What You Should Know About Student Debt

Editor’s Note: An important goal of Envision Frederick County is to encourage people to be more informed about and engaged in civic life. Some consider our democracy threatened by the lack of participation in our society, including or especially young people. Some studies have shown that coming out of college with heavy debt obligation reduces the likelihood that young adults will invest time in community and civic activities. Blair Donald is half way through her college experience at Kent State, and in this blog entry she takes a look that the issue of college debt and her generation.


Everyone knows about student debt in America. Many people are dealing with it personally and more and more are struggling to pay off the student loans they had to take out when working for a Bachelor’s degree. But not everyone is aware of how terrible the loan system has truly become.

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According to this article from Forbes, the total amount of student debt in the United States is $1.2 trillion. Two-thirds of students now graduating from college will graduate with some level of debt. And the problem is not that students are choosing to go to colleges with tuition rates well beyond what they can afford; students who graduate from community colleges with two-year Associate’s degrees still have on average $7,000.00 of debt.

More and more high school graduates are going to college. Nearly 20 million Americans attend college each year, and of those students 12 million (or 60 percent) borrow annually. The job field in the U.S. is extremely competitive, so students are often pushed to attend some sort of higher education. Many jobs will not accept an applicant who has no education past high school, and some require graduate school education and beyond. The fact is, if a student wants to make it as a financially secure adult, he or she is most likely going to have to go to college. And college tuition rates have steadily increased for the last 30 years.

In Maryland, according to this state-by-state graph, 58 percent students will graduate with some level of debt, and the average amount of debt is about $26,000.00. That is a lot of money for a young adult to owe, especially when the supply of jobs is low and demand is high, but the interest rates on these loans are what make them so absurdly costly.

Federal stafford loans are safer than private loans, according to the same Forbes article, but even those interest rates are ridiculous. According to the official federal student aid website, if the loan was taken out after July of 2013 and before July 2014, an undergraduate student will pay 3.86 percent interest.

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But rates are rising – after July 2014 and until July 2015 the rates increase to 4.66 percent. Graduate students pay even more: by July 2015 they will pay 6.21 percent interest and 7.21 percent if the loan was a PLUS loan, a type of loan that can pay for education expenses that are not covered by other financial aid. Congress agreed to cap undergraduate loan rates at 8.25 percent for undergraduate stafford loans, so they won’t exceed that interest rate.

Students begin paying back these loans very soon after college ends. For most federal loans there is a 6 month grace period, but the PLUS loan repayments begin once the loan has been fully paid out. Even during the 6 months between graduating from college and beginning repayments, interest rates accrue for most loans. And keep in mind that these rates are even higher for private loans. Students are paying far more than the actual cost of their education, and they have no choice but to do so. Basically, the student loan system is worried about turning a profit, not getting students through college.

President Obama recently introduced a plan to forgive student loans under some circumstances. According to studentloanservicesgroup.org:

“Obama loan forgiveness is a plan that has been introduced by President Obama due to the increasing problems about students’ loan debts in United States. This plan is intended to help students who are not able to fully pay their loan and those who have settled a significant amount of their loan balance for numerous years. This plan clears all outstanding debts of students who have made timely and regular payments on their current federal loans for more than 20 years. Also, individuals who work in government departments like the military service might have their entire amount overdue cleared earlier before the minimum year based this plan.”

It’s a good plan, but it’s not perfect, and it’s not yet set in stone. I don’t personally have an end-all be-all solution to suggest, but I do think the U.S. could emulate some other developed countries who have better plans for funding higher education.

For example, Switzerland’s public funding means that students can enjoy higher education at a fraction of the cost of schools in the United States. Education is not free, but tuition is reasonable and access to high quality advanced education isn’t lost because of it. But, public funding might mean higher taxes, and no one in the U.S. would be in favor of higher taxes. After all, the economy is already tough for so many people. We have to pay off our student loans.

Higher education institutions in the United States are still some of the best in the world. We can boast the most students with Bachelor’s degrees and the most high school graduates. But our system for paying for it is terrible, it isn’t working, and it needs to be remedied, starting with the fact that student loan interest rates clearly show that one goal in giving them is to make a profit.

It goes right back to why voting is important – things will only change when people ask for change, or demand it.