This translation is not completely accurate as it was automatically generated by a computer.
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A UMNS Report
By Vicki Brown*
7:00 A.M. ET August 27, 2012
A web-only photo by iStockPhoto/Chris Scredon.
The United Methodist loan program is offering a new option with
lower interest and earlier repayment to help United Methodist college
students struggling with increasing debt.
BorrowSmart allows college students who are members of United
Methodist churches to borrow $5,000 at 3.75 percent interest and begin
repaying the loan in 90 days at $50 a month instead of deferring
repayment. Students do not begin repaying most traditional student
loans until six months after graduation or if they withdraw from
school.
“This is a win-win option,” said Allyson Collinsworth, director of
the United Methodist Board of Higher Education and Ministry’s Office of
Loans and Scholarships. “It reduces the total amount the student must
pay back, and the earlier payment schedule protects the investment of
the faithful United Methodists who donate to the loan programs through
the United Methodist Student Day offering each November.”
Since the number of loans the office can give is based on
repayments, interest collected and donations, the earlier repayment
option could mean more students can get loans.
Collinsworth said she hopes the earlier repayment schedule will mean
students will be more aware of the amount of debt they are incurring.
The Federal Reserve Bank of New York estimates student loan debts
now exceed credit cards and auto loans, and more than 37 million
Americans owe $870 billion in student loans.
Save in the end
Wee-Li Tan, whose daughter Hillary is a junior at Hendrix College, a
United Methodist-related college in Arkansas, said he looked at the
calculations listed on the loan application comparing the total payback
for each option and decided BorrowSmart would save his daughter money
in the long run. Tan said he will make the payments until his daughter
graduates and gets a job; then she will take over and pay him back.
“This is not an option everyone will be able to take advantage of it, but it is a savings for those who can,” he said.
He also said students might be better able to manage the early
payback in the last year or so of college if they had a good summer job
or some savings and could make payments for a year or two to reduce the
total amount owed.
“If a student is working to pay all their expenses, I doubt they can
begin payments in 90 days. But parents or co-signers might be willing
to make the payments for a year or two so that the student can take
advantage of the overall savings,” he said.
Students who cannot begin paying the money back within 90 days still
can borrow through the two programs that defer payments until six
months after graduation or withdrawal from college. Those offer $5,000 a
year at 5-percent interest for students at any college or university.
Students at a United Methodist-related college or university can borrow
at a 4-percent interest rate.
Under the 5-percent option, the payment is $65 a month, 120
payments, for a total principal repayment of $8,624.42. The 4-percent
option is a $60 payment with the total principal repaid of $7,900.58.
The savings to the student under the BorrowSmart program would be
more than $1,700 a year on a $5,000 loan compared with the 5-percent
loan option. Students who borrow at the maximum of $5,000 a year for
four years would pay back $6,807 less in the BorrowSmart program.
The Board of Higher Education and Ministry loans about $2 million to
United Methodist students each year and awards about $3 million in
scholarships annually.
Earnings from the loan funds pay the operational expenses for the
Office of Loans and Scholarships. Loan earnings are reinvested into new
loans, and some excess loan earnings have been used for scholarships
in prior years.
*Brown is associate editor and writer, Office of Interpretation, United Methodist Board of Higher Education and Ministry.
News media contact, Joey Butler, Nashville, Tenn. (615)-742-5470 or newsdesk@umcom.org.
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