The Importance of Budgeting to Avoid Defaulting on Student Loans

The Importance of Budgeting to Avoid Defaulting on Student Loans

Students defaulting on their loans will always be a problem for the government as long as there are students taking out loans. There will always be a few that don’t pay off their loans. There are many reasons why students default on their student loans. According Ms. Farrell, the author of “Reducing Student Loan Defaults: A Plan for Action,” in the Office of Planning, Budget, and Evaluation Survey, said “The main reason that students default on their loans is that they cannot budget their finances” (Farrell 24). Even though a number of students are working while going to school, they don’t understand the financial burden that loans will place in their lives. In order for students to pay back their student loans, they need to calculate their in school and out of school budgets.

If too many students neglect to pay their loans, it can create a serious problem for students that are currently in school receiving financial aid. A school can be dropped out of the student aid program. Under a current law, colleges and universities can lose access to student loan programs if they have default rate of 25% or above for 3 consecutive years. Institutions can also lose access to all programs, including grants, if the most recent default rate exceeds 40%. The Department of Education just released a list of more than 300 institutions that could lose eligibility for some or all student aid programs, and 144 schools are no longer eligible to participate in student loan programs because of high default rates (Dervarics 6). So we can see how important it is for students to pay their student loans back; so that their school will not be dropped from the student...

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...in. It helps students to compare and match expenses with income to balance out their finances on a weekly, and/or monthly basis. So give budgeting a try, and see your life become less complicated.

Works Cited

Brownstone, David M. “Planning your future.” Personal Financial Survival Wiley Interscience Publication. 1981: 5

Deravics, Charles. “Student Loan Default Rates Fall Dramatically” Black Isues in Higher Education 6 February 1997: 17

Farrell, Mary. “Reducing Student Loan Defaults A Plan for Action” Dept. of Education Washington D.C. Office of Planning, Budgeting, and Evaluation, 1990 : 7, 24, 27

Finney, Robert. “Every Manager Guide to Business Finance” American Management Association, 1994: 175

Gray, Ginger. Phone Interview. 23 February 1997.

Groza, Maris. “Where to Live.” Every Womans Guide to Financial Independence. Les Femmes. 1997: 13