Photo by Brandy Eubanks and Taylor CammackFinancial aid can potentially pay huge dividends for those who use it properly. Many people who have a college education have financial aid to thank for it.
On the flip side, financial aid can go swiftly from an investment to a mistake, sending students spiraling into a dismal financial future with little hope of escape.
With more than half of the KC population turning to financial aid in order to attend college, knowing the consequences which can and will ensue with reckless mishandling of funds can save money in the long run.
“Students need to consider the ‘big picture,’ and that KC may not be the end of the line,” said Annette Morgan, financial aid officer. “Students need to be aware of the enormity of loan debt that could accrue by graduation, and how expensive their bachelor’s degree may really become.”
This school year alone, KC will dole out more than $15 million to about 78 percent of the student body in the way of loans, grants, scholarships and work study. While the last three place money in the hands of students with fewer strings attached, loans can easily turn into a financial quagmire.
According to statistics released by The College Board, the average debt per bachelor’s degree was $12,400 as of last year.
The East Texas Educational Opportunity Center, a program of the Texas Association of Developing Colleges, helps students file for federal financial aid from its office in Longview. Holly Treadway, educational counselor, said it is a necessary endeavor to receive financial assistance.
“The loans are needed because of the cost of education, and not everybody can get a full Pell Grant that would pay books, tuition and fees for a 12-hour semester,” she said. “The financial aid office awards the loan as part of the award process, but the student has to be a responsible borrower.”
Morgan urges students to consider their “need” for money to get through the school semester, in addition to looking at their ability to repay a loan based on the income of their chosen field.
“For a relatively inexpensive college like KC, students do not need to borrow more than their educational needs,” Morgan said. “If students have received sufficient funds, the wise choice would be to decline the offered loans.”
One way to ensure that a student is only forced to borrow the minimum necessary is to concentrate and succeed in academic classes, according to Morgan.
“The cost of a relatively inexpensive three orfour-hour class becomes very costly if you have to repeat. If you take a class two or three times, you could have taken it at a university for the same price,” Morgan said. “If you look at the bottom line for the cost of the course, and the amount of loan funds needed, it can become astronomical.
The danger of financial aid extends far beyond the burden of repayment. When refund checks were disbursed at KC beginning Oct. 5, some students commented that it was just like getting “free money.”
“It’s not free money. There is not such thing as free money,” Treadway said. “There are consequences if you spend it on things non-related to school, whether it is a loan or a refund.”
The consequences apply to not only loans, but also grants. If a student drops a class or withdraws from school after receiving a Pell Grant, it qualifies as “overpayment,” and the student is obligated to repay the money. If the money is not repaid, the student will be prohibited from receiving any addition financial aid, a situation equivalent to being in default on a loan.
Many students find themselves in a difficult position when they can’t get a decent job, but do not have the money to get back in good standing with the school.
“It gets to be a cycle unless you have a lot of money and the ability to repay,” Treadway said.
In the case of loans, KC has as much reason to make sure they are repaid as the students themselves. If a school’s default rate reaches 25 percent, the Department of Education will look into pulling its ability to offer all forms of financial aid, including Pell Grants and work study.
“If we are not careful in administering loans, we could lose Pell Grants, work study and everything,” Morgan said. “It’s something to be careful about and the problem that’s presented here is that KC has very little control once the students receive the money. Legally, if they request the money through FAFSA, and if they are making satisfactory academic progress, we have to award it to them…It’s kind of scary.”
Entrance counseling is required to receive a loan, but many students still do not understand the possible consequences of a loan. In a recent survey on campus, most of the students who had loans did not know the requirements to remain in good standing.
“Students can learn from others’ mistakes,” Morgan said. “As the spring semester gets under way, the financial aid office plans to initiate financial literacy training in an effort to offer helpful information regarding student debt.”
Beginning Spring 2010, all loan dibursements will be issued in two payments in an effort to surpress loan defaults.
KC’s default rate surpassed the 25 percent threshold in 1993, causing the school to suspend offering loans for 13 years. This school year is the third since KC began providing the option to obtain loans again.
Laurie Kitchen, loan coordinator, said those who work in financial aid are cognizant of the way loans affect not just the students, but the college as a whole.
“We’re very aware of the issues,” Kitchen said. “That kind of student comes along, they get their money, then they withdraw or drop. We’re coming up with some consequences for that.”
Plenty of consequences are already in place by the federal government.
“Students need to realize that the Department of Education is serious about the repayment of funds,” Morgan said. “They want the money back and they don’t care what your problems are. A common misunderstanding about loans is that banks or other entities will be as understanding about crises or upsetting events in students’ lives as the school.”
Once financial aid problems begin, it adversely impacts a student’s credit score, which could in turn severely limit their purchasing power.
“They will claim your IRS tax refund,” Treadway said. “Being in default can prevent you from certain job categories and keep you from being able to buy a car or a house. Of course, you can’t get financial aid if you’re in default, so that also makes it difficult to return to school.”
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