5 Reasons college students are in debt

Chalkboard showing credit plus loans equal debt. Photo courtesy of Shutterstock.

As tuition cost increase annually, students are finding themselves more and more in debt. Students tend to be overburdened with debt when they graduate. Some go on to pursue advanced degrees; therefore incurring more debt. The professional career that these students are hoping for is sometimes not available upon graduation. This tends to cause a bigger issue for them. Some have to go into forbearance or default the loan; neither of which are ideal options.

Not prepared

College students go into debt primarily because they are unprepared for college. Some don’t take the initiative prior to high school graduation to apply for scholarships, which they don’t have to pay back. Most will wait until the last minute and then are forced to apply for student loans to cover their college expenses. Additionally, some students don’t do their research to learn what types of grants the school offers and the deadlines associated with those grants. Most school boards also have specific scholarships. Students need to check with their school board to see which State scholarships are offered and see what the requirements are. For example, in the state of Florida, there is a Bright Futures Scholarship that pays for 75% of the college tuition if the student meets certain specifics such as a 3.0 GPA and certain hours of community service. High school students also need to do well on their ACT and SAT tests – a certain grade level is required to get this same scholarship.

Peer Pressure

College students get into trouble financially when they succumb to peer pressure. Some will try to live up to the expectations of their peers by going out to shop for expensive items. They want to be part of the group so they will use credit cards to buy expensive things that they are unable to afford. This will only increase their debt considerably.

Choosing the best loan

It may not be a wise decision to take out student loans that you have to repay. However, in some cases, this is unavoidable.  Loans from private lenders are risky. Try not to borrow more than you can afford. Seek private loans that have lower interest rates. Most private loans usually carry high interest rates and don’t offer enough protection to the borrower. Most of them have fewer payment options. Make sure that your student loan does not exceed ten percent of your expected salary after you graduate.

Not utilizing resources

Some students are not aware of the benefits of the Pell Grant or they may think that they don’t qualify. Always apply for this loan whether your family makes a high income or not. Complete a FAFSA form prior to college admission. The EFC on your FAFSA will determine the types of grants you will be eligible for. There are programs such as work study that will help you to pay for some of your college expenses. A part time job offers you an opportunity to pay for your college living expenses. Apply for grants that your school offers. If you have to, attend a community college for two years since it is cheaper than the State Universities. After the two years, you can transfer to a State University.

No Planning

Plan ahead. This is so important. Poor budgeting forces you to depend on credit cards to pay for college. In addition, student cards may have high interest rates and paying late fees and penalties will only worsen the problem. Living expenses are often times higher than anticipated, especially when you don’t plan ahead for it. Do your research and call the school to get an estimate on expenses and cost of student loans.

Dave Landry is a finance and debt relief blogger and advisor, specializing in communicating with college students about the best way to manage their extensive student loan fees. Dave also provides content for several financial service organizations.