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'Too damn high': graduates struggle with student loan debt 'Too damn high': graduates struggle with student loan debt
(3 months later)
From the fiscal cliff to the sequester, Congress has developed a talent for doing nothing while important deadlines pass. This time, student loan borrowers are feeling the brunt of inaction.From the fiscal cliff to the sequester, Congress has developed a talent for doing nothing while important deadlines pass. This time, student loan borrowers are feeling the brunt of inaction.
The interest rate on subsidized Stafford loans, the most common type of student lending distributed by the US government, has now doubled from 3.4%, a rate introduced in 2011 and extended regularly as a relief measure. Now, new borrowers face a 6.8% rate.The interest rate on subsidized Stafford loans, the most common type of student lending distributed by the US government, has now doubled from 3.4%, a rate introduced in 2011 and extended regularly as a relief measure. Now, new borrowers face a 6.8% rate.
This might not seem like a big deal to those who believe the rate is already quite low compared with private loans (those rates hover around 9-12%, on average). But we live in an age of skyrocketing student debt and staggeringly few signs of relief. Most hope Congress will retroactively reverse the rate to 3.4% for new borrowers, which, thankfully, is still a possibility.This might not seem like a big deal to those who believe the rate is already quite low compared with private loans (those rates hover around 9-12%, on average). But we live in an age of skyrocketing student debt and staggeringly few signs of relief. Most hope Congress will retroactively reverse the rate to 3.4% for new borrowers, which, thankfully, is still a possibility.
Interest rates comprise just one sliver contributing to the student loan crisis, but it's one that adds up. It's also a part of the process that many borrowers overlook (or don't fully understand).Interest rates comprise just one sliver contributing to the student loan crisis, but it's one that adds up. It's also a part of the process that many borrowers overlook (or don't fully understand).
If an informal survey of friends and colleagues is any indication, borrowers would rather just pay their monthly bill than consider the amount of money they're paying to borrow. A journalist told me on Twitter that he auto-pays the total amount he owes each month, giving no thought to the interest he's paying:If an informal survey of friends and colleagues is any indication, borrowers would rather just pay their monthly bill than consider the amount of money they're paying to borrow. A journalist told me on Twitter that he auto-pays the total amount he owes each month, giving no thought to the interest he's paying:
@katierogers definitely not, i tune all of that out and just pay what i'm supposed to. which is the smart method, obvi.@katierogers definitely not, i tune all of that out and just pay what i'm supposed to. which is the smart method, obvi.
— Timdependence Day (@TimHerrera) July 2, 2013— Timdependence Day (@TimHerrera) July 2, 2013
Another responded with an estimated "4-something" rate. Another replied simply "too damn high".Another responded with an estimated "4-something" rate. Another replied simply "too damn high".
Personally, I couldn't recall my own interest rate until this week's deadline passed, and then I realized my rate had been 6.8% all along, since I borrowed before 2011. I pay roughly $3,700 in Stafford interest each year. To put that another way, that's $37,000 in interest alone over the life of my ten-year repayment plan.Personally, I couldn't recall my own interest rate until this week's deadline passed, and then I realized my rate had been 6.8% all along, since I borrowed before 2011. I pay roughly $3,700 in Stafford interest each year. To put that another way, that's $37,000 in interest alone over the life of my ten-year repayment plan.
In the beginning, I borrowed as little as I could, none of it private, and made my way with Stafford loans and a Perkins loan. I took a work-study job and freelance work on top of my full-time course load. I refused unpaid internships, not because I wouldn't have loved the opportunities, but because I couldn't afford to. And this was just for graduate school.In the beginning, I borrowed as little as I could, none of it private, and made my way with Stafford loans and a Perkins loan. I took a work-study job and freelance work on top of my full-time course load. I refused unpaid internships, not because I wouldn't have loved the opportunities, but because I couldn't afford to. And this was just for graduate school.
I'm the first woman in my family to hold a college degree, made possible by my grandparents, and it has been key to my career opportunities. But I still graduated with a debt that nags me each month. I'm afloat, and I know that understanding how the interest rate on my loan works is my personal responsibility, as is paying off the loan amount. But every 30 days, I'm reminded of life choices I'll have to delay because of my education debt.I'm the first woman in my family to hold a college degree, made possible by my grandparents, and it has been key to my career opportunities. But I still graduated with a debt that nags me each month. I'm afloat, and I know that understanding how the interest rate on my loan works is my personal responsibility, as is paying off the loan amount. But every 30 days, I'm reminded of life choices I'll have to delay because of my education debt.
And I'm one of the lucky ones.And I'm one of the lucky ones.
