President Obama’s new education budget includes a proposal for a radical restructuring of the government’s Pell Grant fund, a plan that has been met with general enthusiasm from students and colleges alike. Under the current plan, students receiving a Pell Grant would not always get a straight deal, as the amount of the grant depends on how much money was allocated to the program that year by Congress.
As we all know, left to its own devices, Congress will seldom get the job done right, and as a result, the amount allocated to the Pell Grant for the last several years has not kept up with inflation, contributing to a steadily shrinking availability of funds for college students. Obama’s new plan will guarantee funds for the Pell Grant every year at such a rate as to keep up with inflation and, hopefully, fulfill his plan to make college affordable for all Americans.
However, as important as it is to reform college financial aid plans now, there still remains the issue of the students who weren’t lucky enough to be born a few years later; the ones who have been earnestly competing for a number of grants, scholarships and loans that are fast disappearing as our economy burns down, falls over and sinks into the proverbial swamp.
The shortfall between rising tuition prices and shrinking financial aid has been filled recently by credit card companies, in yet another example of an absolutely terrible decision students make when they have no other options available – similar to cold Dough Co. for breakfast, but somewhat more dangerous. Credit card use among students has skyrocketed in spite of the fact that money is currently in very short supply; only now, students aren’t just using their credit cards for condoms and beer anymore.
A recent study by student loan provider Sallie Mae found that roughly nine out of 10 students now rely on credit cards to cover basic school expenses, such as textbooks and even tuition. These students estimated charging up to $2,200 per year, and only 17 percent reported that they paid off their cards every month – only 1 percent are lucky enough to have their family covering their credit card bills.
Ordinarily I would chalk these numbers up to student irresponsibility. But the simple fact is that for a growing number of students, the choices are either drop out of school or incur substantial credit card debt. This issue is yet another remnant of the economic irresponsibility that preceded the Hindenburg-like explosion of the subprime mortgage bubble – credit card companies are more than willing to sign students up for large lines of credit, drawing them in with incentives such as temporary zero percent APR or free hats. As a result, half of all students surveyed have four or more credit cards.
To make matters worse, credit card companies have been steadily increasing their interest rates over the past six months. One student in Denver was shocked to find her interest rate had jumped from 9.9 to 25 percent, further contributing to the sizable post-college credit card debt she has to look forward to. In an economic climate where the average credit card balance among students is $3,173, these sorts of rate hikes have the potential to push us into another financial crisis, as cash-strapped graduates struggle to pay off mounting debts. Looking on the bright side, though, it probably won’t be too hard for them to get a house in today’s market. They’ll just have to finance it with their credit card.
This isn’t a problem caused by improper education about the dangers of out-of-control credit card debt; it’s a problem caused by desperation and lack of other, safer options. If we’re going to improve the economy, it’s important to safeguard the financial futures of the new generation that is soon to enter the workforce with bad credit and huge debt. Banks and auto manufacturers got their bailouts – now students need them, too. More must be done to provide adequate financial aid so students leaving school in debt won’t have to watch their debt double every couple of years until they finally sink, just like the economy.
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