Choices you make will impact your financial future
Media reports sensationalize the student debt problem, but the borrowers depicted in these stories are not representative of the typical undergraduate student at American University. As you plan for your education future, we want students and families to make smart choices and take charge of financing their education.
One important step is to understand the cumulative, long term impact of loan choices, compared with other choices, prior to taking on loan obligations.
Elective borrowing affects AU Borrowers’ average debt
We’ve identified a big problem for a small number of students here at American University. A large contributor to the issue of a high average debt for AU grads is elective borrowing—private loans taken outside of the federal financial aid process. A small number of students who chose to take out private loans drastically skewed the student loan indebtedness average for AU’s class of 2010, with average indebtedness three times the rate of federal borrowers. As a result of greater awareness, financial literacy, and more informed choices, the number of students taking private loans and their average debt both declined for the class of 2011.
What can you do? First, apply for financial aid. Last year, one in four AU students who borrowed private loans did not demonstrate any financial need and/or did not even apply for financial aid. Students who only borrow federal loans have a lower average indebtedness at graduation. Second, understand the cumulative effect of all loans you take on your monthly obligations after graduation. We’ll help you find resources to improve your financial literacy about loans and debt.
Understand the numbers
AU’s reported average debt for loan borrowers at graduation ($37,674) for the class of 2011 is striking, especially in these hard economic times. Keep in mind that this average focuses only on the percentage of the class who took out student loans. For the class of 2011, a little more than half (57%) of the class took out a loan, while 43% of the class did not. Understanding your financial situation will help you make better long-term choices regarding loans as you pay for your college education.
Utilize the tools and resources available to you
Student debt, loan rates and college affordability have become some of the defining issues of this fall’s election, but don’t let the debate consume you. There are options already available to provide students with the tools and resources needed to understand and negotiate their personal finances for a lifetime of financial well-being.
On this page, we’ve included some of these tools to help get you started. And, as always, if you have questions or concerns let us know. For current students AU Central is the best place to start, for prospective students contact the Financial Aid Office.
Five Facts to be in the Know
- According the Consumer Financial Protection Bureau, a majority of students who took out private loans had not exhausted their federal borrowing options.
- The Department of Education released an interactive loan counseling tool that estimates the monthly payment for all of a student’s total loans, and provides financial management basics covering topics from managing a budget to avoiding default.
- The 59% of borrowers in the class of 2011* who used federal loans only graduated with an average debt of $18,343. The national average is $25,250
- The average debt for the 41% of the graduating class of 2011, who chose to borrow private loans, was nearly three times greater ($51,649) than those borrowing only federal loans.
- Traditionally, AU’s loan default rate among its students has been below 2.6%, vs. 9.1% nationally (2-year default rate for class of 2010).
*most recent figures available