Student Loans: The Good

Student Loans: The Good, The Bad, The Ugly

Price Rodger

Written Communications I

September 31, 2010

Ms. Vivo
 Abstract

Jobs in the economy today are only accepting workers who have a four year college degree.
Society has always told us that college is a must in order to be successful. School only gives you
a higher education and doesn’t guarantee that you will make over a hundred thousand dollars a
year. Student loan laws need to be stricter and regulated better by the government. Without them
doing so these private lenders are tricking students into high rates for their education. Something
that we are urged to pursue as we get older but are given very little help with. Student loan debt
will only continue to grow unless something is done right away to stop it. Students will not have
to struggle once they graduate from school to repay their loans, but now can start a new chapter
of their life. One where they are debt free.
Student Loans: The Good

Student Loans: The Good, The Bad, The Ugly

The average person with a college degree earns twice as much compared to someone who

has a high school GED. Many high school graduates feel compelled to further their education

and attend college to be more successful. The majority of college students, however, are not fully

able to pay for their education without the aid of the federal student loans. This is where the

problem starts for them. The students obtain these loans out of necessity and typically are

unaware of the seriousness of defaulting on these loans in the future. These students need federal

loans in order to complete their college education but are not familiar with the risks of default

and the high rates that are associated with the federal student loans. Universities should be held

responsible in educating their students in regards to all the risk associated with taking out a

federal student loan, as well as providing alternatives methods of paying for tuition with grants

or scholarships before students sign on the dotted line.

Studies show that student debt is at an all time high "One in every five government loans

that entered repayment in 1995 has gone into default, according to a recent report released by

The Chronicle of Higher Education. The default rate is higher for loans made to students from

two-year colleges, and higher still, reaching 40 percent, for those who attended for-profit

institutions." (NPR Staff)With the everyday cost of living rising, more and more people are

struggling to stay afloat and pay their bills. Upon tuition costs consider the food, gas, and

housing expenses; students are misguided with the appeal of the loans without truly

understanding the fine lines of these loans. When enrolled into a program at American Career

College for example, the cost for the course is very high at forty-five thousand dollars. Only way
someone could pay for that is through student loans. The next step is to schedule an appointment

with a financial aid advisor. Then he/she may suggest that student loans are the best way to help

with school. One must complete a packet with 30-40. A couple weeks later if approved you will

receive a letter of approval for the student loan, a couple signatures here and there is all you need

and the paperwork is done. The fine line of the interest rates, repayment programs, and loan

details will never be fully discussed by the financial advisor. The entire application process is too

easy, five minutes of discussion with an advisor and the entire meeting is over. The whole

process of meeting with an advisor takes less than 30 minutes; this is where change needs to take

place first. I a better system would such as a class offering thorough details about the whole

application process for just a few hours of class would help you prepare for the consequences

and inform you with relevant information to your college degree. What is the annual income for

the profession? Would the profession be enough to repay the student loan? Are you aware of the

consequences if you are not able to repay your loan? These are questions that should be

answered before the student takes out the loan.

As time goes by more and more student loans are being taken out and the total money

owed to the federal government has increased significantly. ” Student loan debt passed total

credit card debt for the first time. According to the Federal Reserve’s statistical release, G.19

Consumer Credit, the seasonally adjusted revolving credit totaled $826.5 billion as of June 2010.

As much as 98% of revolving credit is credit card debt.” Student loan debt outstanding totaled at

least $830 billion as of June 2010” (Kantrowitz) these figures show that either the degrees people

are graduating with are not paying the bills or People truly cannot afford college? Maybe people

don’t know how to properly manage their finances but bottom line student debt from these loans

is getting out of control. The rules and regulations need to be clear to the students so that they
understand a college degree will not guarantee you money, it only gives you a degree given that

you finish school. Today many students take out a loan and get stuck with such a big burden and

just drop out of class. Going to school requires the student’s full attention. Student needs to be

devoted to passing the class, showing up on time, and turning in all of the homework to be

successful. With the interest accruing, the loan amount only gets bigger and bigger. Before I

started my Program at ACC I worked at a collection agency that dealt with only Defaulted

students loans. During my tenor at the company I dealt with many debtors who just didn’t know

how to take care of these loans. People, who went to school earned degrees from private

colleges, took out loans originally for fifteen thousand dollars now owe thirty five thousand over

a 10 year period, now working at low skilled companies like Wal-Mart, and Wal-Greens. There

are some debtors who will do anything to escape the legalities of these loans and that is only

hurting their credit or having their Federal taxes taken to repay the loan.

“Feds open up additional $2B in student loans” (Godhere) Is the title of Emma Godhere’s

article in which she talks about how the government is to extend the limit of student load aid by

$2 billion make sure that eligible students loans for their fall schooling. These statistics only

show that something needs to be done now. With the growing increase with student’s loans,

students need to be better educated. It shows that the cost of schooling is also too high. The

alternatives solutions may not be great enough to help every single student out.

Should the responsibility solely be on the students? I feel Students are young and still

immature when they graduate from high school; at least I know I was. At such a young age our

minds are still being molded. The only way to learn is to experience things yourself but I

disagree. If you can avoid debt, then do so. Most of the time these students do not know what, or

who they want to be. During the course of the first two years their major may change countless
times. Here are some alternate solutions to going to school at half the cost. There are plenty of

scholarships that offer money for school that never has to be paid back, but students have to take

the first step and look for them. Scholarships are the most sought after type of financial aid out

there. Scholarships are seem to be very popular because you do not have to pay them back and

some are not based on financial .There are tens of thousands of scholarships available for college

students, you just have to look for it. Scholarships are also one of the hardest types of financial

aid to get because there might be twenty thousand students vying for one or two scholarships. In

the long run it will all be worth it.

