Wednesday, June 18, 2008

July 1 is Day One for student loans

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For many people who must borrow money to access higher education, July 1 is a big day.

On that day, the rates on federal student loans will drop nearly a full percentage point. The government will also free up access to more unsubsidized Stafford loans. And unconsolidated variable rate Stafford Loans will drop to 4.21 percent, more than three percentage points below the current rate of 7.22 percent.

Compared to what college students were getting before, I'd say these developments are enough to put a smile on any student-debt-worry-wrinkled face.

Personally, I was lucky. I locked in my federal student loans at a cool 3.5 percent interest rate back in 2003. But I just missed the start of the time frame for New York State Attorney General Andrew Cuomo's probe into the shared beds of financial aid offices and private student loan companies.

No doubt, this is good progress on the part of our government. Now if only private student loan companies would follow suit...

For me, federal student loans were never the problem. Private loans, on the other hand, nearly cost me my decent credit and played a role in my decision to change jobs a couple of years ago.

After I graduated, my full student loan payment on both the federal and private loans (both sets of which I consolidated) was about $350 - very manageable, because at the time the interest rate on the private loans was about 4.5 percent. Two years later, those interest rates doubled to about 8.5 percent.

I'd gone to college to be a newspaper reporter, knowing full well the money would suck in the beginning, but I didn't care. I was doing what I loved and believed the money would come later. Ready and willing to wait it out, I deferred my student loan payments. Then, the folks at the Student Loan Corp. came calling, and said I could no longer defer my private loans. I suddenly realized I couldn't make the payment on my salary. I tried to compromise and work things out with the company, but they wouldn't budge. So, I found a better-paying job as a communications specialist. In the month or so it took to transition to the new job and pay scale, I couldn't pay the loan. Even though I explained and explained the situation and always paid on time before, rude and nasty collections staffers from the company called relentlessly, one so rude and demeaning she reduced me to tears.

I consider myself somewhat lucky, because I at least enjoy what I do now and I didn't have to make a drastic career change. But realize there are others who had to find a higher salary doing something they hate or have no passion for, all to satisfy the hungry student loan beast and avoid life-ruining credit blemishes.

I hate the fact that I cried in audible earshot of some scumbag collections agent who had her soul taken from her when she signed on to do her job.

Perhaps she could get her soul back if the government did something I think would over time truly boost our economy and society: simply turn all those federal loans into grants.

Let's face it - most middle class families don't make enough, but they still make too much in the eyes of the federal government to qualify for grants or even the maximum amount of student loans allotted. My parents saved and saved for years for my college education and in a matter of two years, it was gone. That's why they took out private loans for me and while I'm forever grateful for the intent, the resulting blow to my wallet is just unnecessary.

But if all the federal loans I took out had been grants, I'd have a lot less debt worry on my hands right now. So would millions of other students. That's the kind of debt shrinkage that would enable newly-minted baccalaureates to (gasp!) save money, buy the stuff they need to start a new job and a new life after college, even purchase real estate. Call me crazy, but those sound an awful lot like economic stimuli.

Not to mention, many students of color or working class students who would otherwise never consider college because of their financial lot in life might finally get the true access to higher education they deserve, creating more diverse workplaces and more equality among classes and races.

If we can spend billions on a war Congress didn't even authorize, why can't we give money to our future leaders to go to college? That's something I'd rather see my tax dollars go to anyway.

So on July 1, I hope college students enjoy the slight lightening of their debt load - and I hope our country's leaders think about just how easy it could be to widen the college road.


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