A generation in debt

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Everyday after school you run home and wait with bated breath for the mail to come. Each day the waiting is harder and harder. Your anxiety level spikes to feverish heights, when finally it arrives, your college acceptance letter.

You did it; you got in to your top choice. The feeling of accomplishment is overwhelming when you notice a small note at the bottom that says you’ve only qualified for partial financial aid.

Your joy and excitement turns to confusion and misery as reality sinks in. Your college dream comes down to one question: how can I possibly afford this?

The answer for most is student loans. Unfortunately, that brings about another question: how long do I want to be in debt to pay for my education?

For many, the answer is the rest of their life.

With poor credit planning and insurmountable debt becoming hot topics in today’s economy, many can trace the beginning of their personal credit crunch back to their student loans.

The largest private lender in the nation, Sallie Mae, owns or manages loans for 10 million customers.

With that many customers, this one company has complete control over the credit futures of 10 million Americans.

The real problem with student loans begins and ends with the interest rates at which they are borrowed. Most lenders will charge a rate of 4-18 percent.

For non-financial experts, interest rates are the percentage on the money borrowed.

So, if you borrow $20,000 to pay for college, at a rate of 10 percent, the interest is $2,000.

The issue with these high rates is that no college student can afford to borrow that much money to begin with, so when you start piling on massive amounts of interest, the debt becomes ridiculous.

And the minute you can’t pay and go into default or forebearance, collection companies become like the mafia.

No matter where you go they will always find you.

Another aspect of the issue is that it has become a generational problem, meaning only in the last two generations has it been standard procedure to borrow large amounts of money to pay for an education.

Today’s college students are becoming the first generation to start their adult lives already thousands of dollars in debt.

And once you’re in that much debt it just snowballs into an avalanche of unpayable bills.

Consider the fact that the president of the United States and the first lady just payed off their student loans two years ago.

If Barack Obama’s book hadn’t been a bestseller we could have a president with student loan debt.

This insight has caused the president to take stronger action against private lenders.

In his economic stimulus plan, President Obama calls for an end to the Federal Family Education Loan Program which pays private lenders subsidies to gurantee risk free loans to students.

Obama thinks that cutting out the costly program and increasing money for the Pell grants would save countless dollars.

These changes give students hope that the government is finally thinking of them when it comes to student loan policy.

Unlike home foreclosures or business failures there is no bankruptcy protection for student loan victims, so defaulters have had to become creative to get away from collections agencies.

Student loan debt has become such a pervasive problem that many victims have taken to living off the grid to avoid paying back aggressive lenders.

Others have moved out of the country, while those with no hope have chosen suicide.

Your entire life you are told that you must go to college and get an education so you can get a good job and live the American dream.

When the choice is between a life with no education or a college diploma that costs you a high credit rating for the rest of your life, it’s not much of a choice.

There is a growing movement on the Internet to forgive student loans to help jump start the economy.

Advocates argue that if loan debt is forgiven that would free up thousands of dollars a month that consumers would be free to spend on goods and services that have taken a beating during the recession.

They also say that banks wouldn’t be hurt because they are already receiving bailouts.

We are not economists so we can’t argue the financial merits of their proposal, however, it is hard to argue with the logic that freeing up the debt of an entire generation would put thousands, maybe millions of dollars back into retail circulation.

As college tuitions reach astronomical heights, one thing becomes abundantly clear, unless you are uber wealthy, you will need help paying for college. This fact leads to some impossible choices for today’s college students.

With financial institutions becoming increasingly unstable and untrustworthy, how are students expected to make informed decisions?

The answer is they’re not.

Obama has made strong strides in his economic stimulus plan to help students out of their debt hole, but until the system undertakes a complete transformation, students will continue to become the victims of a money lending operation that makes loan sharks look reasonable.

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