The harsh truth about graduate student loans

Guest Column

Student loan debt has been a source of concern since student loans surpassed grants as the foundation of student aid in the 1980s.

The ability to repay student loans after graduation relies on a number of factors such as a student’s fiscal responsibility and his or her ability to find gainful employment after graduation.

However, it is also dependent on the terms of available loans.

The Budget Control Act of 2011 mandated several changes to federal student aid, but the most glaring change affects graduate students.

Beginning in 2012, graduate students are no longer eligible to borrow subsidized loans through the Federal Direct Loan Program.

They are now forced to borrow 100 percent unsubsidized loans that accrue interest from the day the student signs the paperwork.

Tami Luhby, writer for CNN Money, explained the federal government’s dilemma that led to the Budget Control Act.

“While the president has focused on expanding access to college for low- and middle-income children, lawmakers have taken several steps to whittle away at student aid,” she said.

To reach a compromise, lawmakers made the decision to preserve the maximum Pell grant award by no longer subsidizing the interest on loans for graduate students. This makes perfect sense.

To increase the number of Americans that earn a postsecondary certificate or degree, the government must focus on preserving aid for our neediest students.

This reality does not negate the fact that graduate students, in the hopes of moving past entry-level jobs more quickly, will be saddled with even more student loan debt than before.

Fastweb’s repayment calculator allows students to figure their monthly payments and the loan total that will have to be repaid to the federal government.

Using last year’s interest rates of 3.4 percent for subsidized loans and 6.8 percent for unsubsidized loans, and assuming a student borrowed the maximum loan amount of $20,500 for two academic years, a loan under the new law will cost that student $3,399.60 more than under previous regulations.

While the federal government made the right decision to preserve that maximum Pell grant award, universities must make a few changes that will help graduate students see that the return on their investment is still high.

First, universities must stop increasing costs for graduate students.

This is usually the first line of defense for institutions when enrollment is down or state and other aid is reduced.

They simply cannot keep shifting the burden to students.

Increasing the cost of enrollment, coupled with changes to the student-loan program, will eventually make it impossible for students to believe that going to graduate school is worth the cost.

Revenue must be generated somewhere, but institutions need to be more creative.

One option would be a campaign to increase alumni donations.

Also, universities should create awareness of income-based repayment options.

This type of repayment has only been available since 2009, so most students are unaware it exists.

Income-based repayment extends the period of repayment from 10 years, as it is under the standard repayment option, to 25 years, and monthly payments rarely exceed 10 percent of a borrower’s income.

Providing students with information regarding this repayment option will reassure them that loan payments will be manageable, even if their advanced degree does not immediately result in a better paying job.

Finally, universities must help students find gainful employment after graduation.

This can be achieved through increased internship opportunities, participation in professional conferences, opportunities for networking with professionals, showing students where to search for jobs in their field or simply passing along information about available jobs.

Schools are not responsible for insuring that students find a job or are promoted after graduation, but they certainly have the responsibility to provide students with valuable information about employment in their chosen field.

Student-loan debt is a reality for almost every graduate student. The Budget Control Act of 2011 has made advanced degrees even more expensive for students who desperately need them to advance in their careers. Universities must do their part to ensure that graduate students understand that the cost of pursuing advanced degrees is still worth it.

RACHEL SVEDA 

Financial aid specalist

Rend Lake College

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