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By Victoria Angelova OpinionsSeptember 18, 2014

Student burdens call for better loan management programs

Lia Wang '16, Graphics Editor

Student debt in the United States currently surmounts $1.2 trillion. Contributing to this debt are 155,000 people who did not receive their social security checks because they defaulted on their student loans. At the same time, the federal government has made a $66 billion profit from student loans between 2007 and 2012 according to a Government Accountability Office Report. As student loan statistics have become more alarming, American society has shifted its focus from learning in college to how to pay for college.  Higher education, on one hand, is a profitable business for many: banks, loan services and the government itself. However, more frightening is the fact that victims of student loans view education not as a source that inspires them to pursue higher goals in their fields or explore the beauty of knowledge but as a bad investment.

Due to the increase of university spending and a decline in public subsidies and private endowments, the costs of attending college will always be on the rise. However, this tendency does not explain why so many have to suffer from high interest rates on their loans, be poorly treated by loan service firms, or spend more time working part-time jobs than studying.

The federal government already pays $600 million a year to different loan collectors, but much too often, collectors fail to manage students’ accounts properly. The Department of Education has put forward a bill that proposes paying more to loan services whose borrowers actively repay their loans and less to those whose borrowers are delinquent. This step might provide a solution to part of the problem, but the bill could be taken a lot further. According to the U.S. Consumer Financial Protection Bureau, the student loan debt has become the largest form of consumer debt outside of mortgages. In order to deal with it, we need more definite measures.

If every college and university had consultants who helped students choose the best loan service firm and made sure they were not falling behind on their repayment plans, then students would feel supported by the institution. If students could choose to start repaying their loans only after they have graduated and have found a job, then they would concentrate on studying. If the interest rate for every student loan, be it private, federal,or school-offered, was the same and minimal, then they would be able to repay their loans much faster and much more easily.   

Even Wellesley, which gives substantial financial aid and does much to support its students and meet their full financial needs, does not work with any specific loan service firm, and the loans that it offers have exorbitant interest rates (4.66 percent for the Stafford loan, 5 percent for the Federal Perkins and Plitt-Kirgan Loans and 9% percent for the Wellesley College Loan).

While each of these ideas would create additional expenses for schools in the short-run, over time it would be beneficial for both loan takers and loan providers if they were implemented. Students would be able to better cope with the burden of student loans. They would have the chance to pay more attention to their studies, become better experts in their fields, enjoy attending their colleges and universities and be proud of receiving an undergraduate degree. Should, however, more students fall into delinquency, their tuitions will probably never get paid and fewer high school graduates will consider attending a university. These outcomes might prove as disastrous for loan providers in the long run as they were for many banks in 2008. After all, the 2008 bubble burst due to an increasing amount of late payments. People just took out more and more loans they could not afford.

Hence, universities, the government and loan services ought to start believing in students by allowing them to receive a higher education without the stress of the student loan. Even though the steps to solve this problem are harsh, they are necessary. Lower interest rates and help from loan service firms will improve the performance of students in class and dispel any doubts about whether it was the right decision.     

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