Do your best to avoid grad debt

Candace Canerdy will graduate next year with more than a diploma - she'll also have $45,000 in debt.

For many students, graduation means it is time to start paying back student debts.

"I expect times to be hard after I graduate, but everything will work out," said Canerdy, a junior sculpture major. "I have confidence that my work will enable me to repay my loans in a timely manner."

The Office of Institutional Research at The U of M reported that 22 percent of the school's graduating class last year borrowed money at some point. The money awarded to that 22 percent made up just a fraction of the total of $118.2 million awarded nationally to students through all forms of financial aid, including state, federal and institutional loans, grants and scholarships, outside sources, federal and state-work study programs, parent loans and athletic awards.

It was reported in the 2007-08 Common Data Set, put out by the OIR , that the average financial aid package of those included in the 22 percent was $7,396. Regardless of the magnitude of the loan, one thing remains consistent - the debt must be paid off sooner or later.

Tricia Bunn, former assistant manager at Bancorp South, who specialized in consumer debt counseling for five years, had some advice for college graduates consumed by debt.

According to Bunn, taking out loans is not always necessarily a bad thing, as long as you take out a loan you know you can pay back. It can help build credit, and according to Bunn, good credit is a necessity.

"No credit is just as bad as bad credit," she said.

And for those with debts from multiple sources who struggle with payments, combining all debt into one payment by consolidating can make things easier.

She also had some tips as far as where to look for student loans. Borrowing money from the government is the best route to take, she said. With a government loan, as opposed to an institutional loan or a non-secured loan, the interest rates are far lower, ranging from 4 to 5 percent. The average interest rate of most institutional or nonsecured loans is between 14 to 15 percent, according to Bunn.

Chris Bomprezzi, Bancorp South president, agreed with Bunn. He said consolidating is a good way to get multiple loans paid off, but not without consequence however. Consolidating loans can increase the term of the loan, but at the same time, it can lower the interest rate, he said.

Karen Smith, associate director of financial aid at The U of M, said there were 8,277 undergraduates last school year who received student loans, most of them receiving the Stafford loan.

"Subsidized loans like the Stafford loan are the best types of loans for college students because the federal government pays the interest while you're in school," Smith said. "And the interest is low. This year, it is 6 percent."

The Stafford loan is good, according to Smith, because the school deals directly with the federal government instead of banks, like some other universities do. This way there is no middle man. However, the student loan process can be confusing and complicated.

"Financial aid is never simple," she said.