Loan Reform Does Not Remove Student Fiscal Responsibility

President Obama announced his plan to issue an executive order that changes the current income-based repayment plan for student loans. Student loan borrowers will now be able to cap their monthly payments at 10 percent of their discretionary income, down from an original 15 percent.

Obama also announced the "Pay As You Earn" plan to make such benefits available to 1.6 million students as soon as 2012. The executive order attempts to reduce federal loan amounts for students.

In light of this new attempt to fix the ever-present problem of overwhelming student debt, we should all be considering our finances. Too many students are unaware of their exact financial situation or the magnitude of their loan status.

Many students are unexpectedly forced to leave school for a year or semester to save money to cover tuition and living expenses. While we recognize for some students this is an unavoidable or optimal situation, for others such circumstances can be rectified with a personal financial education initiative.

According to the U.S. Department of Education, all living costs at Marquette (including tuition, room and board and other fees) total at $43,248. Additionally, the average financial aid package for full-time undergraduates is $18,248, whereas the average need-based gift award (which does not have to be repaid) is $11,619 and the average need-based self-help award (which does have to be repaid or earned, such as a loan or work-study) is $9,188.

So, what do these numbers mean for us? The average student needs to cover more than $43,000 in costs. An average financial aid package brings that down to about $25,000. If a student gets an average “need-based gift award” as well, that amount goes down even further to $13,381. If a student pays for college themselves, they would need to apply for a need-based loan, which averages at $5,367.

It’s confusing, but we don’t all qualify for everything. While 97 percent of undergraduates with demonstrated need receive financial aid, only 36 percent have their financial need fully met. The majority of students do receive financial aid, gift awards, self-help awards or a combination of those. But – alas – college is expensive. And optimizing our finances is confusing.

Because the awards can be so complicated, we need to understand what we do qualify for. Many of us agree to loan packages without realizing the magnitude of our debt, or the decades it may take to pay it off. Just because we choose a career with a decent starting salary doesn’t mean we will be able to pay off our student loans within several years. There are many more factors that play into financial security, and we should be aware of what those are.

We have university resources available to help us sort through all of this financial aid and loan mess. Financial aid counselors are housed in Marquette Central and available to meet with students when the plethora of documents and worksheets found online don’t seem to help. In addition, a program run by the Office of the Bursar is in the early planning stages and may be implemented in residence by the university sometime in the future.

Financial aid counselors and dorm programs are great resources, but they can only help us so much. We must learn how to handle our money. And we can take this time to be financially responsible beyond loans and financial aid, whether that be with school costs, rent, bank accounts or credit.

We already have great tools to help naive students with finances, but we can always use more. If we are dedicated to moving forward in understanding our finances, the university should also be dedicated to help. We suggest regular financial responsibility workshops to help students untangle their personal finances, from loans to credit.

Being more financially responsible in our daily lives will only make it that much easier to be more financially stable in the long run.


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