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Student Debt: Study Up Before You Sign Up

It’s that time of year again. Students nationwide are heading back to college and signing fresh promissory notes for financial aid. I am one of them. Many of us will mourn the loss of the summer sun while we simultaneously anticipate carving pumpkins and the smell of fallen leaves.

As our quest for knowledge continues and in that vein, I dare to ask, how much student debt do you have and, more importantly, do you understand the parameters in which you agreed to such debt?

As a graduate student, I am skilled in the art of back to school preparation – including ensuring that my financial aid paperwork is signed and ready for disbursement. However, until recently, I didn’t actually know what I had gotten myself into, and what legislation is in place to protect – or harm me. Knowledge is power; the lack of it can be costly.

Doing a little math, I was shocked to learn that the sum I will owe at the conclusion of my graduate studies, roughly $33,000, will accrue additional interest of about $12,000 over the course of the loan. That means for the next decade I will be responsible for a monthly payment of approximately $375, in addition to covering all my other costs of living. That’s about equal to a month of groceries, a monthly car payment, or a health insurance premium. I am certainly not the worst off – and I am not alone.

Even more troubling is the additional cost to me as a woman. The gender pay gap complicates the equity women strive for in choosing to purchase an education. I might be stuck paying off my student loan debt longer than the men sitting next to me in class, due to the lower pay women receive for the same work as men. Women typically earn 79 cents for every dollar a man is paid.

Paying my loan back over a longer period means compounding interest, and a higher total cost.

Several bills in congress have the potential to change the nature of student loans and the student debt crisis. Let your representatives and fellow constituents hear your voice.

One recent notable action by President Barack Obama includes changes to rules regarding financial aid applications. These new rules allow students to apply earlier in an aim to increase Pell grant eligibility, which may decrease the total amount needed for loan borrowers. It’s a small step, but in the right direction.

If I could reach back in time to my former self I would tell her to know the key terms when reading your promissory notes, map out a plan that is best for you, and talk to your congressional representatives about legislation that will work toward solving the student debt crisis. We can make this a better world for students and higher education.

This is my story, share yours at DeclareYourDebt

The Alliance for a Just Society has written a series of reports on the effects of student loan debt which include personal narratives of students who raced to the challenge of higher education and will continue to pay the price tag for years to come.

Graduates Struggle Under a Mountain of Debt

College is supposed to be the pathway to a better job and a better life, but for students across the country college is also the pathway to a life of debt.

Since 2008, states across the country have decreased their investment in higher education, with every state except for Alaska and North Dakota providing less per student in 2014 than in 2008. These cuts have led colleges and universities to increase tuition to make up for the lost funding, shifting that burden onto students and their families.

“A Mountain of Debt,” released this week in Washington and Connecticut, show clearly that when students face increased tuition and low wages, many must turn to student loans to cover costs. In fact, nationwide 70 percent of students graduate with student loans. The average amount of debt at graduation is $29,000.

Students in states like Washington and Connecticut find themselves unable to get by without loans for college, and unable to easily pay them off after graduation.

“I was working 80 hours a week to pay for school and living expenses. My average day would include working multiple fast food jobs sporadically thrown between classes, working one job until 8:30 at night, working 10 p.m. until 4 a.m. loading trucks in a factory, then getting up for class at 8 a.m. and doing it all over again,” said Alex Katz, a student at the University of Connecticut.

Christina Hoadley, a student at Central Connecticut State University, works two jobs to help pay for college, but still is worried about the prospect of paying off her loans. “After grad school, I anticipate walking away with a loan amount to the tune of $40,000. I’ll have to begin paying on all that within 6 to 8 months after completing school. It’s a lot of stress knowing the huge weight of debt that lies ahead.”

In Washington, Roxana Pardo Garcia loves the work that she has found since graduation, but she does not earn enough to make paying off her student loans easy. “My current student loan debt load is $19,000, and my loan payments take about 20 percent of my monthly take-home pay. I just wish I could help my mom out more. After all, she is the reason I went to school: to lift us out of the cycle of poverty.”

Bernadette Binalangbang of Tukwila, Washington has had to take a job outside of her field just so she can work to pay off her student loans. “I really love to bake and making pastries is my passion, [but] I’m currently employed full-time at a medical lab. It’s a complete shift from what I’d like to be doing, but it pays my bills and keeps me afloat — just barely. My student debt payments take up more than 30 percent of my monthly income.”

Disinvestment by states has left students and graduates like Alex, Christina, Roxana, and Bernadette in an uphill battle against the mountain of debt they’ve accumulated. States like Washington and Connecticut need to reinvest in higher education, or even more students will find themselves with no choice but to take out loans that they will repay for years to come.

