Rose Murphy: Student loan debt 101

Will federal student loans for college be forgiven? Are federal student loans worth it? There has been a lot in the news about student debt. Let’s discuss some of the myths and facts about student debt, federal loans and the current state of loan forgiveness.

California ranks lower, nationally, for student debt; partially due to our well-funded public universities. Another reason is California has the Cal Grant, which is awarded to low-income students, and pays full tuition at all public CA institutions. In 2021, nationwide, the average loan debt balance was $37,113. (for more facts on this data check out the Education Data Initiative’s website). The average California State University (CSU) graduate who obtained a bachelor’s degree owed $15,531. The overall average student loan debt for Californians who graduated from any CA institution with a bachelor’s degree in 2021 was $21,125.

Not all schools are the same. Let’s look at the University of California, Irvine. (UCI) College Scorecard is a US Department of Education website that provides the average loan debt for undergraduate students upon graduation. College Scorecard reports the median debt for students at UCI is $15,060, which is a loan payment of $151 per month. With the median earnings of a graduate at $71,961, this payment amount is not out of range. It is important to look at these factors at each institution. What is the average loan debt at the particular institution, the typical monthly payment, as well as projected earnings in the chosen career field?



Federal loans have multiple benefits that private loans often do not. Federal loans often have fixed interest. Some federal loans offer income-based repayment plans. Some offer loan cancellation for certain types of employment; for example, teaching in a low socio-economic neighborhood. Deferment options and interest rate reduction based on payment methods also can reduce costs of the loan. Direct and Indirect Subsidized loans do not need to be paid back until after graduation. Since federal loans do not require a credit check, they tend to be the best option when borrowing to pay for education.

Students should make a budget to determine what is needed in college. They should borrow only that amount. Upon receiving the financial aid award package, loans will be offered, but students do not need to take all loans, or the full loan amount unless it is needed. Keeping loan amounts low in the first years of college is the best way to reduce what you will have to pay back.



A Financial Aid Award Package is sent to students directly. Award packages may contain some or all of the following: scholarships and grants, (which cost you nothing), earned money in the form of work-study, and student loans. Some scholarships and grants have conditions. It is important to read the fine print on everything.

The loans you receive in your Financial Aid Award Package will be primarily federal student loans. Subsidized loans do not usually start accumulating interest until after graduation from college. Accepting subsidized loans before unsubsidized loans is a best choice. Accept unsubsidized loans before a PLUS loan. To view federal student loan programs with more details about the award limits and specifications check out his link.

If you have questions, it is important to talk to the college’s financial aid office. It is a possibility that if you need a small amount of additional funding to make the school accessible, they may have other scholarships, grants or loans available. Students, not parents, should be the person to make contact with the office.

Some schools offer tuition payment plans. If this type of plan is offered at the university, it may reduce the amount required in loans. This is often interesting free. Ask the financial aid office at your college if this is something that may help you to reduce taking out loans.

The debate about mass student loan forgiveness continues. President Biden has called on Congress to pass student loan forgiveness legislation. The President administration has wiped out nearly $13 billion in student debt using forgiveness programs. Students have not had to pay their federal student loans for the past two years due to Federal Student Loan Forbearance. In December of 2021 Biden issued an executive order to improve the delivery of services. Government-backed loans were an attempt to make college more accessible. They had better terms, however enrollment in for-profit, private schools climbed in the past decades. Borrowers were unable to make payments and did not complete their degrees. We ended up with 20% of borrowers in default. This can be avoided by borrowing only the amount needed, sticking to a budget, carefully reviewing the terms of loans and understanding the average debt obtained at the school you plan to attend. College can be affordable.

Rose Murphy is a retired high school counselor now working as an independent educational consultant. She can be reached at [email protected] or abestfitcollege.com

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