Students walk around campus enjoying the late fall sunshine, but more than 50 percent of OSU students are living under the shadow of debt — and the economic recession could make paying off or acquiring student loans difficult.
Student loans for the 2007-2008 school year totaled about $88 million, while the total for grants, scholarships and tuition wavers was about $87 million, said Charles Bruce, senior director of scholarships and financial aid.
Bruce said he worries about OSU’s students.
“What really concerns us is the increase in debt in this generation,” he said.
Increases in university costs and decreases in federal grant money have caused loans to become a larger portion of financial aid for students, said Margaret Betts, assistant director of Scholarships and Financial Aid.
“As we’ve had less and less grant money to deal with, we’ve had, as a nation, to go more into self-help, which is work and loan programs,” Betts said.
This dependence on self-help translates into a greater need for credited money in a time when loan lenders are becoming hard to find.
However, OSU students are having no trouble obtaining loans because OSU is a direct lending institution — OSU’s student loans come directly from the federal government, Bruce said.
“The other program, students borrow through private banks, and the federal government guarantees their loans to the bank,” he said. “Those programs have been seriously impacted by the economy because the banks are having trouble getting funds to lend to students.”
Bruce said OSU is one of the few universities in Oklahoma that uses the direct lending program. Other universities using the program include the University of Colorado, the University of Kansas, Iowa State University and the University of Nebraska.
The University of Oklahoma, the University of Texas, Texas Tech University and Texas A&M University use bank lending.
Bruce said that without the economic strain, there’s no disadvantage or advantage to either of the programs.
“The advantage this past or current year is the fact that [other universities] had students who have had their loans approved and then the banks suddenly decided to get out of the student loan business and the students had to start the process over and find another bank,” he said.
Bruce said the federal lending program, which began in the early 1990s, has increased 43 percent in the last year or two.
“There are a number of schools who have switched to direct lending, and it’s primarily because they couldn’t get the money; the banks couldn’t locate the money for them,” he said.
Bruce said Tulsa Community College is one of those schools.
He also said not all the schools using bank lending are struggling, and students choosing graduate or professional schools shouldn’t base their decision on the type of loan program.
Bruce and Betts said students should avoid private loans, whose interest rates are rising – some between 20 and 25 percent. Federal student loans have set interest rates.
Bruce and Betts also said they recommend students only borrow what they need.
“We try to get college students to, it sounds really cheesy, but live like a college students while your in college so you don’t live like one when you are out,” Betts said.
Bruce said student loans don’t require payments or stack up interest until six months after a student graduates, but beginning those payments on time is crucial because student loans do affect credit reports.
Jim Fain, head of the economics and legal business department, said the economic recession could make it harder for students to find jobs, and consequently, pay off their loans.
Fain said the U.S. has had 11 recessions since WWII, and the average length of a recession is 10 months.
“So we certainly hope that things will be better two or three years from now,” he said. “In normal circumstances they will be. Now the question is this going to be a normal recession or a really bad one? We just don’t know the answer to that yet.”
Fain said he believes this recession is abnormal and will not be mild, which means that students shouldn’t be afraid to take federal student loans but should recognize and plan for possible difficulties.
“One of the advantages of the direct loan program through the federal government is that that program really tries to work with students who are out of school,” Betts said. “There is no incentive for the federal government to have a student default on a loan. They want to try and figure out a way to have the student be able to pay that loan back.”
Fain said he did not recommend students change their major or graduate school plans in response to the economic situation.
“It’s tough, really at this point if you’re a graduating senior the die is pretty well cast,” he said. “You have a pretty good idea of what fields you are going to be looking at it. It’s probably too late to change.”
Fain said students willing to work to earn graduate or professional school degrees often see employment and salary benefits despite the economy, and the rate of return is fairly high.
Bruce said students who need money to continue their education shouldn’t balk at the idea of a student loan.
“It truly is an investment in themselves,” he said.
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