Background
There are many college students and graduates today that are struggling to pay offtheir
student loans. With tuition costs rising for many colleges and universities along with rising
interest rates for loans, it is making paying off student loans very difficult for college graduates.
In the article "9 Unbelievable Student Loan Horror Stories" by Mandi Woodruff, originally
published in Yahoo! Finance Business Insider in November 2012 and republished in Ethics in
Higher Education, edited by Nancy Henke et a1., it describes several personal accounts of
victims of student loan debt. One woman who graduated with an interest rate on her student
loans of 8, having repaid $61,000, was told that she still owes $25,000 even though she
believes there is nothing more to pay back (147). Many others have seen their original loans
from about $80,000 or $90,000, jump to almost $130,000, leaving them left to only be able to
pay the interest on their loans with an almost $700 monthly payment (148-149). Many borrowers
have seen interest rates as high as 18 to 25 percent, leaving them unable to make a dent into what
their original loan cost (150). There are several stories like these around the country, people with
no where to turn to for relief from their mounting student loan debt.
This is why I am targeting private student loan providers as well as federal loan providers
to make a change in this current system. I'm sure we have all been in some similar situations, a
college student while trying to balance a part-time job trying to pay your tuition, or just
graduating and realizing that you have to start making payments on your loans.
My purpose is to try to find a solution that could benefit both sides and alleviate the problems for
the many college graduates facing difficult times paying their student loans.
Proposal
My proposal is to establish a system where college graduates will be able to pay back
their loans in a way that will alleviate the pressure and suffering that many face today. From an
interview "College Grads Struggle to Gain Financial Footing" by Jennifer Ludden and published
from the National Public Radio in May 2012, and republished in Ethics in Higher Education in
2013, edited by Nancy Henke, it describes a study done by Cliff Zukin at Rutgers University.
Ludden describes Zukin's study, "His new study finds six in 10 students take on debt-more than
$20,000 on average- even as a lack of jobs leaves them less able to pay it back" (131). This study
shows just how large the scale is of people facing debt with student loans, many with the average
student debt being over $20,000, as seen in Fig. 1 below from the article "The Student Loan Debt
Crisis in 9 Charts" from the Mother Jones website. Zukin goes on to tell more about his research,
saying, "[College graduates] don't even see in the foreseeable future a secure job, a comfortable
income, starting a family, and even more- 45 percent- do not see owning a home at any point in
the near future" (131). Zukin goes on to say, " The Rutgers study finds a fifth of recent grads
have gone back to school, where many are accumulating more debt" (131). This is proof of what
the struggle is doing to college graduates when they are buried in student loan debt. A recent
survey that came out showed, " ... college grads since 2006. Just half of them are working full-
time" (130). Ifpeople aren't making enough money, how are they being expected to be able to
repay their loans?
More Borrowers, More
Debt
Fig. 1
4.
From Woodruff's article, she describes the amount of debt that has accrued over the
years, reporting, " ... the student debt burden has swollen to a record $1 trillion" (146).
Furthermore, as seen in Fig. 2 below, with so much student debt building up amongst college
graduates, more so than either credit card or auto debt, this shows why something needs to be
done.
MaxedOut
.~~
Fig. 2
5.
For-profit universities are also a big contributor to the amount of debt that is accruing.
From the article "Taming the For-Profit College Monster" by David Halperin from Politico
magazine published in August 2012 and republish in Ethics in Higher Education, Halperin
describes the "financial footprint" that many for-profit colleges are leaving for their graduates,
stating, "".25 percent of federal student aid- $32 billion a year- and nearly half of student loan
defaults. They are the leading edge of a student debt crisis that recalls the harrowing subprime
mortgage disaster" (166). With this magnitude of people facing inescapable strains of student
debt, as seen in Fig. 3 below with the rising number of people facing "delinquent" student loans,
there needs to be a better way to establish a repayment system so that people do not fall into a
ditch that they have no way of getting out of.
Underwater
Borrowers with loan that are 90+ days delinquent
Fig. 3
I propose that loan providers not only work with the schools, but with their borrowers to
find a repayment plan that works for everyone. If the loan providers and borrowers can agree on
a plan that a certain percentage of the borrowers salary each year is dedicated to going towards
their loans, it could be more beneficial than having to pay what could be a varying payment each
month that might only be covering interest. If there is any chance of people paying off their
loans, then we need to make sure that the interest rates are at a low enough rate where it is not
damaging to the borrowers but where private loaners can still make a profit. If a set interest rate
is established along with a certain percentage of their salary, depending on how much their salary
is, then it will make it easier for people to payoff their student loans, therefore resulting in better
numbers and profit for loan providers.
Potential Outcome
The potential outcome for these graduates with loans to payoff, as well as future
graduates, would be that they are able to get a manageable contract with loan providers, allowing
them to have some pressure relieved from the stress of struggling to payoff their loans. If, for
some reason, someone is laid off from their job and are not able to continue contributing to their
student loans, the loan providers will hold off collecting payment until the borrower is able to do
so. College graduates will not face defaulting on their loans and will not have the burden of
trying to make monthly payments.
The outcome for the loan providers would be that they will be able to make more money
since they are getting a steady flow of revenue. They will not have people defaulting on their
loans and therefore causing less problems for them, leaving them not having to increase the
interest rate. This would also leave them in a better position with their reputation with future
clients.
This is a plan that has the potential to benefit both sides of the story, as well as improve
people's well-being by not having the burden of student loan debt haunting them for the rest of
their lives.
7
Works Cited
Halperin, David. "Taming the For-Profit College Monster." Ethics in Higher Education. Nancy
Henke et al. Southlake, Texas: Fountainhead Press, 2013. 165-168. Print.
Ludden, Jennifer. "College Grads Struggle to Gain Financial Footing." Ethics in Higher
Education. Nancy Henke et al. Southlake, Texas: Fountainhead Press, 2013. 129-132.
Print.
Severns, Maggie. "The Student Loan Debt Crisis in 9 Charts." Mother Jones. Mother Jones,
2013. Web. 5 Jun. 2013.
Woodruff, Mandi. "9 Unbelievable Student Loan Horror Stories." Ethics in Higher Education.
Nancy Henke et al. Southlake, Texas: Fountainhead Press, 2013. 145-152. Print