But more than 275,0000 college students in Ohio could benefit from President Barack Obama’s latest plan to allow students to lower their loan payments based on their incomes and reduce the interest rates on their federal loans by consolidating their debt. Financial advisers and college officials said the new plan could reduce some of the graduates’ loan payments.
“There have always been some hoops to jump through to get to those income-sensitive repayments, but they are trying to take those hoops away so more students can take advantage of those programs,” said Amy Barnhart, Wright State’s director at the office of financial aid.
Because of rising costs in tuition, books and even cost-of-living, many students need multiple loans to pay for college, said Larry Brickman, director of financial aid at Urbana University.
“There’s just not enough of one loan to help clear out the cost of tuition that students need to pay for,” he said. “It’s taking more than just two loans to just pay the tuition and costs.”
Members of the 2010 graduating class with loans on average owed about $29,506 at Wittenberg University, up 2.7 percent from 2009; $26,542 at Wright State University, up 13.6 percent; and $29,177 at Cedarville University, up 9.4 percent, according to a report by Oakland, Calif.,-based The Institute for College Access & Success. Information for Urbana University was not available.
About 68 percent of graduates of four-year public and private colleges in Ohio in 2010 left school with student loan debt, the report found.
The average amount of debt held by graduates in Ohio increased to $27,713 last year, up 7.2 percent from $25,842 in 2009.
The Cleveland Institute of Art ($55,231) and Ohio Northern University ($48,886) ranked in the top 20 for student debt among all U.S. private, nonprofit schools.
Matthew Reed, the report’s author and the institute’s program director, said one of the main causes of increased student debt is that college costs continue to rise faster than both family incomes and the amount of available grant aid.
At Wittenberg, tuition and fees increased 2.9 percent to $34,190 in the fall of 2009, compared to $33,236 in the fall of 2008, according to the report.
Urbana University’s tuition increased by 3.7 percent to $20,130 from $19,412 and Cedarville University’s prices rose by 6.25 percent to $22,304 from $20,992. Wright State’s tuition and fees rose 3.4 percent to $7,263 from $7,018 during that time.
Jennifer Alexander, 25, a 2010 graduate of Wright State University, said she regrets not attending Sinclair Community College for two years and then transferring to Wright State, because it would have saved her lots of money and made her debt load easier to bear.
Alexander graduated from the school with a bachelor’s degree in organizational leadership and $40,000 in federal student debt.
She said upon graduating, she discovered the job market for recent graduates was bleak, and she only now landed a full-time job in real estate. Alexander said she wishes she would have procured more scholarships and grants to reduce her debt burden.
“I would look into other alternatives than loans, because you really don’t know if you are going to have a job when you graduate and you won’t know how to pay back your loans,” Alexander said.
Wright State’s Barnhart said widespread unemployment is largely behind the increase in college debt, because students are having a difficult time finding work, and without a job, they cannot contribute to paying for school.
“Because so many students are unemployed right now, they are relying on loans to live and borrowing extra to meet those living expenses,” she said.
The financial circumstances of families are also changing, forcing them to turn to options other than savings to pay for college, said Randy Green, director of financial aid for Wittenberg University.
“The only way to bridge that gap is with some sort of payment plan or longer term debt,” he said.
As more families have experienced layoffs and unemployment, some colleges like Wittenberg have had to develop new ways to assist with higher education costs.
“We increased the amount of money we were putting into aid programs by 4.8 percent,” said Green.
“We also did some creative things that tried to help families.”
One of those things was a bridge loan program through the university to allow current students to continue their education if their financial circumstances changed. The program is mostly aimed at juniors and seniors and is a 10-year loan they payback after graduation.
“Often times $2,000 or $3,000 or maybe $4,000 is all it takes to get them their degree,” he said.
Barnhart said college officials discuss all payment options with students and families, and they encourage students to really consider their career plans and their potential future earnings to make an informed decision about the level of debt they can manage.
Wright State also provides a financial literacy seminar to students to help them grasp how to better manage their finances and debt.
College officials and financial advisers said federal loans are usually far preferable to private ones, because they contain consumer protections such as fixed interest rates, unemployment deferment and income-based payment options.
Alexander, the 2010 Wright State graduate, said next year she will benefit from a new “pay as you earn” income-based repayment plan that will reduce monthly student loan payments to 10 percent of her discretionary income.
The federal government said this initiative will allow more than 1.6 million students, including 76,000 in Ohio, to cap their payments to manageable amounts of their discretionary incomes.
The program also forgives the loans after 20 years, which are better terms than currently offered under the existing income-based payment program.
The federal government also plans to allow the 5.8 million students — including 202,000 in Ohio — with a Direct Loan and Federal Family Education Loan to consolidate the debt into one payment. This is aimed at simplifying loan payments and reducing interest rates.
“I think it’s going to be a start, definitely a start to help out students,” said Brickman of Urbana University.
“I think it will help but my experience is that when changes are made, they’re not thought out appropriately and it takes a while to really find out.”
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