Many students have been in the situation where they need to take out student loans during their time in college. Not every student at Kansas State takes out loans, but according to College Factual around 45% of Kansas State students take out loans during their time in college. A topic this group of students could have been exposed to is Student Loan Refunds.
To explain student loan refunds, we need to go inside the mind of a college student. So, picture this your semester is about to get started and you go check your bank app to see if your last paycheck from your summer job has hit your account and you see a $1,000 deposit from Kansas State. You think wow finally they are giving me money for a change instead of me having to pay. With this in mind you treat yourself to a nice dinner of Texas Roadhouse with your roommates to get the semester started.
You may think to yourself what about this story is important, it just seems like a random day as a college student. For background the $1,000 deposit that came from Kansas State in this case was a student loan refund. Student loan refunds are when student’s total loans taken out are more than their tuition bill, KSIS for K-State students. The amount of money coming into student’s bank accounts can differ based upon what financial aid items they have accepted. In this example we will say the student in question had a tuition cost of $6,000 and they accepted student loans for the semester of $7,000. If the student needed that extra $1,000 for monthly expenses, then there are no problems, but many students inadvertently get student loan refunds and that is where the problem lies. In this case students are taking out more loans than they actually need causing problems for their future self financially.
If a college student on average takes out an extra $1,000 in student loans per semester for the usual length of 4 years of study, using unsubsidized loans to as the vehicle for the loans. While in school the extra student loans will accumulate interest which adds to the student loan situation post-graduation. This interest is on top of the extra $8,000 taken out in loans over the time in college. Below we have shown the total interest from the extra loans.
In total the amount of interest that will be added to the student loan balance is around $1,175 over the 8 semesters the student is in college. With the interest and original loans combined the student will have $9,175 in loans added to their balance. Taking this loan balance individually and calculating the monthly payment we are able to see that this student would have a monthly payment of around $104. This payment will take place for 10 years and over those 10 years the student will pay a total of $12,518.
Student Loan Refunds seem like a really small piece of the puzzle when it comes to students’ full student loan situation, but it can be very impactful in the future. If you feel that your student loan situation could be improved come talk with one our Peer Counselors over at Powercat Financial!
Keaton Verdict
Peer Counselor III
Powercat Financial
www.k-state.edu/powercatfinancial
