Student Loan Debt 101: The Top 7 Questions Everyone Wants To Know About College Debt
First, the good news: Black Americans, especially women, are earning more college degrees than ever before.
Yet somewhere between classes, caps and gowns, and the stage strut to receive that coveted degree, Americans have racked up more than $1.5 trillion in student loan debt, according to the Pew Research Center. For Black students, the financial burden of higher education hits hardest.
There are a myriad of reasons for the student loan debt crisis. Experts blame declining state and federal funding, predatory for-profit schools, plus rising higher education costs.
Still, there’s hope. Dr. Michael L. Lomax is President/CEO of UNCF, the nation’s largest provider of college scholarship funds and educational programs for Black and minority students.
The organization’s report “Fewer Resources, More Debt: Loan Debt Burdens Students at Historically Black Colleges and Universities” examines the debt crisis.
Said Lomax, “The more financial support we’re able to give students, and the stronger the academic and social supports, the greater the prospect of graduating both on time and in larger numbers.”
Hilary O. Shelton, NAACP Senior Vice President for Policy and Advocacy notes, “Structural racism has made it more difficult for African American students to economically, educationally and otherwise catch up with their white counterparts. Despite making regular payments, many African American students are disproportionately drowning in debt.”
Empowering yourself with information about the student loan process is key. Here are 7 Frequently Asked Questions About Obtaining Financial Aid:
Angela Rye’s BET NEWS primetime special, Young, Gifted & Broke: Our Student Loan Debt Crisis will air on BET on Sunday, September 15, 2019 at 8:00pm ET
How do I get a federal student loan?
To obtain a federal loan, one must first complete the Free Application for Federal Student Aid (FAFSA) form. “It’s a form required to determine if current and prospective undergraduate and graduate college students are eligible for student financial aid and the amount for which they are eligible,” says Dr. Brian Bridges, Director of Research and Member Engagement at UNCF, which distributes approximately 10,000 scholarship awards, annually, to students at some 1,100 colleges and universities.
Who is eligible for loans?
According to the U.S. Department of Education website, general eligibility requirements include that one has financial need, is a U.S. citizen or eligible non-citizen, and is enrolled in an eligible degree or certificate program in college or career school. There is no income cut-off to qualify for federal student aid. Many factors (such as the size of your family) are taken into account.
What types of loan options exist?
Generally, there are two types of student loans: federal and private.
Federal student loans are made by the government, with terms and conditions that are set by law, and include many benefits (such as fixed interest rates and income-driven repayment plans) not typically offered with private loans.
The Dept. of Education website notes that if you need to borrow money to pay for college or career school, start with federal loans.
Private loans are made by private organizations such as banks, credit unions, and state-based or state-affiliated organizations; they have terms and conditions that are set by the lender.
Private loans differ by lender and type of loan. Be sure you understand the terms of your loan, and if you have any questions, ask your lender.
What is a Pell Grant?
The federal Pell Grant is available to undergraduate students, according to the Department of Education website.
Students in a post-Baccalaureate teacher certification program may also qualify. Grants do not have to be repaid. Pell Grants (the maximum is about $7,000 annually) may be available to students for up to the equivalent of six academic years.
“In 1980, the maximum Pell Grant covered 76 percent of the cost of attendance at public four-year colleges,” said Rep. Bobby Scott (D-VA), Chairman of the House Education and Labor Committee. Today, he said the maximum Pell Grant “which is the cornerstone of federal student aid for nearly 7.5 million low-income students each year, covers just over 29 percent.”
There are different types of parent loans available. Among them is the Parent PLUS Loan, a federal direct student loan available to parents of dependent undergraduate students. “Parents cannot have an adverse credit history to be eligible to take out the loan,” said Bridges. The Parent PLUS Loan offers a fixed interest rate (7.08 percent for 2019-20) and flexible loan limits.
Parents are fully responsible for re-paying loans, even though they are taken out to benefit students.
How do I repay my loans?
There are various repayment plans, including an option to tie your monthly payment to your income. You should check with your lender to explore options. Don’t ignore your student loan payments!
What is delinquency and default?
Your loan becomes delinquent the first day after you miss a payment. If you are more than 90 days late on the payment, your loan servicer will report the delinquency to the three major national credit bureaus.
If your loan continues to be delinquent, it may go into default. The consequences can be severe. You may lose eligibility for additional federal student aid, and damage your credit rating, which can affect your ability to rent an apartment, buy a car, etc.
Your income tax refunds may be withheld and your wages could be garnished (meaning your employer may be required to withhold a portion of your paycheck) to repay your defaulted loan. Your loan holder can take you to court, and your school may withhold your academic transcript.
Last but not least, defaulting on your student loans could affect career opportunities. For example, a credit check may be part of the security clearance screening process for many private sector positions, federal government jobs, etc.