Starting this year, the Free Application for Federal Student Aid opens on Oct. 1. Since it’s best to complete your FAFSA as soon as possible — as some financial aid is first come, first served — the class of 2021 should be thinking about financial aid right now. In particular, think about how financial aid will help you attend the best school for you.
Many students will likely come up with a plan that includes taking on student loans. According to the College Board, students and parents borrowed $106.1 billion in education loans in 2014-15. And while that’s actually a decrease from earlier this decade, the average indebtedness of college graduates continues to ris e each year.
[Discover what you need to know about FAFSA changes.]
For the class of 2016, that meant graduating with an average of $37,173 in loans. Of course, that’s just an average. Each student could owe more or less.
No matter which side of the debt equation you end up on, you’ll want any money you borrow to be a wise investment. To help ensure it is, during your college-planning process take advantage of a great tool that the U.S. Department of Education offers: the College Scorecard. Here are tips on how to use this tool to your advantage.
— Know before you borrow: At any given higher education institution, borrowing circumstances will differ from student to student. Some may receive help from their parents or work part time to decrease their indebtedness. Others may max out their loans even if they don’t need to, such as to help with their living expenses.
Still, there’s value in looking at the average indebtedness at each school where you plan to apply. You won’t get the exact number that you’ll borrow — although some tools can give you a good estimate of this. But you could gain a better sense of each school’s value based on how much their students borrowed, as well as how that compares with the national average.
[Discover the schools with the most students receiving merit aid.]
The College Scorecard makes such comparisons easy. This interactive online tool lets students look up different schools by program, location, size and other factors. From a borrowing perspective, this data includes the percentage of a school’s students who receive federal loans, as well as their typical total debt at graduation.
That latter number is important. Often, students and their families take a semester-by-semester approach to funding an education.
This can make it easy to lose track of the amount borrowed to date, which can lead to an unwieldy student loan burden post-graduation. By having an idea of this total per school, students can make a more informed decision.
— Think about repayment now: Of course, just like with borrowing loans, repayment circumstances will differ by borrower — even with students who graduated from the same school with the same major owing the same amount. Personal circumstances like health, employment and many other factors can have a great impact on one’s ability to repay.
Still, knowing how students at specific schools handle their loans postgraduation is valuable information. Nationally, on average, 66 percent of a school’s students are able to repay at least $1 of their principal balance on their federal loans within three years of leaving school, according to the College Scorecard. This indicat es students are making progress paying off their debt.
If you’re considering an institution with a repayment rate below that average, you may want to investigate the school a bit more thoroughly. It doesn’t mean you’ll get a subpar education there. However, if many students at a particular school struggle to manage their debt, that could be indicative of a larger-scale problem with the school’s job placement or financial education programs.
[Read this cautionary tale of student debt regret.]
— Understand monthly payments and earning potential: One final student – loan-related feature to look at in the College Scorecard is the typical monthly loan payment for borrowers at specific schools.
While the typical overall debt can be eye opening, those large numbers may not immediately resonate with you. But the monthly amount should, since you’ll potentially pay it every month — 120 times.
To help you appreciate how that number could fit into your future budget, the College Scorecard includes data on how much students earn 10 years after entering a school. Again, this lets you see how the salaries of students from a particular school compared to others and to the national average, which the site lists as $34,300.
For additional analysis of this data, check out the report “Ranking Your College: Where You Go and What You Make,” from the Georgetown University Center on Education and the Workforce. This adds some additional wrinkles to the Department of Education’s data, including reviewing how majors may skew the average earnings for a school, which could give you a clearer picture of your ability to repay.
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Research Debt Statistics Before Choosing a College originally appeared on usnews.com
