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How well do you actually understand your student loan debt?

The unknown
Another term, another gentle reminder from the friendly student accounts office to make your tuition payment or payment arrangements. For most of us, this will involve taking out a loan or two. Before you push through this paperwork, stop for a moment. Think. How well do you actually understand the implications of what you’re doing?

Do you know how much you borrowed this term? Do you know how much you’ve borrowed throughout your college education? Most importantly: are you sure that you need to borrow that amount—should you borrow less? Let’s explore a few important (but not often talked about) student loan facts, and also highlight some equally important implications.

Fact #1: Did you know that part-time students can borrow the same, maximum amounts as full-time students, according to federal rules.
At first glance, you may think “isn’t this wonderful! Full- and part-time students are treated equally.” There’s more to it than that. This federal rule creates an opportunity for part-time students to borrow—this is good. But it also creates the opportunity for you to accumulate twice as much debt. This is extremely risky for part-time students. If you’re in this situation seriously consider these two options:

  1. Borrow only what you need.
    It’s nice to have a cushion to cover living expenses while you’re in college, but remember that there’s still a “cost.” That “cost” is the increased risk of taking on more student loan debt than you need to.

    Rule of thumb: If you’re enrolled at half-time status (4 credits per term, undergrad), try to accept no more than half the maximum loan amount that the government offers you. If you can manage this financially, it’s a way to borrow smart.

  2. Consider going full-time.
    This seems 100% counter-intuitive to saving money, but follow us for a moment... Ideally, you want to finish college as quickly and affordably as possible. If you widen your course load and finish your degree program a few semesters ahead of schedule, you won’t need to incur the debt that would’ve covered the expenses for those extra semesters.

    When you're working towards your degree, these extra semesters don't seem like that big of a deal, but in the end, they do add up.
Fact #2: There are Federal rules that outline how much you can borrow
The federal government sets a limit on what undergraduates can borrow in federal loans.This is called an aggregate loan limit. This threshold is way easier to hit than you would think. Let’s illustrate the process.

Student profile: 30 year old man who takes out the maximum in loans each term and takes six years to finish his bachelor’s degree program. As of the summer of 2015, the aggregate loan limit is $57,500.

Year #1        $9,500 (max.)
Year #2        $10, 500 (max.)
Year #3        $12,500 (max.)
Year #4        $12,500 (max.)
Year #5        $12,500 (max.)
Year #6        $12,500 (max.)
TOTAL         $57,500 limit

In this scenario, if the student hasn’t started to pay back any of these loans, he won’t be able to borrow any additional funds. Not only will he have a lot of money to pay back, but if "life happens" and he needs to enroll in an additional semester, he won't be able to use federal loans.

Good news!

Granite State students don’t actually need to borrow this much. An entire bachelor’s degree costs less than that aggregate loan limit by over $17,000 (and that’s before factoring grants, scholarships, and other free money).*

Even more good news!
The typical student arrives at Granite State with four major advantages: transfer credits, financial aid, Pell grants, and work experience and training (that can equate to college credit).

The combination of transfer credits, financial aid awards (free money, not more loans), Pell grants, and Prior Learning, can really drive down the cost of completing your degree.

Student loan lesson bottom line
Just because you can, doesn't mean you should. Having access to federal student loans is so important, but be sure to borrow smart. Taking out the maximum amount can help you comfortably cover all of your expenses, but pursue other avenues before you make this decision. Tap into the "free money" resources, like Pell grants and a GSC financial aid award, first and consider student loans second.

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*Cost breakdown (based on 2018-2019 tuition and fees):
$314 per in-state credit, 120 credits total for bachelor's program
Fees at $75 per term, 24 terms total (four per year, six years total)
Estimated $100 per term for books/other expenses
$100 Degree conferral fee