April 9, 2014
The Double Edge Sword Known As Student Loans
Higher education should not be a privilege but a right; it should not be exclusively for the privileged. Not so many years ago the idea of seeking a college degree was optional. There were many jobs available in the United States that one could produce enough earnings to support a family. They were referred to as middle class jobs, however, due to some poor decisions made by our government those jobs are no longer available and the middle class is gone. Factories have moved to other countries and goods are produced cheaper there and imported back into this country ergo, we have become a country that no longer ...view middle of the document...
Repayment of a student loan is not easy and certainly not cheap. Interest on the loans is determined by Congress and the amount of interest that accrues (accumulates) on your loan from month to month is determined by a simple daily interest formula. This formula consists of multiplying your loan balance by the number of days since the last payment times the interest rate factor.(Studentaid.gov) The interest rate factor is the current interest rate divided by 365. Interest compounded daily gets expensive at an exponential rate. The student pays interest on interest! Congress should step in and reconstruct the loans to make them comparable to corporate loans where interest rates are frequently less than one percent and interest is calculated fairly, not daily. In 2012 Congress fought whether to let student loan rates increase from 3.4 to 6.8 percent interest. In the end Congress did keep the rate at 3.4, however it still accrues on a daily basis making repayment lengthy and expensive. If the loans were constructed comparable to an auto loan where the interest is calculated based on the principle then divided into equal payments for a set amount of time, the student’s obligation would be greatly reduced.
When the loan enters into repayment status the payments are huge, often times comparable to a mortgage payment. The student then has no available funds to stimulate the economy; every penny earned goes to an enormous loan payment extending ten to thirty years. Congressman Hansen Clarke proposed a bill that would alleviate some of the burden that has been placed on students. This proposal included the 10/10 Loan Repayment Plan which (a) would for ten years automatically withdraw 10 percent of the debtors income and then (b) would forgive loan debt up to $45,000… The petition claimed that forgiving debt would stimulate the economy by in effect giving the former students more money to spend.(Applebaum 465) Unfortunately only one congressman had the nerve to sign the bill notwithstanding the desperation of millions of loan bearers.
The New York Federal Reserve estimates that 37 million Americans have student loan debt, totaling 870 billion dollars.(468) Interestingly...