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Kandice McKee: Cashing in on student loans

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Posted: Tuesday, May 8, 2012 12:00 am | Updated: 2:59 pm, Wed Jun 6, 2012.

Well, it’s finally the last week of regular classes.

If you’re like me, the last thing you want to think about heading into summer is the amount of student loan debt you’ve racked up this year.

But as graduate students lose the option of subsidized Stafford loans after July and Congress continues to debate whether or not the interest rate for subsidized undergraduate loans will double and revert back to its pre-July 2008 rate of 6.8 percent, it’s crucial to consider the harsh realities of student loans and the tough predicament we are facing.

First, the facts:

The number of students borrowing money and the amount being borrowed is going up – those graduating with bachelor’s degrees in 2008 had borrowed 50 percent more than those earning the same degree in 1996, according to the most recent report by the Pew Research Center.

In 2010, the average graduate had $26,000 in student loan debt.

Currently, Americans owe a total of about $1.7 trillion in student loan debt, according to the Chronicle for Higher Education.

 There have been regulations on marketing credit cards to college students, but why isn’t there more being done about the more prevalent and more serious student loans being marketed? After all, student loans can’t be forgiven by bankruptcy, but credit cards can.

Perhaps it is because the government is making big bucks off students that borrow through its programs, which most do.

That is, of course, if students pay back their loans.

In 2009, graduates entering loan repayment or had been in repayment for two years had a default rate of 8.8 percent, according to the U.S Department of Education. Those outside the two-year window aren’t factored in, though some estimate that the figure could double or triple if those were tracked as well.

And just an FYI: Missouri was one of 17 states with more than 75,000 people in default in 2009, according to the Department of Education report.  That put Missouri as the No. 12 state with the highest student loan cohort default in 2009.

What does all this mean?

Well, for one, just because your degree costs more these days doesn’t mean it’s actually worth more. Look up the “Is college worth it?” report by the Pew Research Center.

With near-record and record-breaking enrollments at colleges and universities around the country, it’s no wonder there is a surplus of degree-holders and many degrees just don’t hold the same prestige as they once did.

At one point in history, having a high school degree was considered an achievement. High school degrees began showing up in my own family tree not too many generations ago.

Nowadays, a college degree is almost expected and is most definitely required for many jobs and careers. Almost 95 percent of parents surveyed by the Pew Research Center in 2011 said they expected their child(ren) to attend college.  

Considering the robust amount of bachelor’s degrees in the marketplace, it would only make sense that the next step would be for the demand in master’s degrees to follow suit.

Stay with me now:

Unsubsidized graduate loans have an interest rate of 6.8 percent – the same amount for subsidized undergraduate loans prior to the 2008-09 year and what could be the same amount for the 2012-13 year if Congress doesn’t act, which, I know, is a lot to ask for these days.

If there is a miracle and Congress can come to an agreement and keep subsidized undergraduate loans at a 3.4 interest rate, “The Congressional Budget Office has estimated that a one-year freeze on the interest rate for subsidized Stafford loans would cost $6 billion,” according to a report in The New York Times.

If more and more students consider graduate school as a way to one-up their peers, the trend will become commonplace, as has been done with bachelor’s degrees.

Now, consider that most graduate student rely on government loans – now to be solely unsubsidized come July – and, in 2009-10, the average borrower took out $16,000 loans.

Considering cutting the interest rate in half for loans that don’t accrue interest while students are in college costs $6 billion, consider the amount being made, now and in the future, on loans that do accrue interest while in school. The money to be made in interest is ridiculous.

I hope this doesn’t sound like a conspiracy theory. It’s quite the business move on behalf of the government. Just at the expense of our future generations – spending money on student loans prevents graduates from becoming the money-spending consumers we’re taught to be.   

I like to think of myself as a pretty rational person. I am, after all, a college graduate and graduate student. But perhaps that makes me pretty irrational.

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1 comment:

  • Jenny1977 posted at 10:30 am on Fri, Aug 1, 2014.

    Jenny1977 Posts: 15

    It’s very dangerous today to take student loans. The rates raise and it’s impossible to pay back them. I turn to pay day loan company when it comes to taking cash loans over the Internet. When I entered to the university I take loans for paying paying my education. Every year I save up money and take loans. It is more convenient than take student loans.

     

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