Education – The American Nightmare Not The American Dream
Even though I am a firm believer in higher education, it has become the American Nightmare instead of the American Dream due to Student Loan Debt.
All student loan debt, which includes private loans from banks as well as the federal loans, now stands at $1.2 trillion. This is ridiculous!
Before signing the Bipartisan Student Loan Certainty Act of 2013, US president Barack Obama makes remarks ”A higher education is the single best investment you can make in your future and college has never been more expensive”.
I agree with him that college has never been more expensive. What I don’t agree that “a higher education is the single best investment you can make in your future” as President Obama and others contend. If the student was guaranteed a position upon graduation I might be more inclined to agree but that is definitely not the case.
Upon graduating from college, students and/or parents (in many cases it is the parents who pay back the debt) are faced with reality that now comes payback.
The new initiative being put forth by Obama and his administration is to create a new college rating system by 2015 and tie federal aid to that rating system. My question is “how is that doing to help the students/parents who are already facing 10 years of debt”.
The compromise is a good deal for all students through the 2015 academic year. After that, interest rates are expected to climb above where they were when students left campus in the spring, if congressional estimates prove correct for 10-year Treasury notes.
Undergraduates this fall will borrow at a 3.9 percent interest rate for subsidized and unsubsidized loans. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. The rates would be locked in for that year’s loan, but each year’s loan could be more expensive than the last.
Interest rates will not top 8.25 percent for undergraduates. Graduate students will not pay rates higher than 9.5 percent, and parents’ rates would top out at 10.5 percent. Using Congressional Budget Office estimates, rates would not reach those limits in the next 10 years.
In all, some 18 million loans will be covered by the legislation, totaling about $106 billion this fall. The Congressional Budget Office estimated the bill would reduce the deficit by $715 million over the next decade.
Under the new law which applies to loans made on or after July 1, the government establishes variable interest rates on Stafford loans for undergraduate college students, but put the maximum rate at 8.25 percent. The variable rate each year will be pegged to the rate on 10-year Treasury notes, plus 2.05 percent.
I personally know parents who are paying 8.25 percent on loans. These loans are with SallieMae, Ed Financial, and possibly others, however they are still student loans.
Another point I would like to make it that if you have a 401K plan like we do and expect to withdraw funds for education purposes (such as repayment of student loans), you are penalized. Did you know that? Once you make a withdrawal for education, you cannot contribute to your 401K for six months. That does not include the 10% plus penalty for early withdrawal. I’m not sure what the reason is behind this but I do know it for a fact. Intentionally saving for college is necessary but you need to be sure you are saving in the right way. Maybe burying it your back yard is the best way to do it.
So, what are students supposed to do? Go to college for 4-6 years and graduate having 
$40-$60 in student loan debt? Many students do not have job immediately after they graduate. Yet, the interest begins! Six months later, the first payment is due.
I realize that Federal loans are subject to income based payback, fixed interest rates, and take nine months to default on, making them a much safer loan for students to take. Private loans may have done away with late fees, but in the fine print it states the right to claim default on the loan after missing a single payment. Default is a one way ticket to bad credit. We all know that any ding in credit rating can affect your ability to get a job and obtaining a loan would be impossible.
Back to my original question before I went on the rampage. What about the students/parents who currently have student loans in repayment. I’m talking about high interest loans too. How is the government going to assist these folks?
Some people may argue that going to college is a choice and if you don’t want the debt, don’t go to college. The problem with that is we have brainwashed our young adults into thinking they have no choice except going to college. I beg to differ.
As I stated earlier, I believe in higher education and college can educate and change an individual for the greater good, but when someone is handcuffed financially by the cost of it for many years after graduation, what’s the point?
The cost of going to an institution of higher learning keeps rising while the prospect of gaining employment afterward is lessening.
I am reminded of a statement I recently heard regarding higher education and the point of the statement was to go to college to learn how to learn. Meaning college isn’t going to teach you what you need to know to be successful, but you would learn how to learn the things in life that will actually help.
What would happen if you took the $40,000 + you were going to spend on college and 
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Sherry Starnes
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