Students headed for college worried they don't have the money to pay for it, survey says

Fall semesters at universities across the nation are kicking off. Yet, a majority of students are unsure of how to afford their degree, a recent survey said.

Nearly all students (92%) worried they wouldn't have enough funds to pay for tuition and many planned to use a combination of debt-free ways to pay for college, a ScholarshipOwl survey said.

For example, 91% said they applied for scholarships during the summer to help fill in the funding gaps, according to the survey. Among the other debt-free ways that students planned to use to pay for tuition were savings from a summer job (35%) and income from a part-time job on or near campus (47%). Over one-third (36%) plan to take on a side hustle such as driving for a food delivery service or ride-sharing app, freelancing, dog-walking and handy person tasks to generate revenue to help pay college expenses. At the same time, 26% planned to tap the Bank of Mom and Dad or ask family for additional financial support. 

Still, some students planned to take on debt to pay for college. Thirty-three percent planned to use federal student loans and 21% said private student loans. Roughly 12% said their parents would take loans to cover their college costs.

"The survey results indicate that Gen Z students are aware of the multiple avenues they can access to be able to cover college costs, and the good news is that they are primarily focused on sources that don't have to be repaid (federal and state grants, scholarships, income from employment)," Scholarship said. "That said, more than one-third plan to take out student loans, even if they also have non-loan funding sources."

If you hold private student loans, you could lower your monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered. 

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Reliance on student loans comes as the landscape for student loan forgiveness continues to shift.

President Joe Biden's plan to forgive up to $10,000 in federal loans per borrower making less than $125,000 a year (couples making less than $250,000) and up to $20,000 per borrower for those who used Pell Grants in college, eliminating about $441 billion in outstanding student debt, was struck down by the U.S. Supreme Court earlier this year. 

In the wake of this decision, the Department of Education announced changes to its income-driven repayment (IDR) plans that could forgive up to $39 billion in federal student loan debt t. 

Under the Saving on a Valuable Education (SAVE) plan, borrowers could see monthly payments lowered to zero dollars, monthly costs cut in half and those who make payments could save at least $1,000 a year, the White House said in a statement. 

The plan calculates the monthly payment amount based on a borrower's income and family size, according to the Department of Education. That means that for those earning $32,800 a year or less, which translates to roughly $15 an hour, their monthly payment would drop to $0 immediately. 

Additionally, borrowers with an original balance of $12,000 or less will receive forgiveness of any remaining balance after making 10 years of payments, with the maximum repayment period before forgiveness rising by one year for every additional $1,000 borrowed.

If you have private student loans, you won't benefit from SAVE or other government initiatives. You could consider reducing your monthly payments by refinancing your loans for a lower rate. Visit Credible to get your personalized rate in minutes.

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Students headed to college could also see the amount of money they receive in Pell Grants increase and their spending on loan interest payments decrease if a recently proposed bill is passed.

The Student Loan Interest Elimination Act, introduced by Rep. Joe Courtney (D-Conn.) and Sen. Peter Welch (D-Vt.), would refinance the interest rate of all existing federal student loans to zero percent and cap interest rates for future borrowers, according to a fact sheet on the new legislation. 

The interest rates for future student loan borrowers would be based on a sliding scale determined by financial need, with most paying nothing in interest and no student getting an interest rate above 4%.

Under the legislation, the Department of Education would establish a trust fund to collect payments borrowers make on their principal balance to offset the elimination of interest, the fact sheet said. 

According to the legislation, any money left over would be used to bulk up Pell Grant awards and provide competitive grants to support college completion and retention programs at higher education institutions. 

If you hold private student loans, you won't be enrolled in a federal income-driven repayment plan, but you could refinance your loans to a lower interest rate. Visit Credible to compare options from different lenders without affecting your credit score.

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