Thursday, April 09, 2009

Reduce the Rate (on student loans)

I'm just going to put this out there. I've been off the parental dole since age eighteen, and I have three college degrees (BA, MA, PhD), all paid for at least partially by student loans. I now have a six-figure student loan debt, that gets bigger *every single month* because I cannot afford to even pay the interest on it each month. My payment plan right now is the Income Contingent Repayment plan, in which I pay a percentage of my take home each month (right at 15%). This figure, as noted, is less than the monthly interest, so every six months, that extra interest is capitalized. Yeah. So. My student loan debt is three times the size of my mortgage. It's brutal.

The interest rate is around 8%, and there is no amount of re-consolidating that will improve it. My first student loan was in 1984, when 8% was considered low. These days, a new student loan runs somewhere below 5%. If I could even drop the interest rate to something reasonable, I might be able to make some inroads into the capital.

My only hope, my only consolation is this: after twenty years of ICR payments, the capital will, supposedly, be forgiven. OR, after ten years of payments while working for a non-profit (which I do), my balance may be forgiven. This latter plan is a new Obama production and is supposed to go into effect this summer. I'm not one for praying, but if I did, I'd pray and pray that this actually happens. I could be out of debt before I'm fifty years old! Holy crap!

I have been working very hard to get my finances in order and pay down my credit debt. I've scrimped and saved a $1000 emergency fund. I've quit using credit cards. But always, looming, is this enormous student loan. E-NOR-MOUS.

Here's the thing: I'm a middle-class kid. Dad worked for the federal government, mom worked part-time office jobs. We lived in the suburbs, had two cars, my brother and I went to private schools on and off. But even if my parents had paid for my BA, they would not have forked over for the next two degrees, because, frankly, they couldn't have afforded to support me for another 8 or 10 years. College education - even just the BA - is getting to be out of reach for even the middle classes, never mind the poor and working classes, who are increasingly unable to go to even the most affordable junior colleges. This is unconscionable.

I bring all of this up because of a post I just read at The Angry Black Woman's Blog about a movement to Reduce the Rate. As in, reduce interest rates. Make student loan payments affordable. Stop penalizing universities for studens who default. Here's the agenda:

* Reduce the interest rate on all student loans to 1%.
If banks can borrow at 1% or less, then so should our students.

* Extend the grace period before loan repayment begins from 6 months to 18 months for students who graduate.

In these tough economic times, it takes a college graduate an average of 6 months to 1 year to find a job. The rules should reflect this reality.

* End the penalties assessed to schools for student loan defaults.
Schools should not be held accountable for students who don’t pay back their loans.

* Increase Pell Grants to cover the average yearly cost of a public
4 year institution instead of the amounts in the current stimulus package–$5,350 starting July 1 and $5,550 in 2010-2011

I would like to add: reduce the rate on existing student loans - not just new ones. I work for a museum. I'll never make enough money to pay off my student loan. Seriously. Never. Even if I were to be able to get a tenure-track teaching job at a university, the pay is similar. I know guys digging ditches in oil fields who make twice what I do. This is my choice, yes, but it's also a choice that benefits my community. Those of us who work in non-profits are highly educated, under paid, and deserve a chance at one day, somehow, some day, being DEBT-FREE. It's not a lot to ask.


mighty jo said...

i wanted to go to college but did not qualify for help because my parents made too much money (even though i never saw any of it). i tried to go again later in life, but could not get past my feeling that i should not have to pay for classes i did not want to take. i do not like the education system in this country. i hear all the time about healthcare for the masses--we also need to find a way to bring education to the masses!!

Bird said...

I wholeheartedly agree. It is in any country's best interest to have a well-educated workforce, and that means making it possible for people to pursue post-secondary education.

Once you win that war in the US, could you come up here and try it out for Canadians too?

Jezebella said...

We'll put Canada next on the list!

I am firmly convinced that it behooves the powers that be to keep education levels low, particularly for the working and poor classes, so that there is a steady stream of workers ill-equipped to do anything but work in menial jobs. And, furthermore, those workers, without a good education, are likely to be unfamiliar with their rights as workers and, say, the benefits of unionization.

I mean, Wal-Mart always needs workers! What you want an education for??

ralph said...

yo, you're aiming too low.

signed up to start my third degree. i have government funded places, which mean the Aut gov pays for 85% of my fees. for the remaining 15% (BA: $4K AU a year - $2700US; JD - $8K AU a year - $5500US) i am allowed to defer payment, the government lends me the money.

repayment comes out of my tax, but only after I'm earning a taxable income of $45KAU (about $30K US) per annum. It is a % repayment rate, so you pay a % amount increasing with income.

Last of all - no interest, but indexed to inflation.

Your system.... makes me hurt to think about.


ralph said...

oh. i forgot :)

Until you're earning that much, you are not obligated to pay a cent. If you go volunteering, traveling for a few years, stop working to reproduce, your repayment obligations ceases until such time as you're earning over the designated amount.

the recently elected somewhat more left government totally abolished all places for AUS citize4ns and perm residents (though perm res. need to pay the 15% up front) that are full fee paying; that is - you get one of these places at a government funded uni (and all but 2 Aust unis are gov. funded) or you get no place at all.

student loan interest rate said...

Thanks for tips to reduce student loan rates.

paying back student loans