Some Miami University students may start graduating with even more debt, due to changes in one large private provider's student loan policies.
Sallie Mae, one of the nation's largest sources of private student loans, is changing its current student loan format to a new, shortened payment model. This new model will force some students to start paying back the larger part of their loan while they are still taking classes.
Most student loans allow for a six-month post-graduation buffer, allowing students to locate a job. In a struggling economy, securing a job after graduation is becoming harder for students.
Junior George Radzyminski said he's worried about the future of students and his education.
"My friends, my peers already on tight budgets won't be able to pay off these loans," Radzyminski said. "If student's loans are going to change, then yes, I am scared."
In reference to the recent changes in Sallie Mae's loaning procedures, Radzyminski said he was "surprised that this hasn't been publicized more."
Sallie Mae officials have said the new financing plan will be available for the 2009-10 academic year. Sallie Mae hopes to have student loans paid off faster and keep loans from spiraling out of control because of deferred interest. However, this "quick fix" often puts more students in even more debt.
According to Sallie Mae's Web site, the student loan policy will allow students to "pay a little now, save a lot later-students graduate with less debt with the Sallie Mae Smart Option Student Loan which features interest-only payments while the borrower is in school to avoid capitalized interest."
Sallie Mae will require students to pay off the interest faster, forcing students to pay on the loan's principal before graduation. The bulk of the student loan payments come from the principal and having to balance school with a job could become a problem for students.
Miami's Financial Aid office urges students to do some research on the loan issue, before deciding to go with a private loan.
According to the Office of Student Financial Assistance Web site, students "should exhaust all federal student loans eligibility before considering these loans."
After clicking on a Sallie Mae link from Miami's Financial Aid Web site, a separate screen appears saying "We strongly recommend that you exhaust all of your federal loan eligibility before borrowing through a private lender and that you obtain a co-signer when applying for a private loan."
A student financial assistance senior counselor who wished to remain anonymous said her office is still working on ways to deal with the new changes because it's so recent.
"It's brand new, and we don't really know what to make about it just yet," she said.
Miami encourages utilizing government loaning programs such as Federal Perkins Loans, Federal Direct Plus Loans and Federal Direct Graduate Plus Loans. The Financial Aid Web site offers links to many different types of government and private loaning Web sites.
By filling out a FAFSA (Free Application for Federal Student Aid), students can be considered for the different types of federal loaning options available.
Sallie Mae's policy changes have students across the country worried.
"If students are going to be going broke in school, it might scare people away from even going to college," Radzyminski said. "I hope that's not the case, but people will do whatever it takes to save some money."
