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End of the college loan shark

College is not only about learning information. It’s not only about learning job skills, finding a prospective career or helping you get a better job. Well, it is about all those things, but more importantly, it’s about learning how to live life.

We have never met anyone who said they didn’t enjoy and appreciate their college experience. The problem that arises is most people’s post-college experience. Especially in these hard times, college students are coming out of school saddled with debt and unable to get a job. This problem doesn’t just affect our financial situations, but the rest of our lives, and can in fact close the doors that college is meant to open for us.

As many of you may have noticed on Wednesday, there were people standing around the Franklin and Berkshire Dining Commons and the campus center asking you to call your senators. I know, you think we’re crazy, but I’ll tell you what – this may have been the most important event of your college career. Right now, there is a bill going to the Senate (the U.S. one, not the Student Government Association), and that bill will literally change your life. It’s a bailout. A bailout for you.

This bill, the Student Aid and Fiscal Responsibility Act (SAFRA), will invest tens of billions of dollars into schools just like the mighty University of Massachusetts. It will increase the Pell Grant Scholarship funds by $40 billion. It will invest $3 billion to increase other college grant programs. It will send $2.55 billion to schools that have historically helped the disenfranchised and people of color. Heck, it will even make those darn Free Application for Student Aid (FAFSA) forms your parents make you fill out easier.

When Andrew Proten was a freshman, he took out a $5,000 loan with an interest rate of 2.8 percent. Awesome. But alas, he found out after putting his John Hancock on it that the interest rate jumped to 12 percent. This is called an adjustable interest rate. An adjustable interest rate is basically a fancy way of saying, “We can change your contract whenever we want to for no reason.” This is where they really get you when you miss a payment on your adjustable loan. If that happens, a loan provider can increase your interest rate to 20-plus percent. Azeen Khanmalek is going to graduate in May with about $85,000 in debt, and has no idea how or when he will pay that off. What kinds of jobs are available right now that will pay enough to support yourself and pay off loans? Azeen wants to go to graduate school, and maybe do service work for a year, but how can one do so if loan amounts increase with interest? In a lot of ways, it simply isn’t fair. How are we expected to succeed if we have to put ourselves in the hole before we really even start our lives?

Think about it, if you wanted to be a teacher (like Andrew) or a social worker, how could you afford to go into a relatively low-paying (but critically needed) career if you had, say, $80,000 in loans to pay off? College is meant to give us opportunities and expand our choices. Yet the way we fund our higher education system seems to have the opposite effect.

Over the years, the cost of school has skyrocketed much faster than inflation. Andrew learned in a political science class the other day that the cost of one year at a decent law school in 1929 was $300 (about $2,800 in today’s dollars). But now, a half decent law school costs at least $30,000 a year. That’s an increase of about 1,000 percent.

According to an October 2007 New York Times article, the cost of college rose at more than double the rate of inflation that year alone, with the cost of public schools rising at an even higher rate. We are willing to admit that college costs are what they are for a reason. We appreciate the high level of education, the opportunity to go to a nationally ranked school and all the resources that the University provides for us. So we understand that we have to shell out a certain amount of money for all those nice things. We are not demanding that the prices are substantially dropped (at least not right this second), but something needs to be done. That something is the Pell Grant.

Throughout our history, the U.S. government has had to step in to help citizens in need who cannot compete in an expensive economy through subsidies. We subsidize corn (a non-digestible food item), sugar, milk, meat and almost the entire U.S. agricultural industry. So isn’t higher education worth it too? We certainly think so.

Luckily, we now have President Barack Obama who sees that this is pretty messed up. SAFRA is not a cure-all or a magic bullet, but it is one heck of a start. Now, we are not diehard followers of the “Obamessiah,” but we have to say that ever since he came into office, a lot of people in Congress started getting their heads out of their private assets. We know that we might struggle financially for the rest of our lives, but we also know that we can prevent other students from experiencing the same thing.

