Is your university or college setting you up for a healthy financial future? There is growing concern by the Department of Education and CFPB over practices universities utilize with their student population and the effects they’re having on the financial well-being of students.
Tuition costs continue to rise, college credit cards are peddled to students on campus like candy, and some universities have been investigated for providing misleading information related to student loans and degree accreditations.
Protect yourself from high-interest credit cards, skyrocketing student loan debt, and misleading college marketing tactics by following these basic strategies:
1) Avoid Expensive Schools with Rising Tuition
The biggest concern today is the escalating costs of college tuition. There are many reasons why colleges continue to charge more each year, and it’s becoming difficult for students to go to college without the prospect of developing a mountain of student loan debt, roughly $34,000 to be exact.
In most cases, public colleges and universities face reductions in state subsidies. But instead of reducing spending, they raise tuition fees to make up the difference. Community colleges have actually been spending less per full-time student.
Meanwhile, their revenue from students went up approximately 40 percent in the years between 2000 and 2010, according to the Delta Cost Project, an organization that monitors college spending.
They reduce their spending on students while requiring them to pay higher fees. Their total expenditures remain the same as they make up for lower government funding with higher tuitions. So students end up making up the difference.
2) Read the Fine Print with Credit Cards on Campus
Universities also create business relationships with banks and credit card companies. These “affinity” agreements allow banks to promote credit cards to students on campuses all over the country, while the college or university earns a royalty or commission from new credit card recipients. Universities typically provide special access to events, as well as limited personal information of students and alumni for marketing purposes.
Affinity agreements benefit schools by providing what many, including Pennsylvania congressman Patrick Murphy, consider as “kickbacks”. The criticism aimed at universities cites the skyrocketing levels of student loan debt, which is only made worse when adding high-interest credit card spending.
The Credit Card Accountability Responsibility and Disclosure Act places limitations on the ways in which banks market to students on campuses. For example, banks cannot offer tangible incentives to opening a credit card account, and they are limited in the number of promotional locations they set up on a given campus.
3) Is your university being honest?
In February, it was reported that Ivy League schools were getting additional money out of applicants in violation of the Higher Education Act by more than a hundred schools. This led to concern over the language used by universities in the financial aid information they provided, as reported by the Washington Post.
Universities had applicants complete a CSS/Financial Aid PROFILE form when they only needed to complete the Free Application for Federal Student Aid (FAFSA). The CSS PROFILE form requires the student to pay a minimum fee of $25.
Schools such as NYU, Georgetown, Yale, Duke and Cornell (among others) allegedly failed to notify students that the FAFSA is all that’s required for federal assistance. Legislators claim that universities aren’t always clear on which forms are required for the various types of financial aid available.
Whether or not the confusion was intentional, the case highlights the need for you to be fully aware of all the information when applying for financial aid.
4) Reduce Your Risk
If you’re facing high cost student loan or credit card debt, you need to consider options that can help you get out of debt and begin saving for the future.
Credit card debt can have the highest interest rates of all your debts. Banks charge rates as high as 29%, making it almost impossible to pay off in a reasonable amount of time.
Although your student loan was a good investment, it can overwhelm you when you’re struggling to make monthly payments.
- Contact your credit card company and request a lower interest rate
- Consider consolidating your debt to reduce interest rates and monthly payments
- Refinance your student loans to reduce monthly payments and interest
- Consolidate your student loans to make them easy to manage
You can review the latest student loan refinancing programs details here to find out about current interest rates and terms. But you should also know what questions to ask when refinancing student loans.
In closing, remember, when universities gamble with your finances, you deserve to know the truth so you can end up with a positive return on your college investment.
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