One friend racked up around $140,000 to finance a private education. She had to check before telling me that the interest rate on just one of her privately-held loans for $109,000 is 4.9% – roughly $53,410 in interest paid, if she clears the principal in ten years (unlikely). Another also had to check her rate before sharing it with me: a 6.8% rate on $90,000-worth of loans works out at $60,000 in interest over a decade.One friend racked up around $140,000 to finance a private education. She had to check before telling me that the interest rate on just one of her privately-held loans for $109,000 is 4.9% – roughly $53,410 in interest paid, if she clears the principal in ten years (unlikely). Another also had to check her rate before sharing it with me: a 6.8% rate on $90,000-worth of loans works out at $60,000 in interest over a decade.
So, while there's the opinion that a 6.8% loan rate is enough relief – students are risky borrowers, after all – the rate still becomes a mammoth strain for people struggling to find well-paying, full-time work.So, while there's the opinion that a 6.8% loan rate is enough relief – students are risky borrowers, after all – the rate still becomes a mammoth strain for people struggling to find well-paying, full-time work.
My colleagues and I learned, after launching the Guardian's student debt project, that most borrowers aren't looking for a free ride. They want the dignity to pay off their loans – without being stretched too thin to pay rent or buy groceries. They want the full-time, paying jobs they expected would come with the degrees they earned.My colleagues and I learned, after launching the Guardian's student debt project, that most borrowers aren't looking for a free ride. They want the dignity to pay off their loans – without being stretched too thin to pay rent or buy groceries. They want the full-time, paying jobs they expected would come with the degrees they earned.
In the end, it's the borrower's responsibility to pay close attention to the amount borrowed, as well as the interest rate for borrowing. But it's also the responsibility of our Congress to generate – and actually act on – viable relief options without turning loan debt into a partisan issue.In the end, it's the borrower's responsibility to pay close attention to the amount borrowed, as well as the interest rate for borrowing. But it's also the responsibility of our Congress to generate – and actually act on – viable relief options without turning loan debt into a partisan issue.
Senator Elizabeth Warren of Massachusetts has made this a key cause. Her first bill, the Bank on Student Loans Fairness Act (pdf), would allow students to borrow at the same rate at which banks borrow money from the Federal Reserve: 0.75%. A more modest proposal from Senators Tom Harkin (Iowa) and Jack Reed (Rhode Island) is for the 3.4% interest rate to remain in place for two more years. There's surely room for more thought on this issue.Senator Elizabeth Warren of Massachusetts has made this a key cause. Her first bill, the Bank on Student Loans Fairness Act (pdf), would allow students to borrow at the same rate at which banks borrow money from the Federal Reserve: 0.75%. A more modest proposal from Senators Tom Harkin (Iowa) and Jack Reed (Rhode Island) is for the 3.4% interest rate to remain in place for two more years. There's surely room for more thought on this issue.
While a historically unpopular cast of lawmakers drags out this process, many of those who wait are drowning. Americans have no shortage of depressing headlines and stomach-dropping graphs that provide them with little comfort but the knowledge that nearly everyone else is in the same boat.While a historically unpopular cast of lawmakers drags out this process, many of those who wait are drowning. Americans have no shortage of depressing headlines and stomach-dropping graphs that provide them with little comfort but the knowledge that nearly everyone else is in the same boat.
Every generation owes money on student loans. American seniors owe an estimated $43bn of the estimated $1tn total owed by US borrowers. But here's what's different for my generation: the average household makes less than it used to, and the cost of higher education is rising. So, how could a clear solution still seem so nebulous?Every generation owes money on student loans. American seniors owe an estimated $43bn of the estimated $1tn total owed by US borrowers. But here's what's different for my generation: the average household makes less than it used to, and the cost of higher education is rising. So, how could a clear solution still seem so nebulous?
To both borrowers and Washington, the message is the same: take action.To both borrowers and Washington, the message is the same: take action.
Borrowers: ask hard questions of your lenders, even if it's for help, and even if you'd rather ignore the process. Consider Warren's proposal to dramatically reduce the student borrower interest rate. Consider the Harkin-Reed bill. Hold your lawmakers as well as yourselves accountable by paying close attention to what happens in the near future. And lawmakers: come back from recess and do something. Anything. Because this situation will only worsen, and America can't afford for any generation of workers to be highly educated, but stunted before they start their careers and "grown-up" lives.Borrowers: ask hard questions of your lenders, even if it's for help, and even if you'd rather ignore the process. Consider Warren's proposal to dramatically reduce the student borrower interest rate. Consider the Harkin-Reed bill. Hold your lawmakers as well as yourselves accountable by paying close attention to what happens in the near future. And lawmakers: come back from recess and do something. Anything. Because this situation will only worsen, and America can't afford for any generation of workers to be highly educated, but stunted before they start their careers and "grown-up" lives.
• Learn more: Warren's bill, the Reed-Harkin bill and resources from the Consumer Financial Protection Bureau. You can read more about the Guardian student debt project here• Learn more: Warren's bill, the Reed-Harkin bill and resources from the Consumer Financial Protection Bureau. You can read more about the Guardian student debt project here
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