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The Student Loan Debt Blog: A Blog About Student Loan Debt and Student Loan Consolidation

Student Loan Debt

A Blog About Student Loan Debt & Federal Student Loan Consolidation

Thursday, October 16, 2008

EDITORIAL: Just Because College Is Expensive, It Doesn’t Mean That You Shouldn’t Have To Pay For It.

student loan debtAs I was listening to The Rush Limbaugh Show yesterday, I heard a sound byte of Senator Obama and a young college student who was a little disgruntled about the cost of her education. Obama agreed that what she was experiencing wasn’t fair, and of course, went on to give his typical encouragement blurb about change, hope, or what have you. Limbaugh came back to rant about how Obama doesn’t think that people should have to pay for higher education because he is a socialist. Thoughts of my own mountain of student loan debt soon drowned out the radio, and I found myself sincerely contemplating the issue.

Was Obama right? How much should I have to pay for higher education?

Just to be sure Rush’s argument wasn’t unfairly slanted, I checked Obama’s position on his website, www.barackobama.com. His official stance on higher education costs read as follows:

...Obama and Biden will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students. Recipients of the credit will be required to conduct 100 hours of community service...

Low to middle income families would surely welcome such policies, and for good reason. According to the U.S. Census bureau, the cost of postsecondary education has more than doubled since 1990. Faced with today’s gloomy economic climate and grim future, parents and students are crying for relief. Obama promises to educate high school graduates for 1/3 of the cost of tuition.

But is that his job?

While the tax credit sounds great to those who qualify for it, it should worry Americans who do not, because they will be the ones paying the bill. With Obama appeasing the American middle class by promising to increase the tax burdens only on Americans making more than $250,000 a year, this wealth redistribution system essentially boils down to the “rich” and the government taking care of the “poor”.

Is that really fair?

Others argue that the cost of a student’s college education should only be negotiated by two parties - the college and the student. This could be viewed as a free-market approach to education. While some insist that private institutions not backed by the government only serve the rich, the opposite is true. Harvard University has plans to increase student aid this year in a grand effort to subsidize tuition so that more deserving students can afford to attend. This is a good example of a private institution compromising with students to accommodate the changing economic climate.

Whether you like Obama’s plan or not, the truth is that the U.S. government already offers generous student loan programs that empower millions of Americans to pursue higher education while contributing to the American economy. While we hate to pay back the student loans that seem to multiply exponentially as soon as you sign on the dotted line, we enjoy the professional positions that we are able to pursue as a result of our advanced education. Furthermore, the interest goes to help fund the government that provided the initial loan. This allows students to pay their own way through college without having to offer collateral or pay out-of-pocket. Is that not more than fair?

Just because college is expensive, it doesn’t mean that you shouldn’t have to pay for it.

My parents knew that they would not be able to afford to pay all of our college tuition, so they told us to study hard and apply for as many scholarships as we could. They took out loans to cover some of the difference, and so did we. That’s life. Otherwise, we would have either had to put off going to college until we could acquire the necessary savings and credit or pursue other options. This approach to funding higher education wasn’t pleasant, but it was most certainly fair. It’s fair because the return on the investment has the potential to be exponentially higher than the investment itself. If I owe $100,000 in student loans but I make $150,000 per year, the investment pays off substantially. Unfortunately, since great jobs are not guaranteed, college education is a risky investment. That doesn’t mean, however, that if you come up short that it wasn’t fair because the cost of the education was too high. You might then be able to requisition the government to bail you out because you lost money pursuing gain that did not pan out for you.

Wow; that sounds eerily familiar…

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Saturday, September 27, 2008

Losing Track Of Student Loans Can Wreak Havoc On Your Personal Finances

While having a big family is a wonderful blessing in and of itself, it’s especially rewarding during tax season. Don’t get me wrong; I value my family infinitely more than a tax refund, but it feels good to know that my commitment to my marriage and children is recognized by our government when tax time rolls around. We had twins last year, so when my husband and I realized that we would get a Child Tax Credit for both of them, we thought that was pretty nice. After deductions, we expected a return in the thousands, so we were happy campers.

During that same time, however, we were dealing with a frustrating issue that did not put smiles on our faces at all. Somehow, when I consolidated my federal student loans, one of them was not included. I didn’t understand how it could have happened, considering how informed the consolidation company was. Loan consolidators do all of the hard work for you - they call you out of the blue, offering to make your life easier by combining your student loans with a great interest rate and anything else you need, including forbearances. As they are explaining everything to you at the speed of light, they list all of your outstanding loans and help you to understand why making one easy monthly payment would ease your anxieties about student loan debt. They’re right; it does. So, I agreed with them and consolidated my loans. They reviewed the information with me again, reading back the information on each smaller loan that would be merged together into the big loan. So, I thought everything was taken care of.

And then we found the one that got away.

Actually, the one that got away found us; once the creditor discovered I had moved and gotten married, they politely called to let me know that I owed them money for a small student loan. It took a while to figure out what happened, but when we did, my heart sank. I was so young and I took out so many small loans while I was in school that I hadn’t been keeping track of them properly. So, when the consolidators did not have their facts and figures right, I should have been able to correct them, but I wasn‘t. I ended up with a defaulted loan because it went unpaid and unnoticed for quite some time. As many young Americans know, having a student loan in default is guaranteed to bring a lot of unwanted phone calls, anxiety, and grief that we did not want. One artist was so encumbered by Sallie Mae that he wrote a song about it:



So, we did everything we had to do to bring that loan back to current status, although it didn't happen until around the time we filed our taxes for the year. Thinking that everything was settled, we filed and waited, only to learn that the creditor had not reported the updated status of the loan, so our entire federal refund would be garnished to settle the debt.

Needless to say, that knocked the wind out of my sail.

Lots of people depend on their federal tax returns each year to cover large expenses or to revive their personal finances. However, outstanding student loans, if they are not current or at least in forbearance, can cause your federal income tax refund to be garnished. Although what we lost was actually enough to pay off the debt and would release us from it, we couldn‘t help but feel blindsided. Our tax preparer told us that we could have appealed the situation, considering that the return was garnished unnecessarily. We decided to just let it go. Although we mourned the loss of our beloved tax return, debt freedom, much like family, is simply too great a commitment to take lightly.

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