What Does the Student Loan Debate Really Mean?

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When I started college, I remember everyone telling me to enjoy my time there, because it would be the best four years of my life. And they were right. Now I’m watching my sister enjoy her college experience, and while she’s having a great time, there’s one major difference between her experience and mine: When she graduates in 2014, she’ll be saddled with at least $20,000 in debt. And she’s far from alone—the average student graduates with $25,000 in debt, according to the New York Daily News.

In total, U.S. student debt exceeds more than $1 trillion, with an estimated 7.4 million students in debt. While both Democrats and Republicans have a made a point to say they believe student loan interest rates should be kept down, there’s been little to show for their arguing so far. In fact, just recently, the Senate blocked a Democratic bill that would have kept interest rates at the current 3.4 percent level by closing tax loopholes. So what does all this mean? And just where do Hispanic students fit into all of this?

How does this affect current college students?
Currently, there are three major forms of education loans offered to students and their families: There are student loans (e.g. Stafford and Perkins loans); parent loans (e.g. PLUS loans); and private student loans (e.g. loans from a private lender; they’re also called alternative loans).

If Congress doesn’t doesn’t do anything soon, the current student loan interest rates on Stafford student loans will jump from 3.4 percent to 6.8 percent on July 1. This means all students who apply for those loans on or after July 1, 2012, will pay 6.8 percent in interest when they graduate. Graduate students will also be affected—they’ll lose eligibility for Stafford loans on July 1.  

This will affect everyone differently; after all, everyone sets up different payment plans and schedules, but the Obama administration estimates that with the 6.8 interest rate, students will pay an additional $1,000 over the life of the loan.

Financial aid expert Mark Kantrowitz shares a slightly different opinion. Studying the average amount of Stafford loans that undergraduates took out in 2007-2008 Kantrowitz came up with a different number: Paying 6.8 percent in interest rates, the student would pay about $761 more over 10 years, or $925 more over the life of the loan (typically about 12 years).

"It sounds dramatic to be doubling the interest rate," Kantrowitz told U.S. News and World Report. "But the increase in the monthly payment is a relatively small percent." Either way, everyone can agree—students will pay more over the life of their loan.
 
Additionally, any students who take out new subsidized loans in the next two years will be responsible for paying the interest during the six-month grace period after graduation. In the past, the government has normally picked up the tab for the interest accrued during that period and students begin paying six months after graduation. Now, students can add the interest accrued to their bill.  

Where do Hispanic students fit into this?
A study conducted by the Hispanic Pew Research Center estimates that there are 1.8 million Hispanic students in two- and four-year colleges, accounting for 15 percent of total enrollment. That’s a huge jump from previous years. If Congress fails to act, 986,494 Hispanic students will see their interest loan rates double.

Considering that 23 percent of children under 17 are Hispanic it is imperative that we help them become productive members of society—and one way to do that is to go to a college or university. No one who wants to attend college should be denied the opportunity to go because of cost.

Ultimately, the student loan debate isn’t the problem; rather, it’s a symptom of the larger problem which that funding for education programs nationwide—from head start programs to public universities—has been slashed. I think the one thing that everyone can agree on is that anyone who wants to go to college should have the opportunity. The question is, how do we make that happen?

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