Before College: Students Needn’t Borrow Loan Dollars Just Because They’re Offered

Soon it’ll be March, the month during which America’s colleges and universities begin making financial aid offers to prospective freshmen and transfer students. For many such students, how they respond to these offers is the first step toward helping themselves graduate with less debt.

Last month we discussed net price — the costs a student must pay to attend a postsecondary institution minus the student’s grants, scholarships and tuition waivers.

Most undergraduates rely on a number of financial resources to cover their net prices. These include private scholarship funds, contributions from parents and other family members, their own savings, and money they earn through part-time jobs, etc. Amounts students and, sometimes, their parents borrow in various federal loans are also included.

The financial aid packages postsecondary schools offer students generally include loans from the Federal Direct Loan Program (FDLP). A few schools also offer the FDLP’s Parent PLUS Loans to parents of their dependent undergraduates.

Schools generally put the maximum loan amounts for which students are eligible in their aid offers. But understand this, because it’s critical — students are never required to accept a single penny of the loans they’re offered. Electronic and paper documents bearing financial aid offers usually include instructions about how to downsize or totally reject the loans in those offers.


. . . students are never required to accept a single penny of the loans they’re offered.


If students subsequently discover they need some or all of the loan amounts they once nixed, they can contact their financial aid offices and almost always get those funds reinstated.

All students, but especially those who pass up loans, should try to keep their actual expenditures below the average enrollment-related costs their institutions publish. So they need to establish and update spending plans to control what they shell out for tuition, personal, recreational, textbook, transportation and other expenses.

Those forgoing loan funds may also need to maximize funding from their other financial resources (described above).

If a student can borrow less, the first loan she should downsize or cancel is any FDLP Unsubsidized Loan she’s been offered. Why? Because, unlike FDLP Subsidized Loans, interest on Unsubsidized debt begins accumulating the day the money is released for the borrower. It then gets added to principal when repayment begins. The result is that every $100 in Unsubsidized Loans the typical freshman borrows at this year’s interest rate will cost her as much as an extra $168 by the time she finishes paying off her FDLP debt.

Students need think very carefully before accepting any of the loans they’re offered. If borrow they must, they should borrow only what’s absolutely necessary. These steps are sure ways to keep postsecondary learning as affordable as possible!

Need help analyzing your financial aid offers? Contact College Affordability Solutions for a free consultation.

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