Chauncey Schwendeman graduated from the University of Florida in May with a Bachelors of Science degree in business. He has not yet secured a job, but he will still have to begin payments on the $47,000 in debt he accumulated while in college. Schwendeman is not an isolated case, in fact more than 45 percent of students polled* said they would be graduating with some form of debt. With a struggling economy and steadily increasing tuition rates, often students are faced with the decision to take out loans to be able to attend college. An investigative piece by the New York Times estimates the average student coming out of a four-year degree has $47,540 in loans. So what does this mean for the future generation of students who are getting an education with the heavy burden of debt attached?
"I'm a business major, I understand how debt works," Schwendeman said. "I also understand how interest can pile up. I didn't have a choice whether or not to borrow, but my plan is to pay it off as soon as I get a job making good money."
The most common type of loan is the federally subsidized Stafford loan. Students can take a maximum amount of $3,500 their first year of college, with a gradually increased allowance each year. These loans are available to any student at an approved accredited institution and do not discriminate based upon income of financial background.
Students like Schwendeman consider the Stafford his "best bet" because of the fixed interest rate. Because these loans are only available in small increments, students often have to apply for unsubsidized loans to compensate for the remainder of their expenses. Private and unsubsidized loans can have fluctuating interest rates as high as 12 percent. and some accrue interest while the student is still taking undergraduate classes.
Schwendeman says he knew taking out loans would end up costing more in the long run, but he felt that "it was the only option. It was a means to an end." Schwendeman's $47,000 in debt will have interest that is compounded quarterly and will eventually become more than $100 thousand if he continues to pay on a monthly schedule of $279 per month.
Financial aid councilors warn UF students about the plight of those with heavy debt. Financial Aid Councilor Carolyn Repko says she realizes that sometimes it is a necessary measure, but offers advice to those who borrow.
"It goes without saying, but borrow the absolute minimum you need," Repko said. "If you don't use all of your loan, pay it back immediately. Each thing you purchase with loans, think hard if it is worth paying interest on one day."
*The poll was taken by 60 UF students at random sampling.