What is the BIG Deal about student loans?

Amazing the way we, as thinking people, are manipulated by the media.  Where is the outrage at food and product inflation, gas prices, and joblessness…???  Instead, the media fabricates crises, and we, like sheep, fall for it.  For the issue of student debt, the issue really SHOULD be:  Why is the government (who is not known for their fiscal responsibility) in the loan business anyway?

Our philosophy on student loans is that they are to be avoided.  We didn’t always think this way, but the endless stream of deferment and defaults on student loans has caused us alarm…not only for the pain to the borrower, but the pain for the taxpayer to pick up the tab.

Let me give you the skinny on student loan interest rate…and why the interest rate focus is way out of perspective.  The media has spun this mindlessly out of perspective.  In short, the interest rate was only to be 3.4% for one year.  If you listen to the whiners, they make it sound like it has been low for a long time.  A brief look into a history of less than 2 decades is very revealing.

From 1992 until 2006, the interest rate was variable for subsidized loans…capping out at 8.25%.  Before that, it capped out at 10%.  In 2006, the sub rate became fixed at 6.8%, and the masses cheered…Then in 2008, congress voted to incrementally lower the rate by around 1% a year, until it hit 3.4%...That was school year 2011/2012 and would return to 6.8% in 2012-13.

The difference in payment from the 3.4% to the 6.8% is less than 45 dollars a month if the student were to borrow the max of 27000 dollars.  The anger at the feds making money on interest is so misplaced.  Where else can someone whose only assets are a futon and a bike borrow 27k without regard to ability to repay or accountability?

Most of the money borrowed for college is NOT subsidized, and those rates have always been 6.8% fixed, or the variable with a cap of 8.25-10%.  PLUS loans also have always been high…those are the parent loans that are irresponsibly dispersed without regard to collateral or ability to pay.  Before 2006, PLUS loans had to start repayment 60 days after disbursement. 

From a capitalistic point of view…at any interest rate…students without collateral, income and credit history are a high risk, and are lucky to get any loan at any rate.  From a taxpayer point of view, with the dropout rates higher than the 4 year grad rates…most of the money spent on loans or grants are not a great return on investment. 

We have lots of free resources, like weekly WEBinars, speaking in the local schools, and practice SAT/ACT testing.  Check out our website, as there are lots of free downloads as well.  www.GetCollegeFunding.org

If you would like to purchase a wonderful piece of software for college/career planning and receive a large chunk of money to your high school, go to www.MoneyForYourSchool.org