Focus

Logos photo by Nick Pilgrim Carol Bogaard, Customer Relations representative of the Iowa Student Aid Commission, put on a money management presentation at the college.

Knowing where the money goes

Loan repayment critical for students who borrow

Chris Kelley
Staff Reporter

Thinking about buying a house after you graduate? Maybe that hot, new sports cars you’ve been eyeing for years? Before you even think about these things, you should plan to budget in that student loan you’ve been building while in college.

Student loans can help students out tremendously. Loans are a means of financial aid, which students repay with interest.

Subsidized loans are loans based on needs. The government also pays the interest while you are still in school. This year the rate was 5.6% on subsidized loans.

Unsubsidized loans are loans that anyone can get. While in school, the student must pay the interest on the loan. The interest rate this year was 6.8%.

There are also annual limits to the amount of loans that students may borrow, capping at $5,500 a year for freshmen students.

What most NIACC students don’t understand is the importance of paying back those loans after completing school.

First time borrowers are tempted to just take the maximum amount, because it’s the easy way out.

“NIACC has 1,352 students who borrowed money as of February 17, 2010,” Mary Bloomingdale, NIACC director of Financial Aid and Scholarship programs, said. “The total is $6,609,986 in loans. That’s an average of $4,889 per person as of February 17, 2010.”

NIACC is an extremely affordable choice when considering education. That pales in comparison to what one would need to attend a university.

As of February 17, 2010, the default rate of NIACC students is at 10.1% which causes concern.

“We need to educate borrowers on how to not default on loans,” Bloomingdale said.

Some ways NIACC goes about helping students understand the terms and conditions of the loan are by making counseling mandatory according to Bloomingdale.

She said that before receiving a student loan, borrowers must complete an entrance counseling session.

The counseling session provides useful tips and tools to help students develop a budget for managing educational expenses and helps to understand loan responsibilities.

Also, prior to graduating or leaving school, borrowers must complete an exit counseling session which helps them to better understand student’s rights, responsibilities and service obligations.

Default occurs when the student becomes 270 days delinquent in making payments on loans.

If students fail to make payments on loans after graduating, there are serious consequences.

The entire unpaid amount of the loan becomes due and payable.

The Department of Education will also report the default to nationally credit agencies, making credit scores terrible.

They may even sue the student, take all or part of one’s federal tax refund and garnish wages so that an employer is required to send them part of the individual’s salary to pay off the loan.

To avoid all these consequences to loan default only requires that the individual pay on time.

To apply for a student loan or all types of financial aid, students should complete the Free Application for Federal Student Aid.

Anyone with questions may contact the NIACC Financial Aid Office at (641) 422-2168 or 1-888-GO NIACC, ext. 4168.