Student loans affect College, nation
Although President Obama's new loan replacement program was set to launch in 2014, its passing has been accelerated to go into effect next year.
Earlier this year, Director of Student Financial Services Cynthia Wells said a senior came to see her after he was offered a job post-graduation. “He said, ‘Can I sit down and talk to you about my loans because I need to know whether I can afford to take this job offer,’” Wells said.
It sounds ironic—students worrying about whether they can afford to accept paying jobs—but when many students are graduating from colleges and universities with thousands of dollars in student loans, they need to know whether they can make enough money to repay them.
Wells was happy to sit down with this student and help him evaluate his financial future. “I can at least say, ‘This is what your loan is going to look like when you go into repayment,’” Wells said, and then she can help students to make decisions about jobs based on this information.
According to the College’s admissions’ website: “Colby does not expect its students to borrow to pay College costs and loans are not included in the aid packages of students who need financial assistance as determined by the College. Students may still elect to borrow, depending upon personal and family circumstances, but their election to assume loans will be entirely their option.”
Nevertheless, in the class of 2010, 37 percent of students took out at least one federal student loan during their four years on the Hill. These students graduated with an average federal student loan debt of $16,050. This number does not include loans from private lenders or arrangements students might have made to pay back family members who took out loans in their own names.
Wells states that the College’s “No Loan Financial Aid Policy,” which awards students grants where it had previously given out loans, has helped to lower the amount of loans students take out to pay for tuition since it went into effect in 2008, but this does not mean that students have stopped taking out loans entirely.
The title “loan-replacement grant” is more accurate than “no loan policy grant,” Wells explained, because “we knew that students were still going to [take out loans] to help their family.”
Many students consider the cost of their college education even before they get to school. When Quinn Ziegler ’14 was comparing college acceptance letters, he had to consider more than a school’s location or its student-to-teacher ratio. “When I was choosing where to go, I had to keep in mind how much financial aid I received from each school,” he said. “It wasn’t a primary factor, but it definitely swayed my decision.”
Ziegler chose to come to the College because its financial aid policy gave him one of the largest financial aid packages in comparison to the other schools of equal caliber into which he was accepted. Even with this financial aid, however, Ziegler has had to take out student loans each semester to pay for tuition.
An Oct. 26 Huffington Post article states that “total outstanding student debt has passed $1 trillion, more than the nation’s credit card debt, and average indebtedness for students is rising….From private nonprofit universities, 65 percent [of students] graduated with debt averaging about $28,000.”
The same Huffington Post article explains, “[President Barack] Obama will accelerate a law passed by Congress last year that lowers the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent for eligible borrowers.” To be eligible for the plan, borrowers must have taken their loan out no earlier than 2008.
Also in accordance with Obama’s loan plan, remaining debt on the federal loans would be forgiven after 20 years, which is five years earlier than under current law.
The plan will be put into effect next year, and Obama’s administration officials predict that it could benefit up to 1.6 million borrowers and reduce their payments by as much as a couple hundred dollars per month. With more than two years left on the Hill, Ziegler does not feel the burden of his student loans yet, but he cannot ignore them when he considers his post-graduation plans. For many students, graduating from college with student loans directly influences their job search, as they will be less likely to pursue less financially stable paths in public service programs or unpaid internships.
“The ease of getting a job definitely factored into my decision to become an economics major,” Ziegler said, when he was choosing whether to concentrate on economics or global studies.
Wells said that she hopes students’ decisions about their futures are not dictated by their student loans in this manner. “I wouldn’t want their debt to manage them,” she said. “I want them to manage their debt.”
Ziegler says his parents feel the same way, but in these tough economic times, he is finding it harder and harder to believe them. “The way my parents put it, I should always go after what I want [regardless of the financial repercussions], and they’ll make it work,” Ziegler said, “but I don’t know how long that can last. I need to help out.” Ziegler explained that by the time he graduates, his brother will be a sophomore in college, and his parents will be paying for his education as well.
In a Nov. 6 interview with CBS News, Robert Shireman, former deputy undersecretary at the Department of Education and a chief consultant at the education-oriented California Competes program, said the White House administration’s plan hopes to increase confidence among students about their post-graduate prospects.
“It means people can go to college and use federal loans and have confidence that it’s not going to drive them to bad personal situations,” Shireman said.
Whether or not students will benefit from government programs, they can always seek advice and guidance at the College’s Financial Services Office. Financial Services offers a required loan counseling meeting for seniors with student loans each spring, where staff members explain what happens when loans go into repayment, how to process deferment, how loan payments impact credit rating and where to go to find out more about specific borrowing arrangements.
Financial Services is always available as a resource to students, even after they graduate, and Wells was happy to explain a repayment plan to an alumna who called asking for clarification. “I can’t intercede with the lender,” Wells said, “but I can always guide the borrower.”
In general, Wells noted that “students are doing really great” when it comes to keeping up with loan payments. “They are smart and successful….They’re not falling behind,” she said. “And that’s the grads—not us.”