More and more students taking out loans to pay for college

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Morgan Bond, center, and her family Madison, Warren, Rachel and Bailey beginning to prepare for Morgan’s upcoming college career at The University of Texas. They plan to pay for her schooling and housing through federal direct unsubsidized loans.

Photo Credit: Philip Hutchinson | Daily Texan Staff

When Morgan Bond enters UT as a freshman this fall, she will have 27 college credit hours under her belt. When Morgan graduates from UT in three years, as she hopes to do, she will be waist-deep in thousands of dollars of student loan debt.

Like many students, Morgan, an incoming radio-television-and-film freshman, will be paying for the vast majority of her education using federal loans. Her parents, Rachel and Warren Bond, work for Dell in Round Rock. Aside from Morgan, they have two younger children whom they also hope to put through college with the help of financial aid.

Morgan said the use of the Free Application for Federal Student Aid, the FAFSA, a required document for anyone willing to receive federal and state aid, was a relatively easy electronic process that allowed her family to qualify for loans to cover nearly all of her schooling.

“I did the FAFSA process,” Morgan said. “I pretty much have everything paid for through financial aid. My parents applied, and they got everything covered under their financial aid. I also applied and got an additional $5,000 per year to pay for food and books and miscellaneous things.”

Overall, the $22,000 for Morgan’s tuition, housing, food, textbooks and other items this year will come from federal direct unsubsidized loans, which include a 6.8 percent interest rate that begins while Morgan is still in school. Federal direct subsidized loans, which have a 3.4 percent interest rate, spare a student from having to pay interest until they are out of school.

Any money she has saved up until now will go toward paying off financial aid, rather than for school itself, she said.

“Financially, that’s definitely my biggest worry, like ‘How am I going to pay back all of these loans?’”

In-state tuition for a full-time UT undergraduate amounts to nearly $10,000 per year. She plans to live in Jester Center Residence Hall, which costs a minimum of $8,714 for room, board, shared room and community bath. Between tuition, housing and transportation, the University projects the 2012-2013 cost of attendance to be around $13,000 per semester.

For the 2009-2010 school year, more than 40,000 students were receiving federal aid amounting to nearly $300 million in loans. At that time, the median loan amount for a freshman was $5,473.

Morgan said she was a drum major at her high school, maintained a 4.0 grade point average, logged more than 2,000 hours of volunteer work and was a member of various student organizations. Despite her achievements, she received only $375 in scholarship offers from the University.

“We’re basically upper middle-class,” Morgan said. “I’m not a minority. I pretty much only qualify for academic scholarships, and even those take into account the need. It was kind of disappointing at the beginning because even though I worked really hard, it didn’t pay off.”

Morgan said with the 27 college credit hours she currently has, she hopes to graduate from UT in three years. Her parents plan to pay for her first two years of loans, and she will take over paying for the third year, which will be the same year her younger brother enters college, she said.

Morgan’s mother, Rachel Bond, said the interest rates on unsubsidized loans are a major source of financial strain when trying to pay back a loan, especially for families with multiple children.

“Taking into consideration that I stayed at home with the kids for the first 12 years of their lives, we did not have a college savings plan,” Rachel said. “We will be paying off their college loans for many years to come. We will begin right away, but the 6.8 percent interest rate will be a tremendous burden over time. The burden will be greater once our son goes to college.”

Rachel said even though her family will be financially capable of putting all three of their children through college, there is an unnecessary amount of strain on high-achieving children of middle-class families.

“At this time, we are in a position that paying off student loans will not break our personal bank because we both have jobs and are doing well,” Rachel said. “We are both in the IT industry and this area tends to be hit on this side of the economy. Personally, I feel there is not enough assistance given to the kids of middle-income families. Morgan was considered for very few scholarships, grants, etc. because we make too much money.”

Tom Melecki, director of the Office of Student Financial Services, said the financial aid process for the University was much easier this year than last year, despite the larger incoming freshman class.

“In some ways, we’re actually in somewhat better shape this year than last year,” Melecki said. “Last year we had to wait until the end of the legislative session to know whether or not we had money to fund state grants. We were able to let people know a lot earlier this year and give them a degree of certainty.”

After the 2009 legislative session, Melecki said, students who qualified for the TEXAS Grant, a state grant awarded to financially needy students, were awarded $6,780. Today, students with the grant receive $5,000 each semester.

“Some of our key grant programs aren’t as generous as they used to be, but at least this year we were able to tell people what they had,” Melecki said. “In that respect it has been a somewhat better year for
our students.”

Melecki said the Office of Student Financial Services is actively trying to stress the importance of graduating in four years to reduce student costs. On average, student debt increases by more than $5,000 when a student graduates in five years. After six years, that average debt increases by almost $13,000, he said.

“You want to have a great experience, but not one where you just sort of hang around, because it’s getting way too expensive to be a student for a prolonged period of time,” Melecki said. “We are doing everything we can to help students understand that it really is in their best interests to save a little here and there, and to graduate as soon as possible.”

Tuition for the 2012-2013 school year is due 5 p.m. Aug. 15. Students receiving financial aid will be able to pay using their aid funds online with the Office of the Registrar. Any additional financial aid distributions for books and other necessities will be made within the first few weeks of school.