Dale Barkat, a 22-year-old senior electrical engineering major, strolled into the Regent Administrative Center at CU on Tuesday. With his long board and backpack in hand, he was ready to talk to a financial aid representative. He said he did not know when he had to start paying off his student loans – loans for which he did not even remember signing or the amounts they totaled.
Barkat shrugged and said he would figure out how to pay off his student loans sometime in the future.
“Maybe I’ll just get a masters degree so I won’t have to pay off the student loans (so soon),” Barkat said.
Like Barkat, about 44 percent of undergraduate students take out federal or private loans. Each CU student accumulates an average of $17,225 in debt by graduation, and of the students who do not enter graduate school, roughly 2.8 percent default on their student loans, said Evan Icolari, the assistant director of financial aid.
“We think students borrow without understanding the impact of their decision,” Icolari said. “Some students tell us ‘Boy, this is going to be hard for me to pay off.'” What many don’t know is that they can get loan modifications that can help them get by in difficult situations.
Other students like Andrew Ground, a senior political science major, also said he does not have a plan to pay off his student loans and borrows beyond what he needs.
Ground owes $20,000 in student loans but continues to splurge on sporting events, gambling, dining, cable TV and vacations, he said.
“I’ve treated the loans as free money,” Ground said. “I’ve used it more than once when I didn’t need to, like to finance a trip or vacation.”
Icolari said these borrowing habits are not uncommon among students at CU.
“Students’ borrowing trends are more about what they have access to rather than what they need,” Icolari said.
The federal government puts annual and lifetime limits on how much money a student can borrow, Icolari said. Freshmen can borrow up to $2,625 per year, sophomores $3,500 and juniors and seniors $5,500, depending on the amount of approved credit hours, he said.
According to Teresa Hufford, a student debt counselor in CU’s student debt management department, 2,000 students seek help every year to avoid defaulting on loans. She said the department will offer students deferment and forbearance entitlements which will allow students more time to establish a better financial situation before making loan payments.
“A lot of students will come in and say, ‘I don’t even remember signing these student loans,'” Hufford said. “It’s not unusual to find a student that has $50,000 in student loans. Students are taking out larger loans than in the past because tuition keeps going up.”
Andrea Garoutte, a freshman open option major, said she wants to be a nurse practitioner, which means she will be in school for another eight years. She already borrowed $1,300 for her first semester because she did not receive enough scholarship money. Garoutte said she has no idea how to pay her loans off, but she hopes she will make enough money from future jobs to not default on her loans.
“I don’t want to be paying off my student loans when I’m 40,” Garoutte said.
For the five years Hufford has worked as a debt counselor at CU, she has seen students who do not understand how to maintain a budget and who are confused by interest rates. Education about loans is crucial to preventing debt, she said.
“Educate yourself before taking aid,” Hufford said, “because if you’re late on your payments, if you default on student loans, it stays on your credit report for seven years.”
Hufford advises students to read their mail, give creditors a current mailing address and phone number, keep track of bank service charges and fees, and stay within the terms and conditions of the student loans. Before that, students should be aware and keep record of the student loans they sign.
“Most often students seem to be falling behind due to credit card debt, income that is below anticipated levels or poor budget-management skills,” Hufford said.
Ground understands he is in debt but continues to spend his money on other luxury expenses and entertainment because he “can handle it” and paying off the loans is “not a pressing issue right now,” he said.
“I know there is debt coming, but I’ll deal with that when it happens – when the bank starts calling,” Ground said.
Barkat also is not worried about paying off his student loans now. He said he plans to get a job with Hewlett Packard and will be able to pay off his student loans quickly.
“If that doesn’t work, I will just leave the country so I won’t have to pay (them),” Barkat said as he laughed. “No, if I work for Hewlett Packard, I will (be able to) pay them off in one month’s salary.”
Hufford said a lot of students will deny and defer the responsibility of student loans.
“Students need to be aware that you can’t blow (student loans) off,” Hufford said. “They think adult living and responsibility is all in the future. Then when they get into the real world, reality hits.”
Later, when they are in danger of defaulting on loans, Hufford said, students find themselves making a much lower salary then they had anticipated.
The trap students fall prey to most easily is underestimating everyday expenses and not writing down an anticipated budget for the month, according to Hufford.
If students find themselves in a bind, Hufford suggests looking into a contingent payment plan. Creditors will sometimes offer deferment options for past-due loans.
“They say to me, ‘They’re going to bleed me. I can’t pay it. I can’t pay it.'” Hufford said.
Hufford tells her students: “Sometimes (you) just have to skin (your) knees.”
Recently, Ground thought of a way to pay down some of his student loans – the army. He plans to serve two years in active duty after he graduates and hopes the army will pay for some of his student loans, as well as three years of law school in the future. He is hopeful his plan will work and he will not default on his loans.
“It’s possible I just can’t comprehend how hard it is to put $20,000 down,” Ground said.