Money matters: Tips to successfully prepare to pay off your student debt 

It’s the dawn of a new day on campus. The first day of college classes. There’s excitement in the air as students, from brand-new freshman to wizened seniors, rush to and from classes. But while this year’s crop of future college grads bask in the start of a new year, there’s something looming over nearly all of them. It patiently waits in the shadows until they have graduated and are finding their way through the working world.

It strikes after the caps and gowns are put away, usually from the mailbox. It comes in an innocuous-looking envelope. Open it up, and out comes this thing with dollar signs and interest rates: It’s time to pay back those student loans.

According to data from The Institute for College Access and Success, or TICAS, 69 percent of seniors who graduated from a public or nonprofit college in 2013 had some kind of student loan debt. That debt averaged roughly $28,000 nation-wide, marking a 2 percent increase from those who graduated in 2012. In California, the average student debt is slightly lower; around $20,340, according to the Institute’s data.

“It’s getting harder to get through school without borrowing,” said Lauren Asher, TICAS president. “So student debt is growing.”

While the idea of being saddled with thousands of dollars may be daunting for would-be graduates, it doesn’t have to be. Preparing to manage educational loan debt can start before students even set foot on a four-year university campus, according to Lois Kelly, director of financial aid and scholarships for Cal Poly SLO.

“It actually starts a lot earlier than the summer before you go to college,” Kelly said. “The student and the family need to sit down and evaluate their needs.”

In addition to considering loans and scholarships, Kelly said that college hopefuls could also consider saving up money, or working a job to earn funds as well. Looking at schools that have a track record for getting students jobs after graduation is also a smart move, according to Kelly.

“[It’s] the best predictor of the student ability to get that job,” she said.

When it comes to actually taking out the loans, students and their families have a range of options. The most common and popular is federal student loans. Federal loans are not only deferred while students are in college, but have a sixth month grace period after graduation before students need to begin paying them back. Kelly said some students also take out private loans from financial institutions like Wells Fargo or even from credit unions. There are even loans for parents. In the end, Kelly said that early planning and a little research can go a long way.

“We hope that students are being prudent in their borrowing and really evaluating whether or not they need to borrow with those loans,” she said.

• QUESTIONS: Cal Poly Financial Aid Office
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According to data from the CSU system, the average student debt for Cal Poly students who assumed loans as freshman was $19,000, slightly below the state’s average. But the average amount is just that, an average. Kelly said student loans could range anywhere from as little as $500 to as much as $40,000.

While most students won’t have to pay their loans when in school, they can still set themselves up to successfully pay them off. Making those loans worth the money is as easy as going to classes and making sure you pass them, Kelly said.

“It will cost you a lot less money if you are enrolled for four or five years than if you are there for six or seven years,” she said. “That costs you years when you could have been working and earning money.”

When students graduate and bills for repayment start showing up, Kelly said the key to staying on top of them is communication with the lender, especially when that lender is the federal government. For students having difficulty making payments, federal loans allow forbearances, deferments, and multiple repayment plans, including options based on income. But grads can only take advantages of those options if they stay in contact with their lenders. 

“Be certain your lender knows where you are and what you are doing, and don’t ignore emails or notifications. Sometimes students think they can put their heads in the sand and it will go away,” she said.

However students choose to finance their education, the issue of student debt has been highlighted in the media and in politics for the last several years. In the 10 years since TICAS was founded, more policymakers are taking note of the issue, TICAS President Asher said.

“There’s more attention now,” she said. “I think consumers and policymakers are becoming more aware.” 

Kelly said she’s also noticed that parents have more awareness about the topic of student loans in recent years.

“An 18-year-old often relies on guidance from parents prior to coming to Cal Poly,” she said “We have many more questions from parents when it comes to their options.” 

Questions and concerns about the topic of student debt extends past Cal Poly’s campus to nearby Cuesta College. Even though many students hold off from taking loans until they transfer to a four-year university, the college still provides access to federal loans for those who might need it. 

“I think our students are now more wary about not accruing a large amount of debt,” said Patrick Scott, Cuesta’s interim financial director. 

“So in a way, that’s good.”

But more awareness hasn’t translated to less student debt, at least not yet.

“There’s still a lot of burden on the student and family to figure out how much college will cost and how to pay for it,” Asher said. 

Staff Writer Chris McGuinness can be reached at [email protected], or on Twitter at @CWMcGuinness.