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.
Average loan debt for AU students is decreasing
Good news. The average loan debt for the graduating class of 2012* is $34,649, down from the previous year’s $37,674, and has reduced 15% from a high of $40,966 for the Class of 2009. The 2012 average debt figure brings the average back to levels not seen since 2008.
Understand the numbers
AU’s reported average debt for loan borrowers at graduation ($34,645) for the class of 2012 may seem high compared to the national average of @$26,000, but keep in mind that this average focuses only on the percentage of the class who took out student loans. Almost half (45%) of the class of 2012 did not take out any loans to finance their education and graduated debt-free.
Understanding your financial situation will help you make better long-term choices regarding loans as you pay for your college education.
Elective borrowing affects AU Borrowers’ average debt
Several years ago, we identified a big problem for a small number of students here at American University and began a focused financial literary campaign to encourage students to make educated decisions when financing their education.
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, many of whom didn’t even apply for financial aid, drastically skews the student loan indebtedness average for AU’s graduating class. On average, these few borrowers take out private loans averaging two to 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 is declining.
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.
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
1. According the Consumer Financial Protection Bureau, a majority of students who took out private loans had not exhausted their federal borrowing options.
2. 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.
3. The 54% of borrowers in the class of 2012* who used federal loans only graduated with an average debt of $21,906. The national average is $26,600* according to Project on Student Debt (Oct. 2012).
4. The average debt for the 16% of the graduating class of 2012, who chose to borrow private loans, was more than twice the amount ($47,154) than those borrowing only federal loans.
5. Traditionally, AU’s loan default rate among its students has been below 2.9%, vs. 13.4% nationally (3-year default rate for class of 2011).
*Each fall, statistics for the previous year’s graduating class are publicly released.