Two out of three college graduates today leave with more than just a diploma. They leave with a debt accumulated from college loans, then enter a stressful harsh reality where finding the right job to pay debt off is nearly impossible. In the United States, the debt from college graduates amounts to $1.2 Trillion dollars, ($1 trillion comes from federal student loans) which accounts for 6% of the country's debt. When the debt rises in our country, our economy decreases. When our economy decreases then the number of job opportunities decreases. So why is it that universities, colleges, and community colleges continue to raise tuition? President Obama made a plan to provide free tuition to community college which cost $60 billion dollars. Aside from that plan, we still have no solution in eliminating or decreasing this debt.
We've all heard this story before. Go to college to obtain a higher education, graduate and find a good job. How are we still teaching this to our generation when we cannot even handle this tuition debt crisis? What is the best solution to slow the debt? Is it free tuition as proposed by Bernie Sanders? Is it education about loans? We will never know until we take action with a proper plan. But what we do know is that college tuition continues to rise and it is difficult for many students to make an instant decision on which college or university they want to attend. Every student can apply for a scholarship, grant, and loan but not everyone will obtain them.
Those who choose to pursue an education but cannot afford it are only left with one option and that is to apply for a loan. There are two types of student loans, one being federal and the other private. A federal student loan is funded by the the government. A private student loan is a nonfederal loan that is created by a lender such as a bank, credit union, state agency or school. Many students choose federal student loans because of better fixed interest plans, better payment options and are less expensive. Now here comes the tricky part of the federal student loans because there are four different kinds. There are direct subsidized, direct non-subsidized, direct PLUS and Perkins loans. As a quick overview, a direct subsidized loan is for any undergraduate student,the amount loaned is determined by the school, and the U.S. Department of Education pays off the interest. A non-subsidized loan is for either an undergraduate or graduate student, but the student is responsible for paying the interest. A direct PLUS loan can only be used by graduate students or parents and is lent by the U.S. Department of Education; the user cannot have an adverse credit history and the maximum loan amount is the total cost of attendance minus any other financial aid received. Lastly a Perkins loan is available to any student (undergrad. grad. professional) with exceptional financial need; it has an interest rate of 5%, but not many schools offer this grant since the school lends whatever funds it has available.
After explaining these loans, from the surface it doesn't sound too bad, especially if you have a subsidized loan. But the ugly truth resides from the loan amount you have to repay from the accumulating interest rate. The school makes sure that you know you are financially responsible for paying back the loan amount so when you miss a payment or multiple payments, your life can get much more difficult than you think. Not paying back a loan can result in bad credit history and carrying this burden leads to a domino effect of more burdens to come.
"One of the problems of debt forgiveness is that it sets a precedent that similar loans in the future will also be forgiven. Although the loans are allocated toward education, money is fungible and will have the net impact of increasing the spending ability of students in other areas of their lives. As the expectation of repayment obligation falls, borrowers may enter into a situation where they take on higher levels of debt and take more risks. This will lead to a weakened ability to repay, creating a vicious cycle that hurts the financial sector and the credit ratings of the borrowers." said Julia Paxton, Ohio University development economist.
However, despite all hopelessness from this growing crisis, the only solution that is reasonable according to the Institute for College Access & Success is explained in their recent report "Aligning the Means and the Ends: How to Improve Federal student Aid and Increase College Access and Success." TICAS is asking for simplified and improved access to obtaining information about student loan debt; calls to include information on consolidating debt, and increase the student's information to both school default and graduation rates. This can prove to be a effective solution because many students need the proper education and knowledge of student debts and the impact they can have in the future. Will we ever figure out a solution to handle this student loan debt crisis? Only time will tell from here.
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