More than $1 trillion.
That’s the outstanding balance owed in U.S. student loans this year, a staggering and unprecedented amount of college student debt.
The recession is partially responsible, with many people entering college to seek degrees they see as necessary for a secure future. Now the interest rate on some loans is set to double if Congress doesn’t pass legislation.
Many students are troubled about the possible increase.
“This issue isn’t just for a certain segment of America, it’s for the majority of people,” University freshman Gregory Keating said.@@http://directory.uoregon.edu/telecom/directory.jsp?p=findpeople%2Ffind_results&m=student&d=person&b=name&s=Gregory+Keating+@@
On July 1, the interest rates on subsidized Stafford Loans will leap from 3.4 percent to 6.8 percent@@http://www.purchase.edu/Departments/EnrollmentServices/FinancialServices/programs/stafford.aspx@@. Students will lose a six-month grace period during which they wouldn’t have to pay interest on the loan and the interest wouldn’t accumulate, but would be taken care of by the federal government. In this scenario, subsidized Stafford loans may end up costing about $1,000 more over the life of the loans, according to President Barack Obama’s administration.
There is legislation in Congress meant to prevent the subsidized loans from expiring, but Republicans and Democrats cannot agree on how to pay for it.
“Having interest rates that high is counterproductive,” Keating said. “I think the government should be a little more sympathetic to kids going to school, because most are average Americans and not everyone is making a fortune.”
Keating has taken out several hundred dollars in Stafford loans this year, and that’s just the beginning.
“I’m definitely going to be taking out more loans all throughout college,” Keating said.
Nearing the end of their college careers, many students have already accumulated large amounts of debt.
“So far I’m sitting at about $20,000 in Stafford subsidized and unsubsidized loans and that’ll be about $25,000 by the time I’m done,” University student Keegan Clements-Housser said.@@http://directory.uoregon.edu/telecom/directory.jsp?p=findpeople%2Ffind_results&m=student&d=person&b=name&s=Keegan+Clements-Housser@@
Because Clements-Housser is a self-proclaimed “super senior,” he is concerned about adding on to his debt.
“I’m not looking forward to paying more. I also need to take out more loans that will be at the higher interest rate to finish my degree,” Clements-Housser said.
In 2007, Congress passed the College Cost Reduction and Access Act. The act reduced interest rates on subsidized Stafford loans over a four-year period. Now, Congress is debating whether or not to let the lower interest rates expire.
“People tell you you have to go to school because that’s the only way you’ll get ahead, but then you have to pay for it,” Keating said.
Student loans can be private or federal and unlike nearly every other type of debt, cannot be discharged in bankruptcy — unless it is shown to cause undue hardship in a court of law.
“It’s just strange I think; you go to college and you have so much fun, but then, oh crap, you have to pay off your loans,” University freshman Brittany Nakamoto said.@@http://directory.uoregon.edu/telecom/directory.jsp?p=findpeople%2Ffind_results&m=student&d=person&b=name&s=Brittany+Nakamoto+@@
Nakamoto is trying to brainstorm ways to someday pay off her student loans. As an out-of-state student, she is attending the University almost completely on student loans.
“I think I will just have to work really, really hard and not treat it lightly,” Nakamoto said. “I’m going to work hard so it’s not my parents who have to pay it off. I could start saving money now, maybe have a college payoff account.”
Keating is more dubious about how much in loans he’s willing to take on.
“If paying for college becomes way too costly I think I’d have to start asking the question, ‘Is college really worth it?’” Keating said “If I could buy a couple of cars and a house for the same as going to college, is it worth it? And then I have to pay even more back?”
Currently, Congress is only debating whether or not to maintain a current student financial aid program, the subsidized Stafford loan. At this point, there is no serious legislation in Congress to reform or increase financial aid, despite the explosion in student debt.