If we all agree that the college experience is important, then shouldn’t everyone have the opportunity that we’ve had? The best part is that SAFRA, if passed, will take effect next year, which means we could see results almost immediately. So please, if you want to change the way we pay for college and make it more equitable for students all over the country, take action. Lobby on your own behalf. Call your senators; tell them you need better college funding. Tell them that you don’t want your life to be a constant financial struggle just because you wanted to get an education. Tell them that students are the future of this country, and we need all the help we can get.

Azeen Khanmalek and Andrew Prowten are SGA senators. They can be reached at akhanmal@student.umass.edu and prowten@student.umass.edu, respectively.

Comments
3 Responses to “End of the college loan shark”
  1. Ed says:

    The problem is that as financial aid has increased over the past 40 years, college costs have matched it. I fail to see how increasing student financial aid will do anything other than encourage colleges to again increase their prices.

  2. Just My Two Cents says:

    Unfortunately SAFRA will not help students like Andrew. Andrew took out a private loan which has a variable interest rate, that is not part of the FFEL program. FFEL loans are capped at 6.8%. If Andrew had a FFEL loan, as a teacher he would qualify for IBR (income based repayment) which would adjust the amount of his payment to meet his income.

    Under this new Obama loan program, the government will lend money to students. The government borrows funds at a rate under 2%, but then forces students to repay their loans at a rate of 6.8%. The government pockets the difference, they call it “savings” but I think it’s more like a “tax on students.” They say the money will go back to students in the form of Pell Grants, but because Pell Grants are not granted entitlement status, they are expenditure that could be cut from the budget at anytime and the government will continue taking the student’s money and spend that money on anything they want.

    This bill does nothing to address the problem than Azeen mentions, that college cost have increased 1,000%. It’s the high cost of college which forces students into debt. What’s needed is a way to deliver a high quality education at an affordable cost. Until that problem is addressed the government will keep emptying students pockets and subsidizing over priced education.

  3. Ben Rudnick says:

    The basic problem with Azeen and Andrew’s column is that it presumes that every person who wants to go to college should go to college. The simple truth is that the two major causes of the rising cost of a college education are government subsidies and the misconception that every person needs a college education.

    They rightly state that the government subsidizes all kinds of food products, but fail to realize that the effect of this is to raise prices, and that is the intent. The US subsidizes these products in order to make them a bit more expensive so that the people who grow/raise our food can make a living doing so. The reality is that if the government did not pay farmers NOT to grow all the crops they could the price would fall to the point where they could not make money doing so. The subsidy of farm products in the US is meant to keep food in that narrow price range where it is both cheap enough for the consumers to afford it AND expensive enough for farmers to earn a living.

    In the case of college subsidies, the attempt to reduce the cost of education to the “end user” has the same effect as it does on food, it raises the price. By making college a more attractive alternative to trade schools or getting job for students graduating from high school, the government increases demand for the limited space in America’s universities. Increased demand leads to increased price, as it has always been. As college prices rise the government has continued to increase the subsidies, and a self-reinforcing upward price spiral results.

    That would be enough of an impetus to force college prices to rise faster than inflation, but then add in the multiplier effect of the relatively new idea that every person must go to college to be successful, and that is why the prices have gone up at a shockingly high rate. I am not denying that a college education can be tremendously valuable in the marketplace, or that it does tend to raise one’s lifetime earning potential. However, what real benefit does a student get from their education if all they want from the process is to check off the boxes required to graduate, all to merely check off the box that says “I have a degree.” I know too many people who have a college degree and are working in jobs that have nothing to do with what they learned in school to buy into the idea that they absolutely had to go to college to be successful people.

    The real focus of government subsidy of college education should be on identifying the students who really do have the potential to make their college degree count for something. Instead of throwing money at every high school grad who would rather stay in school than do something else, the government should steer that money to those students who display academic excellence in high school and want to continue their education for a clear purpose. While it is true that college can be a place where young students can “find” themselves, it should not be subsidized by the government merely for that reason. Rather, that money should be reserved for students who know what they want to get out of their college education and display the ability to excel, especially those in the lowest income brackets and forced to go to high school in the poorest areas.

    Government should focus the support on those students with the highest appreciation for academic achievement, but who have the least financial resources.

    Ben R.
    Collegian Columnist

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