A 21st Century Journalism Project

Dealing with Student Debt

In People on May 1, 2012 at 3:31 pm

By: Tim Reeder

Student loan debt surpassed credit card debt in 2012. Graduates spend ten percent or more of their paychecks on student loans.

Representative Hansen Clarke of Michigan proposed the Student Loan Forgiveness Act of 2012. This would forgive student loan debt for those who have paid 10 percent of their discretionary income toward their loans for 10 years and would cap interest on federal student loans at the current rate of 3.4 percent. After five years, teachers, public servants, and medical practitioners could have their debt forgiven.

If the act becomes law, it will help put money back into people’s pockets and their local economies instead of private loan companies. In theory, people will have money to invest, buy homes, and start businesses.

Student Loan Debt weights a lot on college graduates (Photo Credit- Google Images)

Angie Rider, an elementary school teacher in Detroit, told the Huffington Post in 2012 she was frustrated with her student loan debt. “I have my Bachelor’s degree and my Master’s degree, which is supposed to help you become a great teacher, but you don’t get paid enough to pay off what it cost you,” Rider said.  The cost of college tuition increases every year at the same time as job salaries have stagnated. This makes paying back student loans almost impossible without defaulting, even for graduates with steady employment.

Nathan Kennedy, a small business regional manager, and his wife Jackie Kennedy, a nurse, are both paying back student loans. “We make more now, but if you calculate in our monthly student loan payments, we actually make less than when we had jobs requiring less academic qualifications” Kennedy said.

As for students still in school, they have some options available to save themselves from getting into debt. One way is to receive a Federal Pell Grant, if eligible. Federal Pell Grants do not have to be repaid and can award up to $5,550 a year. These grants are only offered to undergraduate students who have not yet earned a bachelor’s or professional degree.

Scholarships also do not have to be repaid. An average scholarship is anywhere from $1,000 to $2,000. The most common scholarships are merit-based, need-based, student-specific, career-specific, or college-specific.

The U.S. Military has two ways to offset the cost of higher education: The Montgomery GI Bill (MGIB) or Reserve Officers’ Training Corps (ROTC). The MGIB assists active duty members in the military by potentially paying over a thousand dollars a month for up to four years of college. These benefits can be used during or after military service.

ROTC is a college based program that allows student to have the college experience while training to serve any of the branches of the U.S. Armed Forces. In return the students serve anywhere from four to ten years depending on which branch they trained with.

Genevieve Foote had scholarships and grants to help her first two years as an undergraduate student at Alfred University. As a graduate student at Edinboro University of Pennsylvania, she gets no help from scholarships and grants. She has acquired even more debt. “I didn’t think about my student debt very much as an undergraduate, but I’m keeping a closer eye on it now. I have a lot to pay back so that’s why I transferred from University of Pennsylvania to Edinboro University of Pennsylvania for my graduate work,” Foote said.

By the time some graduates pay off there debts they will be in there 70s/80s. (Photo credit- Google Images)

Transferring schools was cheaper and saved Foote a lot of money. “After I graduate this spring, I’m hoping to get a position to have a comfortable living. If I don’t get that job right out of school I’m going to have to move back in with my parents, get a pay-as-you-go phone, save any spare money I might earn, and possibly go on unemployment. I can’t waste any time in trying to get a job that will help pay off my debt,” Foote said.

A student or graduate with two or more different kinds of federal student loans can consolidate them and may get a little relief by lowering the interest rate.  The interest rates could be decreased by .5 percent or more. Decreasing the interest rate will help a lot of graduates over time. The lower the interest rate the less money will be added to the loan as interest accrues while the loan is being repaid.

Student loans have surpassed credit card debt because graduates are having trouble paying them back. They’re having trouble because the jobs available to them are not paying enough. Companies can’t hire additional employees while the economy is in such a poor state. The working poor are an increasing demographic as the result of this, but programs assisting with student loan debt could help reverse this trend.

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