A recent report indicating student loan default rates are at an all-time low is good news all around for students, lenders, schools and taxpayers, according to the U.S. Department of Education. But Annabelle Smith, director of financial aid and veteran services in Houston, warned that there is still a good deal of confusion surrounding student loans, including who is entitled to them and for what uses they are and are not intended. The U.S. Department of Education recently reported the default rate at 5.2 percent, the lowest it’s ever been.”The news is encouraging”, Smith said, but stressed that schools and lenders need to maintain their aggressive posture in educating students about student loans. “Often”, she said, “students feel entitled to student loans or accept them even if they are not needed.” “This can lead to roadblocks later on, however, when students reach the cap on their borrowing limits or when the loan bills start rolling in.”
“Students need strong guidance from admissions, career counselors, and financial aid staffs to make sure they fully understand the impact of accepting a loan,” said Smith. Financial aid counselors in Houston encourage students to take a big-picture approach.
Smith asked students to draft a budget that considers the earning potential of their chosen career versus their anticipated living costs and student loan payments after graduation. “Before any student considers any student loan, they need to sit down with what I call their ‘road map,'” Smith said. “Students should also consider the school’s lending limits per student.