The Student Loanmageddon

                                                                         

Last year both the Republicans and Democrats both vowed to extend the 3.4% student loan interest rate for another year to avoid backlash from young voters. Once again Congress failed to develop a permanent plan that would prevent Stafford subsidized student loan interest rates from doubling to 6.8%.  This year the country is waiting relentlessly for Congress to reconvene and develop a solution regarding the student loan interest rate hike when they return from vacation on July 10, 2013.

The interest rate hike will put more pressure on college students to quickly find a job and a job that will at least pay enough to cover basic living expenses and their student loans. Hopefully, students will earn enough income to pay any other financial obligations they may have such as credit card debt.

According to Huffington Post, the government earns billions in revenue and will earn even an additional $51 billion with the interest rate hike. Sadly, the students who need the interest rates to remain at 3.4% are the ones that will suffer the most and go further into debt.  Sen. Elizabeth Warren, stated, ''We should not be profiting from students who are drowning in debt while we are giving great deals to big banks".

Members of Congress are out-of-touch with Americans because they can afford to send their children and grandchildren to college without the need for student loans. The student loan industry is a constant reminder of the economic disparity between the rich and the poor.

Every American deserves the right to receive a college education without having to pay for it for the rest of their lives. Then again, Americans deserve a right to a free quality public education, a fair judicial system, live and work free from sexual harassment; discrimination and prejudice based on color, race, gender, ethnicity or religion but unfortunately those issues still exist.  The student loan issue is just another mountain that Americans have to deal with.

The interest rate hike probably won’t stop students from attending college but the haunting student loan debt derails plans for college students to live the American dream by becoming a homeowner, starting a family or starting a business.

According to Tucson Weekly, more than 100 college campus leaders sent a letter to Congress concerning the interest rates. Some leaders also went to the White House and some students protested in front of the Capitol to urge Congress to take action prior to July 1, 2013 but their voices went unheard.

Most college students affected by the interest rate hike will not see a change until they return to school in the fall semester 2013 since the hike only applies to loan disbursed on or after July 1, 2013. 

Many students don’t really understand the impact the interest rate hike will have. If they did, many more would be complaining and voicing their concerns.  In addition, many students feel helpless about the student loan interest rate hike.  However, students can voice their concerns to their state senators and congressman as well as their U.S. congressman. Even a simple email or phone call will show Congress that the issue is important to you, as well as current and future college students. There are online petitions that can be utilized such as moveon.org or change.org to get support for the interest rate hike.  Use the Bankrate amortization schedule to calculate your payments over your loan term http://www.bankrate.com/calculators/college-planning/loan-calculator.aspx.

The maximum amount students can borrow for Stafford subsidized loans for a 4 year education is $23,000.  This will result in a monthly payment of $175.57 for a 20 year loan term and would result in a total payment of $42,135.83. However, if you owe an additional $30,000 in unsubsidized student loans with an interest rate of 6.8%, your monthly payment would be $229 a month.  You would now owe a total of $375.57 a month in student loans. 

The average cost of utilities in an apartment is $165 per month, the average car note is $350 per month, the average cost of clothing is $220 per month, the average cost of an apartment is $1,600 per month, the average cost of internet is $45 per month, the average cost of a cell phone is $139 per month, the average cost of toiletries is $103 per month and the average cost of food is $200 per month if you buy groceries, if you eat out often the cost is higher. Based on these figures you would need to bring home at least $2,442 a month after taxes plus your student loans of $375.57 based on the figure used above which results is needing $2,817.57. This excludes gas for your car, car insurance and maintenance, health insurance and hair care (hair salon or barber) and any other expenses such as coffee, cigarettes, cable, etc.

You have to ask yourself why does Congress only approve short-term fixes to address the student loan interest rate. Three years ago Congress could have developed a permanent solution. When Congress was predominately Republican they could have come up with a solution, when Congress was predominately Democrat they could have come up with a solution, yet they did not. 

Develop a plan that you know you can stick to it to pay back your student loans.  Defaulting on student loans can result in losing your tax refund, garnishing your wages or accessing money in your bank account. Another headache you don’t need.