March 2006

Up for discussion: Loans and debt management

Lora Jo Bossio is director of financial aid. (Debbie Aldridge/UC Davis)

As the cost of attending university rises, many students accrue an increasing amount of debt. Lora Jo Bossio, director of financial aid at UC Davis, says it is important for students and parents to thoroughly communicate and plan a budget for each academic year.

"Our role is to assist students in financing their education in as reasonable a way as possible," she says.

At UC Davis, expenses on average for the academic year run from $17,000 for commuting students to $23,000 for those with on-campus housing and meal plans. And students borrow an average of $4,500.

Students accumulate an average of $18,000 in student loan debt over the course of four years at UC Davis. Some students borrow more or less, depending on the length of their undergraduate studies and their financial situation. While several costs are fixed, many costs are flexible, such as housing choices, meal plans and transportation.

Loan programs

Through the Federal Direct Loan program, UC Davis offers students subsidized and unsubsidized loans. Although interest rates have varied, new rules effective July 1 fix the rate at 6.8 percent for the next five years.

 The Financial Aid Web site offers help for establishing a budget and saving money. (Karin Higgins/UC Davis)

Currently, freshmen can borrow up to $2,625 a year, sophomores up to $3,500 and juniors and seniors can borrow $5,500 a year.

Parents can also borrow for their student's education through the Parent Loan for Undergraduate Students (PLUS). This loan, which requires a credit check, provides resources up to the cost of attendance minus other forms of aid. Effective July 1, it will have an interest rate of 7.9 percent.

In addition, UC Davis offers loan funds through the Federal Perkins Loan program. These loans have a 5 percent interest rate and are for students.

Once at college, students are often lured to sign up for credit cards by companies giving away freebies or attractive incentives. Unfortunately, Bossio says, many students don't read the fine print or understand how much interest adds to the debt. Bossio encourages students to talk to consumer debt counselors if they feel they've taken on more than they can handle.

Help and tips available

The Financial Aid Office front desk, located in Dutton Hall, helps students understand the various forms of financial assistance available to them. And every student must also go through a loan counseling session before borrowing his or her first loan.

"We don't want students taking out a loan without thinking it through," she says. "Student loans are an investment in the future."

Students and parents can also find helpful information on the Financial Aid Web site including:

• an online debt calculator, which allows them to simulate repayment responsibilities using various loan scenarios;
• a worksheet for facilitating discussion and establishing a quarterly budget; and
• tips for saving money.

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