COLUMN: Students should pay attention as interest rates rise
Dayton Clark, The Oklahoma Daily
- Yes 100%
- No 0%
2 total votes.
I am what is called a non-traditional student. In my case, that just means I am a middle-ager returning for another attempt at a degree.
The last time I was enrolled at OU was in fall 1986. The primary reason I left school when I was unable to finish my degree then is the same reason I was not able to return to school in all those years since — student loan problems and student loan debt. So, when I started seeing information online and in the news recently about a crisis in student loan debt and the potential doubling of student loan interest rates, I was keenly interested to put it lightly.
I took out a $2,500 student loan through a federal credit union for the 1985-86 school year, which was during the height of the supposedly “wonderful” years under President Ronald Reagan. My interest rate on that loan was a whopping 18 percent.
Then in 1987, I was denied a Stafford student loan because of some new rules that had gone into effect during summer 1986, while I was not paying attention. This turn of events forced me to cease my education, enter the workforce and start paying on that student loan with the outrageous interest rate.
The jobs I got with half an education did not exactly help me pay down that debt before it became a god-awful, futile tar-trap. The next thing I knew, I had paid in around $8,000 for that $2,500 student loan and still owed thousands more.
To make a long story short, it has taken me nearly 26 years to pay down that loan just enough to get another one and continue my education.
I only tell this tale of woe to emphasize how big of a deal student loan interest rates can be for those of you who are using them now. You’d better be paying attention because even if you don’t get shackled to a ridiculously high interest rate like I did, you will most likely be borrowing a lot more than a measly $2,500. You, like 7.4 million Americans, will be paying down a very large debt that has an interest rate that could potentially double.
That’s right — I said double.
The amount of student loan debt in America is so severe, it has crossed the $1 trillion mark. Student loan debt surpasses credit cards as the leading source of U.S. household debt outside of mortgages.
The student loan interest rate was cut in half to 3.4 percent in 2007 in an effort to ease the pressure on borrowers in an economy that was going rancid. That cut in interest rates will expire July 1 and the rate will double, going back up to 6.8 percent.
Sure, that doesn’t sound like a huge jump. It may not even sound like something you need to worry about just yet with your graduation date still “out there” somewhere in the future. But I’ll be honored if some of you vaguely remember this column and its admonitions when you are still writing checks to pay down your student loan debt with grey hairs sprouting in the strangest places.
There are some good reasons this issue is a big deal. Today two out of every three jobs — especially those with which one could actually have a chance at paying bills, managing family affairs and saving for a decent retirement — require some post-secondary education. The sluggish economy and the rise of tuition costs are reinforcing each other in a feedback loop that ought to worry everyone faced with paying for college.
The federal government also is deeply in debt for a wide range of reasons. Student loan debt has exceeded $1 trillion and surpassed combined credit card debt.
Then, of course, it’s also “campaign season” — not that said term means much with the around-the-clock, year-round electioneering we see these days. President Barack Obama spoke on the issue just last week, saying, “Making college affordable — that’s one of the best things we can do for the economy.” The consensus, even among many Republicans and including Republican presidential hopeful Mitt Romney, is that the interest rate should remain at the lower level. However, since Democrats and Republicans in Congress can’t even seem to agree on subjects they do agree about, discussions no doubt will continue.
Many of the Republicans are accusing Obama of fear-mongering, pandering to the youth vote, which he really needs to win another election. Many of the Democrats, in turn, are accusing the Republicans of playing obstruction again and not approving anything the president says or does in order to cost him political capital and heighten their chances of retaking the White House.
Sadly, there could be some merit to all of these charges, especially the latter.
My message on this is simple — you’d better pay attention and vote. Your financial future is at stake.
Scott Starr is a Native American studies senior. You can follow him on Twitter at @Scott_starr_.