6.24.2009

Back on the Soap Box

This is a long post so if you are bored you won't hurt my feelings if you skip today and tune in tomorrow.

I have worked in financial aid at a college or university for over 6 years. Before that I was a workstudy student while I was going to school in the office of financial aid. Between working in financial aid and my own experience with aid (aka my own bachelor's degree, MBA, and getting Bret through medical school) I know a little bit about the topic.

There is a new law going into affect July 1. It's called the College Cost Reduction and Access Act. Since this act has more to do with repayment than the awarding/processing/types of programs it doesn't really affect me in the job area just in the personal area (aka it affects our repaying of our loans).

I feel pretty torn about my opinions on this legislation. One hand I appreciate what they are trying to do and although it will hurt Bret it may pay off big for me. See I work in what is considered "public service". I work in higher education and have put some time in working for the state at state schools. Under the new legislation my monthly payments could be capped at 15% of my gross income and after 10 years service and on time payments the remaining balance can be forgiven.

On the other hand for Bret it is a different story. The Income Sensitive Repayment solution dissolves the economic hardship deferment. Because most programs don't have a residency deferment for loans they use this economic hardship category. This means that our loans go back into deferment because his income is not yet enough to start making payments. Instead we now can either see if we qualify for a forbearance or we have to start making the minimum 15% of our income level payments. Can I just say that sucks? We don't have 15% of our income to devote to making the payment yet. They will get their money eventually so why not give us a break? The only good news is that after making payments for 25 years if we have not paid off our loans the balance could be forgiven. (Assuming a new legislation doesn't veto this effort)

I think my biggest concern about this act is the message it is sending our students. I will be the first to tell you that students are dumb when it comes to taking out student loans. I have seen student use their refunds to buy a car, jet skis, pay for vacations, and support their families completely. There is this part of aid that is designated to "help" with the cost of living while you are going to school. Students take no regard to how much they are borrowing and are so engrossed in the buy now pay later attitude that it tends to bite them in the butt. I can't count how many times students look at me with an expression like I just told them they have cancer or burst into tears when we go through their exit interview and I explain how much they have borrowed and how much their monthly payment is going to be. It doesn't matter how many presentations I give on money management, making the interest payments in school, or the fact that the total amount is listed on EVERY award letter we send them, etc, etc, etc. Reality is no where to be found in most of these students. I know because I was that student.

This legislation continues to feed into this attitude. There is nothing that helps make students more accountable for their borrowing actions. Instead we reduce their payments and offer more forgiveness. Now students feel even more confident that they will never have to actually pay back their loans so why not. I get that loans are a necessary evil. I have student loans and will be making my checks out to the government and Sallie Mae for the next 15 years (25 if you include Bret's).

The idea of getting a job and working your way through college for so many is such an insult when I even suggest it. Half of our students don't even take advantage of the workstudy they are awarded. The worst part is that parents encourage this. the excuse that I hear is that they want their children to FOCUS on their studies. Even though workstudy usually allows you study while working. This is why our country is facing the credit crisis that it is. We are not teaching our children how to live in the real world. We are not giving them the tools to be financially successful. We are setting them up to fail.

We are encouraging them to take out tens of thousands of dollars sometimes over a hundred thousand for a simple bachelors degree IF they finish. Then when they go to find a job they have no way of making the payments and that's IF they find a job.

I don't have all of the solutions but I do have some suggestions. We need to work at cutting the cost of education. We need to work on making "pay as you go" a requirement. We need to close the gap that faces the middle class (aka everything goes to the highest level of need students and NOTHING goes to students stuck right in the middle). We need to look to the professions working in financial aid with the students who has the experience to understand what will and will not work instead of legislators trying to get re-elected or campaign funding from lenders.

5 comments:

FRANNIE said...

Oh I can so relate.

It cost me more to go to college than it did to buy my house when I was married.

I am still paying it off (Sallie Mae you rock for putting me through school) but the best thing my parents ever did for me was to make me work while I was in school.

They covered some of my tuition but I had to work to pay for where I lived. I had a roomate, no cable and $30 a week for groceries.

The best life lesson is learning to support yourself.

Julia@SometimesLucid said...

Great post. People only want to look at the positives of these types of bills - not the unpleasant truth behind them.

Married to a med student - Marissa Nicole said...

Be very careful with this new loan repayment thing because with the current way the legislation stands you may have to do it for BOTH of you if you opt in.
Current rule: When two married individuals both have student loan debt and file taxes jointly, they could face up to double the monthly loan paymentof two unmarried borrowers in otherwise identical situations. This is because their combined income is used to calculate each spouse's own IBR payment, ignoring the fact that their joint income must be used to pay down both borrowers' debts. (This could mean paying 30% of your combined income!)
Negotiated change: When a married borrower whose spouse also has federal student loans applies for IBR, they will still look at the joint income, but they will also factor in the spouse's debt before calculating IBR payments. (That is from an email from IBR.org - let me know if you want me to forward it to you.)

I totally agree about loan repayment mentality - one my my husband's friends has tens of thousands of dollars in credit card debt on TOP of his loan money (he uses his loan money to make the minimum payments so he can keep racking up credit card debt!)Gives me anxiety just thinking about all that borrowed money!

AB HOME INTERIORS said...

I hear ya sista! I cant believe kids use their money for cars! Stupid kids!Stopping by from SITS!

Darci said...

amen and amen. each student that comes into my office looking for more loans gets a big lecture and a repayment chart =) The problem is that not everyone is required to see my face to get all their awards.