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Feb. 8, 2012 Volume 33, No. 19

MU officials help graduates manage student debt


Tuition increases impact student loans, debt

It won’t be long before members of the Class of 2012 start lining up outside MU’s Office for Financial Success in Stanley Hall.

The office’s 15 volunteer financial counselors offer personal financial advice to students, faculty and staff year-round. But every spring OFS is crowded with graduating seniors who, shortly after they pick up their diplomas, are due to receive their first student-loan bills.

“We start to see people getting stressed about it the last couple of weeks of school,” said OFS Director Ryan Law, an instructor in MU’s Department of Personal Financial Planning. “The payments on their loans will begin six months after they graduate, and they start to ask, ‘How am I going to pay it off?’ ”

Fortunately, most of them figure it out. Less than 3 percent of MU graduates who were scheduled to start repaying their loans in 2008 and 2009 failed to do so and defaulted on the debt, according to recent data from The Project on Student Debt. That’s much lower than the national default rate, which rose from 7 percent in 2008 to 8.8 percent in 2009.

At 2.9 percent, MU’s default rate is among the lowest of Missouri’s 13 four-year public colleges, whose 2009 rates range from 2.1 percent at Truman State to 17.2 percent at Lincoln University. According to an analysis by Student Financial Aid, when compared to 12 peer institutions in the Midwest, MU’s default rate is about average for a large public university.

As college costs inch up and state support lags, MU officials are keeping a closer eye on the amount of debt students are taking on.

Fifty-six percent of MU students relied on student loans in 2010. But since 2006, the average debt that students accumulated before graduation had grown by $3,000 to $22,145.

Freshmen asked to think about debt

Wendy Carter-Fischer, assistant director of Student Financial Aid, said one area of concern is that more students are exhausting their federal aid before graduation. They then turn to private lenders, who may demand higher interest rates based on the borrower’s credit rating and offer less favorable repayment terms.

Student Financial Aid also has seen an increase in applications to MU’s long-term loan program, which is funded by contributions from donors. “We view that as a last resort for students because they will normally already have federal loans and some might have private loans,” Carter-Fischer said. “That’s giving them possibly another loan they will have to repay.”

Last fall, MU began requiring students who apply for a university loan to meet with a counselor from the Office for Financial Success — the first step in what Carter-Fischer hopes will become a comprehensive debt-management initiative that would start as soon as a student steps on campus for the first time.

“We definitely feel counseling students on the front end, when they are coming in as freshmen, is important,” she said. “A lot of the time students realize they are borrowing, but don’t keep track of how much they are borrowing. It’s an afterthought — their primary focus is paying for college and getting through school.”

Students prepare living-expense budget

Thomas Duffany, who became an OFS counselor a year ago and president of the organization last June, agrees. A senior who is married with two children, Duffany knows firsthand that students often develop a false sense of affluence. Conveniences too easily become necessities that are paid for by money that would have been better spent on rent and books.

Nor do many students anticipate the possibility that they may not have a job lined up after graduation or, if they do land employment, that it may not pay much at first. “A lot of students don’t consider the things they’ll want after they graduate, like buying a house or a new car or getting married and starting a family,” Duffany said.

Before sitting down with an OFS counselor, students are asked to prepare a budget. Law said counselors offer a clear-eyed assessment of income and spending habits to help students set priorities.

Can a smaller, less expensive apartment meet the student’s housing needs? Is a study-abroad adventure really worth taking on additional debt? Is work-study or other part-time work available?

“We have seen some students say, ‘Wow, maybe I don’t need this loan,’ and they re-evaluate their priorities as far as expenses go,” Law said. “Others are, ‘Well, I just have to get through school.’”

In addition to working with Student Financial Aid, OFS counselors look for every opportunity to educate students about their student loans. They meet regularly with freshman interest groups, schedule presentations in residence halls and buttonhole incoming freshmen and their parents at Summer Welcome.

As for those about to graduate, Law said seniors need to know that, whatever their prospects upon graduation, there are ways to avoid defaulting on student loans.

“In some cases they have jobs, in other cases they’re not there yet. So they need to be aware of the payment options,” Law said.

“Everyone goes on the 10-year repayment plan, but that may not be the best thing,” he said. “There’s a 25-year plan for undergrads. You can get a deferment if you need to. You can get on an income contingent plan. Those are all important things for graduates to look at.”


 — Brian J. Wallstin