Student loans

Here’s what you need to know before taking out a student loan

A TAMU-CC student discovered how quickly student loan debt can escalate, even before repayment begins.

CORPUS CHRISTI, Texas — As college application deadlines approach, high school students face the difficult decision of how they pay for college.

While some students may choose not to attend college, a confusing decision is left to those who do – how to pay for their education.

When students receive their financial aid packages from their respective schools, the contents may vary depending on the student’s qualifications. According to Federal Student Aid Website, scholarships, loans, and work-study funds are some of the many types of aid that students may see in their packages.

Maria Serna, assistant director of financial aid at Texas A&M University-Corpus Christi, said students have more options available to them than they realize when deciding to make the next transition in their education. . Making sure students understand the type of funds included in their financial aid package can make all the difference, says Serna.

“We advise our students to make sure they understand what their different options are, and that if they take the loans,” Serna said, “yes, you can get that money up front and more automatically, but with work study it’s money you don’t go into debt for.

When paying for higher education, students often don’t have enough information or resources to effectively narrow down their options. TAMU-CC graduate Natalie Ramirez currently works for an ophthalmologist in San Antonio. Ramirez owes about $30,000 in student loans, not including those his parents took out on his behalf.

After graduating, Ramirez quickly realized the impacts student debt had on his life after graduation and wished he had learned more while in school.

“I don’t have a lot of established credit to start with,” Ramirez said. “So having such a large amount of debt on my credit history makes it kind of bad. It makes me look bad.

While students typically get a six-month grace period after graduation before having to repay their student loans, Ramirez quickly found that even without repayments, his life still revolved around his existing debt.

Ramirez adds that one thing she wants prospective students to understand is financial literacy and what it can mean when navigating options to pursue higher education.

“I really wish I had more financial knowledge when it came to taking out these loans,” Ramirez said. “Even the loans related to my parents, I feel like I haven’t fully understood that implication on them and how it affects them now.”

When completing a FAFSA application, students are encouraged to submit the application as soon as possible. The reason for this quick turnaround is that students who apply earlier may receive more scholarships and more forms of non-refundable aid.

“There are a few things we notice. Number one, for example, waits too late,” Serna said. “Financial aid is given on a first-come, first-served basis, and so students who apply earlier certainly tend to get more free money than students who wait later. That’s when we start to see more student loans.

Serna adds that while financial aid may vary depending on the student, the office itself will prevent students from taking more than they would initially need to cover costs.

“Many students don’t understand exactly what they are accepting or refusing, so their first instinct is to accept the full amount. Well, the good news is that we limit how much a student can borrow,” Serna said.

Students have the option, when viewing their award letter, to accept or decline the awards, in whole or in part. Serna said students often take more money off the table than they need.

“More often than not, sometimes students who don’t even need to borrow will opt for it because they may be eligible to receive it, but they don’t have to take it,” Serna said.

While students have the option to accept or decline their rewards program, students like Ramirez said that when it came time to pay his tuition, declining his rewards program was not an option and even ended up forcing his parents to tackle some of that debt. as well as.

“I couldn’t drop out of school. I had to continue. They were putting that money away for me, they wanted me to go follow my dreams and do something that they didn’t have the opportunity to do either,” Ramirez said.

Direct PLUS loans are types of financial assistance for which parents or legal guardians are responsible. The loan covers the student’s attendance fees at their respective university, making them very expensive to withdraw.

“I feel like they kind of didn’t know what they were getting into when they signed that loan,” Ramirez said. “And when we kept taking loans for the rest of the year to finish my education, in a way, I almost feel indebted not only to my school, but to my parents.”

As of July 1, 2022, the fixed interest rate on a Direct PLUS Loan is 6.28% according to the Federal Student Aid website. Although the loan offers the parent a chance to help their dependent pursue their education, the financial responsibility is tied to them and cannot be passed on to the child. This makes the loan a hard pill to swallow for parents who want to help their child but cannot afford to do so.

“In the beginning, when we sat and talked about school, it wasn’t really a difficult conversation. It felt more like an emotional conversation,” Ramirez said. “Because my parents wanted absolutely anything and everything for me to go to school. They said ‘yes, we’ll take out the loans, we’ll just have to pay them back’, and now we’re both bound for school.

Even though Ramirez and her parents are still grappling with the issue of paying off her student debt, she thinks current and prospective students should assess what’s important to them before committing to graduate school.

“If I had gone to school to pursue a career in nursing, or become a lawyer or something, then I would feel a little more vindicated,” Ramirez said.

Serna assures students that when the time comes, the TAMU-CC financial aid office will be there to ensure there is no confusion when signing on the dotted line.

“We always advise our students to borrow responsibly,” Serna said. “So we provide students with enough to finance their education usually starting with tuition and fees. So what we do is we meet the students one-on-one to sit down and chat, ‘Okay, what are we looking at here?’

Despite her financial situation, Ramirez said she will always have fond memories of being an islander and being able to continue her education.

“College is an experience that everyone should have the opportunity to go for. I had a great time in college. It definitely changed a lot of perspectives that I have on a lot of different things,” Ramirez said.

The key is to borrow responsibly.