It appears that the latest political football is the interest rate on student loans. The loan program in the news this week is the Stafford subsidized loan program. The government guarantees the repayment of these loans which are made by private lenders. In the case of the subsidized version of the Stafford, the government funds the cost of bringing the interest rate down as well. The current interest rate on these loans is 3.4% but may be doubled to 6.8% if the government interest subsidy is not renewed by July 1. The interest is paid entirely by the government while the borrower remains a full time student. It is only after that status changes that interest charges begin being applied (again, this applies to the subsidized version only). This topic being in the news gives me a chance to write an article that is long overdue about how I feel about student loans in general.
Of course, being an election year, this is prime fodder for a ‘who cares about you more’ appeal by both presidential campaigns. I don’t have a position on whether the rate should change or not as I guess we are so far down the rabbit hole it may not matter at this point. It is fascinating to me how we are following the exact same script of Europe as austerity measures seem nearly impossible to implement by elected politicians. At some point the government spending must be reigned in, but each individual interest group believes it should not be them but someone else’s government trough that should be taken away.
The Amount Owed In Student Loan Debt Nears $1 Trillion Dollars
Student loan debt is now nearly $1 trillion dollars. This is more than the amount owed on credit cards or auto loans. Making available easy money for college appears to have had widely negative consequences for our culture (seems to almost always be the case when the government gets involved). This appears to be not much different that the subprime mortgage crisis. With student loan proceeds flowing into America’s colleges we have seen unprecedented inflation in college costs. Basic economics: more money chasing the same goods and services = higher prices.
From FinAid (a leading website on how to pay for college)
A good rule of thumb is that tuition rates will increase at about twice the general inflation rate. During any 17-year period from 1958 to 2001, the average annual tuition inflation rate was between 6% and 9%, ranging from 1.2 times general inflation to 2.1 times general inflation. On average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years.
One Man Seems To Have Revealed The Truth About Student Loans
Alan Collinge, author of The Student Loan Scam, offers some of the most shocking revelations about the downside of America’s student loan industry on his website, studentstudentloanjustice.org. Young people are simply not aware of what they are getting into when signing up for a student loan. Most do not know what the cost will be to repay the loan over its term, as rigorous disclosures associated with credit cards, mortgages, and auto loans are not required. To make matters worse, many students are graduating today with little hopes of a career that will provide them with enough income to sustain a reasonable living standard and even make a dent in their college loans.
If being in debt up to your eyeballs is not bad enough, credit card debt among undergraduate students has skyrocketed. Despite the Student Credit Card Protection Act of 2007, credit card issuers have come up with a way to get around it.
Perhaps no story illustrates the absurdity of what is happening today with student loans than that of Joe Therrien. Therrien quit his job as a New York school teacher to pursue his passion. After earning his Master’s Degree in puppetry and accumulating $35,000 in student loan debt he returned to his old school looking for work. Due to a hiring freeze he was unable to get a teaching position. What did he do? He joined the Occupy Wall Street movement. Who knew you could get a Master’s in puppetry? I guess Sesame Street is not hiring either…
Occupy Wall St. Protester Wants College Paid For Because That’s What He Wants (not the puppet guy as outlined above)
My Advice On Paying For College
1. Not everyone should go to college; you may very well be better off pursuing a shorter term educational program. Computer techs, X-ray techs, and a myriad of other professions are in demand and do not require a college degree. 19 Great Jobs That Don’t Require A College Degree.
2. Attend a community college first and live at home w/ parents.
3. If you go on to attend a University, do that while living at home w/ parents.
4. There is no shame in taking more than four years to complete your degree (giving you time to earn the money and ‘pay as you go’).
5. Join the military for one enlistment before going to college and tap into their college funding program.
6. Don’t ever borrow money unless you have a plan to pay it back. Student loans are no different.
I will spare you the blah blah on scholarships and grants. Any money you can get for college that does not have to be repaid is a good thing, but you didn’t need me to tell you that. If you are looking for a good website on this, I really like FinAid.org.
If you are really interested in the dark side of student loans, check out the documentary The College Conspiracy.