay all of my costs. I even got a refund of a couple thousand dollars which I promptly used to buy a car that ended up being a money pit. While I definitely needed the private loan to help cover my costs, the extra $2,000 I borrowed above what I needed also added up to over $600 in interest before I would finish school.

All told, I ended up borrowing over $15,000 for my first year of college and all but $788 would gather interest for the next several years.

Fast forward to sophomore year when I restart the process over, but with a new wrinkle. My freshman year was 2009, when the Great Recession wreaked havoc on the economy. My father was laid off from his job, he and my stepmother were getting a separation, and our house was going into foreclosure. So the rosy picture that was painted from our previous year’s tax info on the FAFSA didn’t reflect my family’s reality.

This meant a couple of things for me: unfortunately nobody would borrow to my go-to cosigner but my financial aid office let me know that I could file an appeal with them due to my special circumstances.

After successfully appealing my aid to represent my situation ,the government let me have some of those grants I had previously not qualified for. However, even with these grants and my $6,500 in federal loans I had available as a sophomore, I still needed another private loan.

After some convincing, my mom agreed to cosign a private loan for me but only for what I needed to pay what I owed. Plus, this loan required quarterly payments on the interest. While it kept the loan from ever getting bigger, the extra $150 every three months always hit me at my poorest times and was a real budget buster several months.

At the time I was so worried about getting my bill paid that I had no worries about getting a refund, which in retrospect I’m more than happy about. But still, the total amount borrowed went up again. This time $14,300 for the year.

Two years of school down and over $29,000 in debt. The average indebtedness for my fellow 2014 graduates was $33,000 so I was on track to be well-above average in an area I’d prefer not to be. Also, I planned on becoming a teacher – a profession which isn’t exactly known for high salaries.student loan journey getting into debt2.jpg

Thankfully, being able to live off-campus and pay my rent and food costs as I went saved me from having to take out any more private loans because I could pay those costs as I went. So for my junior and senior year I took the federal maximum each year of $7,500 which with my federal grant I was able to pay my tuition and use my refund to pay a couple of months ahead on my rent. This enabled me to work part-time in college gaining great work experience and also being able to stay ahead on my monthly bills. I was finally using my loan money responsibly.

I had one more curveball thrown at me after my fourth year. Teaching majors at my school were on a 5-year program because it required 150 credits. Four years earlier, I was told of a lifetime aggregate limit on my federal loans in entrance counseling. Did I remember? Definitely not. So while I expected another $7,500 for my fifth year, my federal loans offered were only $4,000 and I came up short of being able to pay my tuition bill.

So what could I do? I had maxed out my federal loans I could take out. My mother would only cosign another private loan if I convinced her I’d explored all my other possibilities. After a visit to my financial aid office, they informed me that I could possibly qualify for a few thousand more dollars in federal loans if my parent applied for a Federal Parent PLUS loan and was denied. So I worked with my father to apply for that and to our surprise they accepted his application!

It turns out the Parent PLUS loan is more understanding about adverse situations than private lenders were. One last loan wasn’t ideal, but I took just enough to cover the remaining tuition. Plus, it was better than getting to my 5th year and having to quit with 4 years of debt accrued.

All totaled up, I estimate I borrowed $48,600 during my five years of school. But I made it through and am the first person in my family to have a degree. I’m proud of what I accomplished and I learned a few things along the way about financial aid:

  1. File your FAFSA early. If you want to be considered for the most/ best aid apply before any deadlines.
  2. Don’t borrow more than you really need. You have to pay it back, with interest.
  3. Meet with your financial aid office when things come up. They helped dig me out of a couple situations that might have otherwise left me helpless.
  4. Graduate in four years if it’s possible. Two extra years can cost you almost $300,000 lifetime.

 

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