That's My Job: Letting the professionals speak

What better opinion can you get than a professional's? Based on that logic, I went to my own financial advisor to get her perspective on a few of the issues facing student borrowers today. She was gracious enough to comply, and below is our Q&A.

Enjoy.

Q: What is the difference between private and Federal Stafford loans?

A: Students should definitely try to go for Stafford Loans first. Freshman will get the least amount of money, but it increases as thy progress through school.

Q: From 2008-2009 the percentage of first year college students taking out private loans increased from 14-43%. Why do you think that is?

A: It probably has to do with the economy. Parents are likely finding it more difficult to help students with the costs of college. Federal Stafford loans provide a reasonable amount of money, but it still requires a degree of frugality to use them most efficiently.

Q: What advice would you give to a freshman taking out a loan for the first time, maybe when they weren't planning on needing to?

A: I would recommend that they use only the amount they need, but not the full amount they're given, unless withdrawal becomes absolutely necessary. If you take all of it out at once you'll be sure to spend all of it. I've had students come in before who used their loan money for a wedding. Be smart about it.

In some cases the school can offer grants to those in extreme circumstances, if they genuinely need it. If you're about to be evicted, for example, or you don't have enough money for food, the school has special grants to help.

Q: And what advice would you give a high school senior beginning now to look at their options for financing college?

A: Students will benefit greatly if they get a job, save their money, learn to budget, and learn that it's time to grow-up. Saving is the most important thing they can do. A Stafford loan will cover more or less the cost of tuition and rent. Books and food should really be paid for by saved money. The best thing anyone can do for themselves is to save money.

Q: There is the TEACH grant program, which offers grants to students who will teach in a low-income district after graduation. Does BYU-Idaho participate in the TEACH grant program?

We don't endorse the TEACH grant here at BYU-Idaho. The grant requires that you teach in a low-income school, and if for any reason you can't comply—if you can't find a teaching job, you get fired, the school improves from low-income to normal—the grants become loans, with a retro-active interest from the day it was given to you.

It's estimated that 70-80% of these grants will become loans because the requirements were not met. Really it's just a thing some politicians cooked up to look good. There's no way to ensure that the borrowers will be able to teach where the need to, in a low-income area.

Lesson Two: If You Have to Borrow, Do It From Uncle Sam, Not Uncle Sammy, the Shady Loan Shark.

Introduction:

If your Federal Stafford loans have not been enough to cover your college costs -- don't take out private loans! -- there is good news. Good ol' Uncle Sam recently made two -- that's right two changes in how you get more of those tasty, safer, Federal Stafford Loans.

Unsubsidized Stafford Loans

University undergrads can now add $2000 a year to the amount of loan money they have previously been allowed. Unsubsidized means that interest accumulates while you're in school. Not as good as subsidized, but better than private. The fixed interest rate is 6.8%.

TEACH Grant Program

If you're thinking about becoming a teacher, this is the grant for you. You get a grant (money not borrowed, but given) of up to $4000 per year if you teach four academic years in a "high-need" public or private elementaries. This means low-income school districts. If you fail to meet your teaching obligations, however, the $4000 per year becomes an unsubsidized Stafford loan. Read more about these programs here.

This grant program also comes with a special bonus, the Stafford Loan Forgiveness Program for Teachers. Read the details at the link, but basically, after graduation, if you teach full-time, for five consecutive academic years in these "high-need" and "low-income" schools, you can have up to $17,500 dollars of your student loan debts forgiven... forgotten... poof... gone.

Conclusion:

There are ways to get through college without borrowing from private lenders. These are just a few. Go to the Financial Aid office at your university to see how Uncle Sam can help YOU.