Saturday, June 08, 2013

My letter to someone

June 8, 2013
I am writing in regards to the student loan bills that have recently been trying to be passed. I am a graduate from Washington State University and currently am paying off a small student loan debt. However my husband is currently pursuing a professional degree in Optometry from Pacific University, this leads us to be very interested in the legislation of federal student aid. When all is said and done his tuition from 8 years of schooling will total 192,000, now when you add a 6.8% interest rate, which is what most of his graduate loan rates are, with the grad plus loans being a higher rate, we are looking at leaving school owing $250,000 with all interest included, and after repayment (according to current loan estimates) we will have paid $100,000 in interest alone! After school we can expect him to earn $70-85,000 a year while he gets established in his industry. With this income we are likely looking at paying nearly 20% income tax (both federal and state combined) leaving us with $57-70,000 to live on and pay $34,500 to student loans per year. This means that we will be spending half of our income on student loan payments for 10 years!
As you can imagine, the debt amount is crushing, however we knew that we were taking on a large debt and we don’t expect anyone to shoulder our bill for school. We weighed the pros and cons, and we considered the amount of tuition that would be accrued. What we could not/did not foresee was the incredibly high interest rates on graduate student loans. As an undergraduate my husband qualified for many grants and scholarships due to high academic achievement, as well as financial need. However most of our loan debt is federally unsubsidized, and going to crush us in repayment because of the high interest rates. There has been a lot about federally subsidized Stafford loans, which many people do not realize that is just a small portion of the loans offered, I have also heard talk of payment plans in which you pay a portion of your income for X amount of years and the rest is forgiven. I do not agree with any of the current proposals, forgiving everyone’s student loan debt is not feasible for a country already saddled with debt, nor would it encourage thoughtful spending and careful planning on the students’ part.
If the federal government wants to help ease the student loan debt for graduates then ALL loan rates should be lowered. Banks and other major corporations can borrow money from the government at much lower rates from what I have found, so why are students and families that are just starting out having to pay so much money to borrow money to gain an education. This debt is going to prevent us from supporting the economy on both a local and a federal level because we simply will not be able to afford anything other than our student loan payments. I believe that what needs to be done is simple, offer students lower interest rates (they should be the lowest rates available), and offer students ways to pay loans off before taxes. If the student loan rates were lowered to say 2%, it would put our student loan payments per year to about 27,600 saving an extra $500.00 per month leading to total interest paid on the loan to $26,040.00. This is a much more manageable sum than paying $95,240.00 in interest payments. The change I believe we need to see is outlined and shown by the numbers in this letter, interest rates need to be lowered and options to make loan payments before taxes added. This will get students out of debt faster, more responsibly, and allow them to contribute to the economy during and after repayment.