If you are like over 90 percent of students at Missouri Baptist University who have some type of loan debt, knowing how your loans work will save you potential trouble that many students are getting into down the road.
Photo by Brandon Boos
With so much information out there on financial aid, student loans, scholarships, tuition waivers, deferred loan payments and on and on, it is crucial for students to know exactly what they are getting in to before taking on debt to pay for college.
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When the average American university graduate leaves college with just over $30,000 in debt, according to research by The Institute for College Access and Success, it’s no wonder why many students, parents and graduates are taking a hard look at how they got into this situation. Student loan debt reached $1.48 trillion last year, with 44 million borrowers making average payments of $351 per month for 20 to 30 years following the day graduates walk across that stage at commencement, according to 2017 statistics from Student Loan Hero’s website. The reason students are prone to borrow like never before is because the cost of college has risen dramatically in the past 20 years, according to trends in research collected by collegeboard.org. Missouri Baptist University is no exception to the rule when it comes to financial challenges. The Institute for College Access and Success, or TICAS, has conducted annual studies on student loan demographics for every state for the past 12 years. Their research shows that in 2016, MBU had 91 percent of students graduating with some debt, the average debt being $26,015, approximately $4,000 lower than the national average. These statistics show the road to obtaining a college degree is more expensive than ever before as Eric Bliggenstorfer, who is the Financial Services administrator at MBU, explained via email. “Costs of attending college are rising faster than grant-based financial aid. Low- and middle-income students are faced with decisions. Do they take out student loans to finance their degrees, attend college part time while working full time, delay college entry while saving money for college, or not attend at all?” said Bliggenstorfer. This is why student loans are so necessary for many students as Jennifer Wang, office director at TICAS, explained over the phone: “Student loans are actually really important, and if you take away the opportunity for students and their families to take out student loans, it can be the difference between going to school and not going to school.” Since student loans are often critical to helping students achieve higher education, experts agree they should be taken seriously and explained to students. A recent study by the National Economic Research Associates showed “40 percent of college graduates with federal loans couldn’t recall receiving any consultation with regards to their student loan debt.” The article goes on to say, “Too many students walk into the financial aid office, receive a promissory note, and assume a future starting salary will be more than enough to cover repayment.” Another recent study by Time magazine showed that 45 percent of students aren’t aware how much of their salary they will spend paying back their loans, one-third didn’t know what their interest rate was, and 44 percent of graduates didn’t understand the difference between federal and private loans. Findings like these remind financial aid experts that more must be done to help students understand their loans. “Offering to hold more seminars, presentations and small events to help educate students and parents can be a great resource in order to help start the process and to start an understanding for how student loans and financial aid works,” Meyer said via email. Just as with any problem, the first step toward a solution is awareness. Wang explained why her organization does what it does to help students because every other group involved in college financial aid has representatives except the most valuable constituents, the students themselves. “The schools have representatives, the lenders have representatives, the student loan servicers have representatives,” said Wang, who stressed the need for good counseling. “The right information at the right time. … It’s not necessarily the case that more information is better, because if it’s not the right information, or timed poorly, then that’s not gonna help anybody.” Many experts agree that talking about the financial side of college, especially loans, should begin with students in high school so they don’t see it simply as the next necessary step in their life but more as a serious adult decision that must be made responsibly. “One of the most distressing type of meetings I’ve had is with a graduating senior who is woefully unprepared for the process of entering into loan repayment. They ask questions that would have been best answered years before when they were making borrowing decisions,” Pam Miller, associate director of financial services, said via email. “They may be seeing and thinking about their total loan debt for the first time. They may have never seen their total loan amounts or realized the impact of compounded interest. They may be, for the first time, weighing their future earning power against the dollars owed.” Despite the issues that student loans bring, getting a college degree is still the best financial option for students, because in the long run it is shown in studies by Pew research that college graduates make over $17,000 more annually than those in the same age ranges with only high school diplomas. Many TICAS-supported ideas have turned into bills in the U.S. Senate for changing the student loan system to make the process more understandable for incoming college students and their parents. Their ideas include a unified Net Price Calculator, which would create a tool that would let students put in their information once and get cost estimations from multiple colleges, and a standardized format for financial aid letters, which would make all schools refer to financial aid in the same way. If you have taken out loans but are not familiar with what your finances will look like after you graduate, financial aid experts encourage you to find websites where you can learn more, not only about how you will be able to repay the loans but also how to minimize them while you are in college. The bottom line: It’s crucial for student borrowers to understand their loans. Miller said: “Since their repayment may last for decades, since federal student loan debt is not discharged and very rarely forgiven, and since debt may well have a heavy impact on their future, this frequently ignored topic should be of vital importance to students.”
Emma Tihen 
Jessica Kunkel