A mandatory loan counseling program is helping Elgin Community College buck the nation's historically high default rate, while also reducing the amount of money college students borrow.
Across the country, student college loan debt now tops $1 trillion, according to a report earlier this year from the Consumer Financial Protection Bureau, a federal agency created in response to the financial crisis.
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Sample of student loan costsElgin Community College estimates its attendance cost at about $8,000 a year (tuition, books, other expenses without room and board) for a total of $16,000 over two years. Here's how your student loan costs can vary based on how much you decide to borrow to help pay those bills.
Ÿ If you borrow $6,000 at a 3.4% rate, you'll pay $59.05 a month for 10 years, and pay back a total of $7,086.
Ÿ If you borrow $6,000 at a 6.8% rate, you'll pay $69.05 a month for 10 years, and pay back a total of $8,286.
Ÿ If you borrow $10,000 at a 3.4% rate, you'll pay $98.42 a month for 10 years, and pay back a total of $11,810.
Ÿ If you borrow $10,000 at a 6.8% rate, you'll pay $115.08 a month for 10 years, and pay back a total of $13,810.
Ÿ If you borrow $14,000 at a 3.4% rate, you'll pay $137.79 a month for 10 years, and pay back a total of $16,534.
Ÿ If you borrow $14,000 at a 6.8% rate, you'll pay $161.11 a month for 10 years, and pay back a total of $19,333.
Note: A government-subsidized loan based on need would have a lower rate like 3.4%, while an unsubsidized loan, not based on need, would have a higher rate like 6.8%.
Sources: Elgin Community College website ("Calculate your Tuition Costs"); U.S. Department of Education website's "Repayment Comparison Calculator"
In addition to the federal government's required online survey at studentloans.gov, ECC students also must meet one-on-one with a financial aid adviser to discuss the loan process.
Since introducing the loan counseling program in the fall of 2011, ECC has seen a 13 percent decrease in the amount of money students are borrowing, said Amy Perrin, director of financial aid and scholarships.
In the 2010-2011 school year, ECC students borrowed $6.385 million. Last year, that figure dropped to $5.5 million, Perrin said.
The average loan at ECC was $3,264 in the 2011-2012 school year, said Kim Wagner, managing director of student financial services.
Other local colleges also have implemented policies aimed at reducing student debt. At Harper College in Palatine, financial aid counselors look for ways students can first use scholarships, grants, or work-study options. If a loan is still requested, the student must first fill out a budget.
Maria Moten, assistant provost and dean of enrollment services, said grants, scholarship and federal work-study now make up about 70 percent of the college's financial aid, with the remaining 30 percent taken in loans.
"We used to be more on a 50-50 split," Moten said.
As a result, the college has seen a drastic decline in the amount of money students are borrowing.
So far this year, the college has awarded $3.5 million in government-subsidized loans, which are based on a student's need, and another $4.4 million in unsubsidized loans. Those are loans that are not needs-based and carry a higher interest rate than subsidized loans, in which the federal government pays the interest while a student is enrolled.
Harper College also plans to require that all new students requesting a loan attend a financial aid orientation.
"We will talk about finances, how to apply for financial aid and financing your education," Moten said. "That's to help students understand personal finance, budgeting and money management."
In the spring, College of DuPage in Glen Ellyn introduced an online self-assessment to gauge students' financial literacy. The College of Lake County in Grayslake requires students to complete a financial aid worksheet.
During 30-minute financial counseling sessions at ECC, counselors explain the expectations of a loan and students are asked to create a budget detailing where they spend their money and what kind of salary they expect to make once they graduate.
ECC has seen a 4 percent reduction in the number of students borrowing money, from 1,765 in 2010-2011 to 1,695 in 2011-2012, Perrin said.
"We talk to students about what they need versus what they want," Perrin said. "Students come in blindly thinking they want to take out as much as they can. But when we start talking about the budget process and any money they have borrowed in the past, they start thinking about what they need and that decreases the amount they are requesting."
Like many students entering college, Jessica Vojtsek, 18, of Algonquin knew she needed to borrow money to pay for tuition, books and commuting expenses while attending ECC.
The 2012 graduate of Jacobs High School in Algonquin could have borrowed enough money to also pay for a new wardrobe and other miscellaneous living expenses. But after a loan counseling session with an ECC adviser, Jessica borrowed only what she absolutely needed and might repay an unused portion at the end of the school year.
"I knew if I had the money I would just spend it," said Vojtsek, who is pursuing an Associate in Arts degree. "The adviser was really helpful because she explained a lot of things that I didn't already know. I wasn't sure how much I was actually borrowing, how much I would owe in the end or how long I would have to pay it back."