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Student loan advice from the Federal Reserve chairman


Thursday, August 09, 2012
Federal student loans can be extremely helpful to students and families who need financial aid to pay college expenses. Yet these same loans can also be a hindrance to individuals who borrow money without having a strong understanding of financial literacy.

Hundreds of thousands of students finance their college education with federal student loan programs such as Stafford and Perkins loans. However, few students are aware of the financial responsibilities they are taking on when they borrow large sums of money. At a town hall meeting on financial education in Washington, D.C., Ben Bernanke, the chairman of the Federal Reserve, stressed how important it is for students to research these financial aid options before signing on for a loan.

Speaking to the teachers in attendance about the importance of financial education, Bernanke said students should think about their future before they take out a loan. This means considering the degree they hope to earn and the types of jobs they might acquire. As they will also be expected to start paying their loans following graduation, it is important for students to have a sense of how much they will make in their chosen field. Simply put, will they make enough to cover their monthly payments.

"A particularly valuable lesson we can teach students is how to apply an economic way of thinking to their decisions. For instance, the topic of student loan debt …. Students with some exposure to economic thinking will be more likely to conceptualize their spending on postsecondary education as an investment in their own human capital and choose their school, course of study, means of paying for their education, and profession with that thought in mind," said Bernanke.

Research is vital to making an informed decision regarding loans. Students who are considering taking out a loan for college should visit the U.S. Department of Education’s Federal Student Aid Web site, or call the Federal Student Aid information center at 1-800-4-FED-AID (1-800-433-3243). They can also meet with their high school counselor, who may be able to offer additional financial aid insight.ADNFCR-16000756-ID-800838323-ADNFCR

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