“Research firm Student Lending Analytics estimates that 37 percent of graduates facing

loan repayment are struggling, delinquent or in forbearance. Fortunately, a monthly payment cap

of 15 percent of income above a certain level recently went into effect for federal loans” (Makan)

Once again data shows that students are coming up short on paying for their student loans. They

are not getting the assistance they need to take care of them. With the right education on these

loans students can feel at ease knowing what they get themselves into. Students end up taking

these long fixed repayment programs; by the time they graduate they have a thirty- year

repayment program. At which point they might have children and they might attend school and

they would still have their loans outstanding.

“Well, education debt generally is good debt because it enables you to obtain a job that

has high enough of a salary that you can pay back that debt. But you need to be careful to not

borrow excessively. A good rule of thumb is to not borrow more than your expected starting

salary for your entire education.”(Martin M) does in interview with Mr. Kantrowitz, publisher of

FinAid.org. He gives us insight that there some key things to keep in mind before you enter an
agreement with a student loan. If education classes were just offered before you take out student

loans. Students would not have to go through the hassle of falling into default. Rules and

regulations need to allow a longer grace period once the student graduates from college and

lower interest rates.

With the way things are going student loan debt is only going to get worse in the next couple of

years. Fewer and fewer students will make payments for their loans. With better laws and

regulations over whom and who does not receive financial aid will help put a stop to this debt.

There are plenty of options for students to look into such as going to an affordable school or one

close to home so they could enjoy fresh cooked meals and cut back on expenses such as laundry

and rent. Another must is to get a part-time job. If you are going to take on the responsibilities of

student loans you should start to repay them as fast as possible. College and universities need to

delegate who should receive student loans and allow students lower rates so that when they

finally graduate from school their loans do not grow bigger than the amount of money they earn

in a earn at a new job. Universities and students need to assume an equal role and do their parts

in finding a solution to the growing student debt. For many students plunging into debt is the

only option. The lenders start small and cheap, tricking students into a false sense of security. By

the time the full effects of debt creep in, it's too late.
Student Loans: The Good

Annotated Bibliography
Godmere, E. (2010). Feds open up additional $2B in student loans. Retrieved from

http://thesheaf.com/2010/09/09/feds-open-up-additional-2b-in-student-loans/

The Sheaf article written by Emma Godhere explains that student loans are not just happening

here in the United States but also in Canada too. The federal government just allowed more

students up to 2 billion more dollars in student loans if they are already in financial debt with

their student loans. Without that money students would be faced with difficult times in trying to

find ways to pay for their education. People who graduated college are faced with high interest

rates and jobs that do not pay enough.” “According to the notice that I got from the student loan

people, I owe a total of $28,548 in federal student loans and an additional $3,450 in provincial

loans to the credit union here in Charlottetown,” With interest still accruing on it the loans.

People who further their education need to put more thought into what they get themselves into.

Makan, J. (2010). College loans 101: New rules for borrowers. Retrieved from

http://www.smartmoney.com/personal-finance/college-planning/college-loans-101-new-

rules- for- student-borrowers/

SmartMoney Magazine written by J. Maka gives simple rules to follow to help the college

student get through their defaulted student loans and manage them better. “with private-college

tuition has soared almost a third since 2004- more students are becoming first time borrowers.

Indeed, 53 of incoming freshman reported using loans last fall, the first significant increase since
2004, according to UCLA’s Higher education research institute, but a sluggish economy and

confusing new rules are making it tougher to manage student debt

Martin, M. (2010). Expert: In U.S., Student loans trump credit card debt. Retrieved from

http://www.npr.org/templates/story/story.php?storyId=129727070

Studies show that credit card debt is gradually declining but now a new debt is growing, student

loans. With statistics and fact martin shows that 830 billion dollar credit card debt is now

surpassed by an 850 billion dollar debt of student loans. He clearly states that students are

receiving the proper education about student loans and are not taking the right steps to keep their

debt from going into default ruining their credit. He proposes that schools should be penalized,

but allowing the school to get a budget of financial aid given to them if students fail to repay

their loans.

NPR Staff (2010). Report: Feds downplaying student loan defaults. Retrieved from

http://www.npr.org/templates/story/story.php?storyId=128725717

Fed downplaying student loans defaults recognize that the government is not doing their part on

giving informing people of the right information. Saying that publicly all of the statistics and

date given by them is incorrect. Student loan debt is a big problem than what they are saying it

is. New laws and regulations need to come into effect in order to bring the billion dollar number

down. Also college institutions should be held accountable for allowing almost any student to

take out loans, without the proper processing of paperwork.

Kantrowitz, M. (2010) Total college debt now exceeds total credit card debt

http://www.fastweb.com/financial-aid/articles/2589-total-college-debt-now-exceeds-total-
credit-card-debtAugust 11, 2010
Credit debt is now slowly decreasing but a new problem that is arising is student loan debt. It

compares the two debts, showing that student loan debt is more than credit card debt.” Federal

Reserve’s statistical release, G.19 Consumer Credit, the seasonally adjusted revolving credit

totaled $826.5 billion as of June 2010. As much as 98% of revolving credit is credit card

debt.Student loan debt outstanding totaled at least $830 billion as of June 2010,“Consumers have

been paying of their credit card debt because of the higher minimum payments set on the credit.

Due to the economy being bad there is a steady decline in available jobs leaving people with

options of going to school but taking more school loans out.