Student Loans: I’m ready to place blame.


Student loans. Two words I escaped in undergrad but responsibly and begrudgingly chose to assume for my graduate degree (currently in progress). I’ve blogged about student loans in the past, but now that I am actively going through the process, my convictions have strengthened.

My decision, after much contemplation and research, to assume student loan debt was not an easy one but necessary if I wanted to make that “investment” into my own future. (Note: I do not plan to “Teach for America” or work for the Feds, so it’s safe to assume that I will pay back every penny with sufficient 6.8 % interest.)

I could NOT believe how easy the application and approval process is. You fill out a few questions about yourself and your financial state (and at my age, both of these are minimal), submit, wait, and APPROVED! You then complete a 15-minute webinar on loans, sign a “digital signature” and your loan is assigned to a master company who you deal with directly.  The money is directly deposited into your account. After doing this, you don’t really hear from your loan host, except for a few ‘holidays’.

This year, I received a “birthday card” (via email)  from my student loan host…on the wrong day. They don’t even have my date of birth correct in their database. Fabulous record keeping. Sure, this is a minor feat, but when you can’t record-keep correctly, it makes me question what else you can’t do correctly.

Then, just this week, I received a “Welcome Back!” email from my loan host as well. Please see the ‘circled’ sections below:

A few things to consider before we move on:
There are subsidized loans, which allow you to hold off on accumulating interest until graduation day; and unsubsidized loans, where interest begins accumulating from the day you accept the loan. With unsubsidized, you can either a) pay the interest during your time in school or, b) have the interest funneled into the final loan amount and end up paying interest on interest. (initially, you can choose subsidized over unsubsidized, but subsidized maxes out earlier than unsubsidized)
Being the stingy, OCD person who would rather spend that money on something else, that I am, decided to take ‘option A’ in regards to my unsubsidized loans to ultimately reduce the amount I have to pay back. You would NOT believe how difficult this process is.

Let’s talk about how unrealistic student loans are.
Where in real life are you expected to make a monthly payment without receiving a bill or some sort of “payment voucher” etc?
Where in real life can you REDUCE THE TERM OF YOUR LOAN because you’ve gone 10 years with on-time payments? (I’ve yet to meet a mortgage lender who says “Thanks for being on-time for the last few years. We’ve wiped your slate clean, the house is yours!”

We saw with the mortgage industry what happens when you assume more debt that your asset is worth. So why are we allowing students to pull out the maximum [graduate] loan amount of $20,500/year when tuition can often only cost $5k-$6k? Imagine how low payments would be or how quickly you could pay off loans if only the bare minimum was accepted?

Another problem: deferment. I fully support our armed servicemen and women and agree with deferment while they are fighting for our freedoms overseas. I do not support deferment for those experiencing “financial hardship”. If you are unemployed, you can defer for up to three years. Really? I guess this is better than allowing unemployment benefits to be put towards loans, but still. How is this even an option? Maybe you should have selected a degree in something other than Art History or Gender Studies through Social Work.

Finally, cancellation. Whose idea was this? I would love to know so I could take them for a long walk on a short plank. Like I mentioned above, loan amounts can be taken out to far exceed the cost of education. Now there is an option to cancel loans for a variety of reasons. If you plan to cancel the loan based on “service”, don’t disperse a loan at all. Simply don’t charge tuition for said person. Allowing them to take out sometimes 4x the loan amount and then canceling the entire thing…???Heaven only knows what we’ve actually paid for in tax dollars.

The last thing I am implying is that students are not responsible for their own loans. They absolutely are. But, back to the email….
Why would you send emails saying “You don’t need to do anything!” when in reality, you do?
Why would you cease correspondence after signing loans until 6 months after graduation when the payments begin?
Why would you omit the fact that you can start making payments on your loan amount starting the day you assume them?
Why would you allow telephone operators to say payments cannot be made over the phone and make online account set up extremely time-consuming in an effort to discourage early payment?

I’ll tell you why: Because student loans are a feeder into the dependency of a nanny state.

With student loan debt at an all-time high, approaching nearly $1trillion dollars, we should be scared. We should be making moves.
We should absolutely encourage people to begin paying money back immediately upon the commencement of the loan. Even if it’s only $10 a month, some sort of effort, some sort of action should be promoted if it won’t be required.
We should ONLY allow tuition costs paid directly to the school + a book allowance to minimize repayments and loan withdrawals.

The student loan program is entirely broken. It is only working for that small percentage that actually pays, or intends to pay, back the full amount + interest. I call for an entire moratorium on the federal student loans industry. Otherwise, cost will only increase as those of us who make every effort to repay them are left with the burden of compensating for those who do not.

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