Very few of us here at the U are fortunate enough to have our college educations paid for without resorting to student loans. I personally have acquired a debt total in figures I’d rather not make explicit. To all of you here with an academic, athletic or parental scholarship, good for you. For all the rest, I feel your pain. Or more precisely, I will feel your pain when we all have to start repaying our loans far too soon after graduation.
Despite Wall Street’s recent financial fiasco, loans such as federal Stafford loans are still readily available to any student who needs them and satisfies basic requirements such as being at least an average student, working earnestly on completing a degree and avoiding drug-related criminal charges. These loans have good terms and are a sensible option for funding your education.
Other loan sources such as Sallie Mae and private banks lend at usurious rates often exceeding 10 percent. Although 20 percent of students pass up a cheaper federal loan for these private loans, they are definitely a last resort-type option, along with credit cards and asking a distant elderly relative with a supposedly modest fortune.
Speaking of wealthy relations, MyRichUncle was the only one of eight New York-based lenders to escape prosecution for misleading marketing tactics, which must now follow a code of conduct and put a mostly gestural amount of money into a fund that is used to educate borrowers and families about student loans. Preying on students trying to get an education might be ethically repulsive, but how much rigorous ethical integrity is ever attributed to free market companies?
Sallie Mae is a company that provides loans guaranteed by the federal government, which is the same kind of arrangement Fannie Mae and Freddie Mac had on home mortgages, and we’ve already seen what happened there.
If the federal government at some point needs to provide a few hundred billion dollars to rescue Sallie, things could get very bad for students before they get better.
As the credit meltdown continues and the economic effects spread, private lenders will ratchet up interest rates and tighten qualification requirements, if they even continue offering loans at all. Wells Fargo, the dread bank behemoth, withdrew from participating in the Stafford Loan Program this past year, but still offers its own private loans at difficult interest rates.
One problem that hasn’t been resolved smoothly at all, though, is the now-failed $700 billion bailout of the financial sector, the bulk of which was requested carte blanche by Treasury Secretary Henry Paulson, a former Goldman Sachs executive, an insider’s insider and good old boy whose views on education are probably not as nuanced and informed as would benefit our cause. With the recent bill rejected, it’s probably back to the drawing board.
Regardless of whatever plan finally passes, the fact remains that hundreds of billions of dollars are at stake and spending will have to be cut in the coming years. The question is where.
Although Congress recently enacted legislation attempting to ease the collegiate financial burden on struggling families, the actual cash needed to fund these programs is in danger of shrinking. Many of us watched the first presidential debate Friday night. If you didn’t, I suggest watching the next three closely to find out what Sen. John McCain and Sen. Barack Obama think about education and how they’re going to implement their policies, if for no other reason than your time here at the U will be directly affected by who our next president is and his views on student loans and higher education in general.
James Sewell