Balances becoming harder to repay thanks to higher interest rates
By Steffi Shook | email@example.com
With financial aid, grants and scholarships, paying for college is a piece of cake, right? Unfortunately, funding your education isn’t as easy as receiving a check from Uncle Sam.
With federal student aid declining and strict limits on federal loans, many students are looking elsewhere to make ends meet when it comes to higher education.
According to a report issued by the College Board, private loans are the fastest growing sector of the student loan industry. College students borrowed $17.3 billion in private loans during the 2005-06 school year; that is a 913 percent increase from a decade ago.
These statistics come as no surprise considering tuition and fees have increased by 41 percent at public universities and 17 percent at private universities since 2001. Private loans are often a student’s only option to bridge the gap between government loans and skyrocketing tuition costs. These loans, however, can lead to bigger problems.
“I am concerned about my student loans affecting my ability to keep a healthy and satisfied family after college,” sophomore Bobbi Wirkner said.
Wirkner is not the only student that is concerned about private loans affecting her life after college.
Nearly two out of every three undergraduate students are going into debt to go to college, according to the Department of Education’s National Center for Education Statistics.
The center also said the average college graduate owes more than $19,000. Unlike federal student loans, the federal government does not guarantee private loans. Because the government places no limits on the interest rates and fees private lenders can charge, some have variable rates up to 19 percent.
Currently 126 Flagler students are dealing with these private loan issues, based on information from Flagler’s Office of Financial Aid. Many students, like freshman Mary Ziegenfuss, are thankful to avoid these costly private rates.
“I’m so glad I don’t have to worry about fluctuating interest rates,” she said.
Not only are currently enrolled college students affected from these higher interest rates, but many high school students are electing not to attend college to avoid them altogether according to Speaker of the House Nancy Pelosi’s Web site.
Pelosi recently proposed House Bill Five, which would work to “make college more affordable by cutting the interest rates on student loans in half.”
Pelosi’s Web site said by the year 2020, the United States is projected to face a shortage of up to 12 million college-educated workers. She believes that this shortage is directly related to soaring student loan interest rates.
The effect of these high-cost student loans is not only financial. The organization Student Loan Justice posts thousands of testimonials about the emotional traumas caused by private student loans.
One of these stories involves a young man who committed suicide after being hounded by collectors over his student loan. Another testimony on the site is from a Florida resident who says she will never be able to buy a house because of her student debt.
When contacted about the rising interest rates of student loans, Bank of America responded that all student loan information could be found on their Web site. But viewing the interest rates required the user to submit a social security number.
Most other private loan lenders have kept quiet when it comes to this issue, despite the fact that 85 percent of private loans issued by student lending giant Sallie Mae go to undergraduate students.
With tuition costs projected to continue to rise, many students have no choice but to partake in this expensive borrowing.