Student loan defaults are rising in the United States (and so are the debt rates) and we should wonder: are we be really surprised by all this?
Everybody knows what a student (or college) loan is: it is very simple, it is just "another loan" that is in fact designed to help college students pay for their tuition, living expenses, books, and the likes. The difference from other types of loans is that (i) the interest rate is quite lower with respect to a "standard loan" (the one you could get to buy a car for instance) and (ii) the repayment schedule is deferred for the entire duration of the education. Accepting a student loan, of any kind, should be done with extreme care, and the student should be aware of the basic facts and total US figures: - The current outstanding student loan debt in the United States stands at more that $830 billion; - Almost 14.5 millions are the undergraduates who enroll for college; - Each college student in higher education pays (but this is just an average figure) almost $11,000 to attend university education.
The figures above are impressive and we may wonder how the US can keep up this huge higher education loan deficit that appears to be getting wider and wider... Anyway, for sure a student loan has some advantages as said, in particular, the 2 major advantages of a student loan over conventional loans are: 1) Lower interest rates; 2) Easier repayment terms.
You can have a private student loan or a federal student loan. In the case of a federal student loan, Federal Direct Student Loan Program, also called Direct Loan Program or FLDP provides low interest loans for students (and parents) to help pay for the cost of college education after high school. The lender, in this case, is the U.S. Department of Education and not a bank or a financial institution, such as SallieMae for instance (and in this case we would be talking of private loan). For sake of clarity, also consider that until recently, there was the Federal Family Education Loan or FFEL Program, the second largest of the US higher education loan programs initiated by the Higher Education Act of 1965 and funded through a public/private partnership. Following the passage of the Health Care and Education Reconciliation Act of 2010 on March 26, 2010 FFEL Program was eliminated, and no subsequent loans were permitted to be made under the program after June 30, 2010. In other words, following the passage of the Health Education Reconciliation Act of 2010, the Federal Direct Loan Program is the sole government-backed loan program in the United States.
In this article titled " Dark lords of student loan debt," Vox Day (a blogger) shows that the advantages of a college loan (and the value of college education) may come as a hard bargain:
... the value of a college education has not only declined significantly [...] it has also been slashed by the construction of a methodical system of financial rapine...
We invite you to read the full article and figure out by yourself if that is the case and/or you are affected by the Dark Lords, or Gods depending on the point of view, of student loan debt and if indeed these programs are a scheme... What is important to remark is that indeed college is always been considered a valuable investment, but right because we are talking of "investment", a college student (and their parents) should stop a moment and think about the ROI of college.
Perhaps the value of college as declined over the years, perhaps such value is no longer a "big" value as it had been for the previous generation, perhaps the ROI of college education could be substantially increase if, instead of considering private education, we consider a public education?
Certainly, there is no single answer and no answer that is valid for everyone regardless of his/her particular situation, life objectives and, most importantly, financial situation and whether your student loan is private, federal or it is a combination of private and federal student loan.
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