Are Student Loans Worth It?

According to FinAid.org, the average student loan debt among graduating seniors was $23,186 in 2007-2008.

Student Loans have been a heavy burden for young people starting out for decades now. With the economy in turmoil more and more families are seeking loans for their kids to go to college because the Government funds are lacking more and more everyday.

In the 2008-2009 academic year, they took out more than $95 billion in loans, both federally guaranteed and private. This is an extremely alarming number for our economy. Our future leaders, the people that we hope will get us out of this mess are starting their adult lives out way worst than their parents were when they started out. Bankruptcies amongst the younger working generation are at highs that have never been seen in history.

Since the bank-based loan program began in 1965, commercial banks like Sallie Mae and Nelnet have received guaranteed federal subsidies to lend money to students, with the government assuming nearly all the risk. Democrats have long denounced the program, saying it fattened the bottom line for banks at the expense of students and taxpayers. The legislation, proposed by President Obama in 2009 and fiercely opposed by banks, substitutes an expanded direct-lending program by the government for the bank-based program, directing $36 billion over 10 years to Pell grants, for students from low-income families.

Congress sets the interest that a lender can charge on federal loans, and most lenders do charge the maximum. Currently the maximum interest rate on new Perkins loans is 5 percent. On unsubsidized Stafford loans, the rate is 6.8 percent. For subsidized Stafford loans, the rate is 5.6 percent — the government pays the interest (dropping to 4.5 percent for 2010-11 and 3.4 percent for 2011-12). The lower rate is only for undergraduate students; graduate and professional students still pay 6.8 percent on both types of Stafford loans. On PLUS loans, borrowers pay 7.9 percent if they borrow through the direct loan program. Students should check these rates because they do change.

Student loans have now become probably the biggest investment that one can make in his life. Sure some will say a home is but when you think of it. How is one going to afford a home not to mention qualifying to buy one when he or she starts out with a insurmountable 50K or more student loan debt.

Advertisements

About defaultprevention

Default Prevention Specialist since 1998.
This entry was posted in Borrowing, Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s