Starbucks’ Free College Gimmick Clouds the Real Problem

student drinking coffee

As we’ve reported here and here, the state of higher education in this country has reached a crisis. The cost of tuition has risen substantially faster than any other good or service over the past 40 years.  There are many that are calling the student debt crisis the next financial bubble.

Under the Starbucks plan, employees would receive a discounted tuition rate for the first two years from Arizona State University’s online program. The discount amounts to roughly $6,500 over two years on $30,000 retail price. The remainder of their tuition is expected to be paid by the employee, through personal savings or federal Pell Grants or scholarships.

While this promotion may be somewhat helpful for struggling low-wage Starbucks employees, it does little to fix structural deficiencies in the higher education system. They are deficiencies that Starbucks directly causes and benefits from. As a key member of the Fix the Debt organization Starbucks funded groups that were lobbying for lower corporate tax rates.  These tax cuts are a direct cause of the disinvestment we’ve seen over the past 40 years in higher education. Read more

Sallie Mae Slap on the Wrist Doesn’t Go Far Enough

This week the Department of Justice levied a $97 million fine against the student debt servicing giant Sallie Mae. The findings of the DOJ’s long investigation revealed a host of bad practices and illegal behaviors at the company, including overcharging on nearly all military service members’ loans, and mishandling borrowers’ payments to maximize late fees and penalties.

The fine is appropriate and offers some sense of justice, but it also feels eerily familiar to the lawsuits levied against the mortgage companies before, during, and after the Great Recession. Time and time again, the Department of Justice, state attorneys general, and regulators all found ample evidence of egregious wrongdoing and rampant fraud, resulting in several multi-million dollar settlements with all the mortgage giants.

Unfortunately, it ended there. There still hasn’t been a single executive of a major bank brought up on criminal charges and held accountable for the actions that caused the housing crisis. There were no structural changes in how the banks operate. These settlements simply became the cost of doing business – and we are still seeing the same reckless and illegal behavior years after they’ve supposedly taken their medicine.

The student loan debt crisis is the next bubble, no different than the mortgage collapse. Our future and our families are at risk. We have been here before –  this time, it’s not too late to stop it. Slapping Sallie Mae on the wrist isn’t the answer.

Sallie Mae is a folksy name for the giant SLM Corporation. Contrary to what many assume, Sallie Mae is a for-profit company, it services and collects on student loans. Most student loans are originated by the U.S. Department of Education, which is also making a big profit off of student loans – a reported $41.3 billion last year. If the Department of Education was a corporation it would be the third most profitable in the world, right behind Exxon Mobil and Apple.

The Department of Education has options. Sallie Mae’s contract is coming up soon to be renewed for the next five years. Violating federal law is grounds for termination. Sign our petition telling Secretary of Education Arne Duncan that Sallie’s Mae contract shouldn’t be renewed.

This is a clear example of the federal government having an opportunity to restore the faith of the country. It’s an opportunity to hold giant corporations accountable. If you break the law, even if you’re a giant financial institution, there will be repercussions that are more than just the cost of doing business.

Until corporate executives are put in jail or until lucrative federal contracts are pulled, financial industry giants will continue to consider federal law a mere suggestion.

Please sign our petition here.

Student Debt Threatens the Future for Everyone

overwhelmed_student-300x300A college degree was once an investment in the future, a path to a good job, a home, car, vacation and money set aside to retire some day. But that college education has for many, become a ball and chain limiting future growth. Unless we begin to address this debt issue we will continue to see a growing chasm in American society – those who have access and wealth –  and those who have mortgaged their future with little way to dig themselves out of debt.

Since the Great Recession began, states have dramatically cut their allocations for higher education. Nationwide, higher education budgets have been slashed 27 percent since 2008 or more than $2,300 per student.  We are just now beginning to see the effects on our economy – and the great risk to our future.
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Families and Our Future Sinking in a Sea of Student Debt

This is the first in a three-part series by the Alliance for a Just Society, looking at the high cost of student debt for our country and for our future.students campus photo

Young college graduates are putting their futures on hold as they struggle under the burden of high student debt – and a weak economic recovery that has failed to provide good jobs for them. Young adults in their 20s and 30s are delaying buying houses, cars, furniture or starting families. The implications for every family, and our nation, are huge.

Student loan debt has passed $1.2 trillion, according to the Consumer Financial Protection Bureau. Such widespread indebtedness has many causes and the ramifications are pervasive – including a decline in purchasing power.
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