Financial Aid offers advice as students with loans multiply

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The number of students who will use loans to pay for college increased for the 2005-06 school year from 2003-04, according to a financial aid official.

During the 2003-04 academic year, of the 53 percent of CSUN students on financial aid, 63 percent received loans.

The average loan amount per student during that school year was $6,040, which was a 13.5 percent increase from the previous year, when students borrowed an average of $5,224.

“Financial literacy is now turning into a national movement,” said Gregorio Alcantar, the debt management counselor in the Financial Aid and Scholarships Department at CSUN. “Lenders such as Edfund are trying to help schools teach students how to become successful borrowers.”

Yesenia Perez, a first-year student at Pasadena City College who said she would transfer to CSUN sometime this year, said she learned about loans the hard way.

Perez said that after graduating from high school, she enrolled at American Intercontinental University, where tuition was $4,500 each quarter.

After attending the private university for almost two quarters, she said she decided the school was not for her. Perez said she left the school with a debt of about $8,000 in loans.

“When I was 18 years old, I had no idea what taking out the loan would get me into,” Perez said. “It’s hard having to pay $100 per month, especially now that I’m back in school. I will never take out another loan.”

According to Alcantar, many students also share Perez’s fear of borrowing money.

“Loans are not evil. They are often better than credit cards because they offer more options and allow students to save more,” Alcantar said.

While credit cards often have interest rates at 13 percent or higher, student loans offer 4.7 percent interest rates and payments are often deferred up until six months after graduation, while credit card payments are due each month, Alcantar said.

According to David Russell, a professor who teaches financial management at CSUN, credit card companies will also raise interest rates when the borrower already has a lot of debt. He also said some insurance companies review credit history to see if an individual missed any credit card payments.

“Students need to understand that having no debt is not the best solution – being able to manage it is a lot better,” Russell said, “Many people borrow money to pay for trips or because they want to have a nice car and clothes, which isn’t bad unless they are unable to make the payments.”

Alcantar said he helps students understand credit card debt and teaches them how to manage their expenditures. He said he attempts to help CSUN students juggle between school and personal finances.

“During a personal assessment, I start by putting the student’s spending into perspective. Then, I start asking the hard questions like, ‘Do you really need to go to

Starbucks every day?'” Alcantar said. “Once we get past that, I can help them strategize and give tips.”

According to Alcantar, students can choose to pay back a loan in two ways: as a consolidated loan, where all the loans are combined into one bill, or the “income-sensitive repayment” plan, where payments are adjusted annually based on an individual’s monthly gross income.

“Awareness seems to be the biggest problem,” Alcantar said. “They receive the first bill, then the fear kicks in.”

“They don’t understand that they have options in paying back the loans,” he said.

When a student first decides to borrow and take on a loan, students should make sure the funds will actually go toward their education, Alcantar said.

“There are two most important things to consider: the first being that the student will have a place to live, and (second), paying for the actual class itself in the form of tuition and supplies,” Alcantar said.

Ariana Rodriguez can be reached at ariana.rodriguez@csun.edu.