2008 Woodie Awards
Paying debt drags down students this season
Elizabeth Owuor
Issue date: 12/16/04 Section: Lifestyle
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Young America beware: the fast lane to the good life is becoming clogged with the specter of record-high student loans and credit card debt.
According to the National Center for Education Statistics (NCES), students are taking on more loans than ever, which is in part due to the rising cost of higher education. Combine high college costs with the eternal quest of credit card companies to rope in fresh meat, and students have a concoction for financial disaster.
"I know of people who are starting to pay them back," said Topher Larkin, a theater major who graduated last year. "My friends would always joked about the loans they would have to pay but now the reality of it is hitting them."
A slowing economy and a highly competitive job market adds to the future of graduates with financial burdens. In the past, many college students were able to receive federal grants that did not have to be repaid. Today, privatized loans, or loans disbursed by independent companies like Sallie Mae, with high interest rates lock many young people down with the financial ball-and-chain.
Congress' recent decision to change the eligibility requirements for the Pell Grant, need-based aid provided by the federal government that does not need to be repaid, will bring bad news to students who have to look elsewhere to help fund their education. Making the grant harder to receive will force more students into the arms of privatized lenders with possible higher interest rates. In the long run, high interest rates increase overall indebtedness, forcing students to pay more over time.
But student loans are not the only thing hindering today's young people from a debt-free future. Credit card companies fill student mailboxes with thousands of new credit card offers each year, setting the stage for the "buy now, pay later" mentality that later cripples credit and encourages debt. Capital One sends out envelopes with enticing offers that read: "You're confirmed for a Visa Platinum card offer." These advertisements lead students to believe that they are already approved for a card that boasts a $2,000 spending limit. The only thing to be approved however, was the advertisement to be sent to the student. Complete with a gimmick plastic credit card with the word platinum emblazoned across it, the company insinuates that credit is easily obtainable and does not have to be earned.
According to the National Center for Education Statistics (NCES), students are taking on more loans than ever, which is in part due to the rising cost of higher education. Combine high college costs with the eternal quest of credit card companies to rope in fresh meat, and students have a concoction for financial disaster.
"I know of people who are starting to pay them back," said Topher Larkin, a theater major who graduated last year. "My friends would always joked about the loans they would have to pay but now the reality of it is hitting them."
A slowing economy and a highly competitive job market adds to the future of graduates with financial burdens. In the past, many college students were able to receive federal grants that did not have to be repaid. Today, privatized loans, or loans disbursed by independent companies like Sallie Mae, with high interest rates lock many young people down with the financial ball-and-chain.
Congress' recent decision to change the eligibility requirements for the Pell Grant, need-based aid provided by the federal government that does not need to be repaid, will bring bad news to students who have to look elsewhere to help fund their education. Making the grant harder to receive will force more students into the arms of privatized lenders with possible higher interest rates. In the long run, high interest rates increase overall indebtedness, forcing students to pay more over time.
But student loans are not the only thing hindering today's young people from a debt-free future. Credit card companies fill student mailboxes with thousands of new credit card offers each year, setting the stage for the "buy now, pay later" mentality that later cripples credit and encourages debt. Capital One sends out envelopes with enticing offers that read: "You're confirmed for a Visa Platinum card offer." These advertisements lead students to believe that they are already approved for a card that boasts a $2,000 spending limit. The only thing to be approved however, was the advertisement to be sent to the student. Complete with a gimmick plastic credit card with the word platinum emblazoned across it, the company insinuates that credit is easily obtainable and does not have to be earned.