Student Loan Program

College students can get long-term state loans to pay tuition from this spring semester. Under the ``study-now-pay-later" program, student borrowers will be allowed to pay back their loans after graduating and landing a job. Financially-strapped students welcomed the debut of the credit package, but not without some worries about paying back their debt.

Their main concern is that the interest rate for the loan is set relatively high at 5.8 percent. The rate might go up following possible hikes of the market interest rates, thus bringing heavier burdens to borrowers. Some students described the program as an ``interest time-bomb," which could explode after graduation. Others said the loans will weigh them down until they retire from work.

Excessive debt payment burdens may also lead borrowers to default on their obligations and file for individual bankruptcy. The bad loans then must be shouldered by the government using taxpayers' money. Thus, it is necessary that the authorities make the utmost efforts to make student loans available at a much lower interest rate. They also need to do more to guarantee the success of the program that is designed to help students of poor families study without experiencing financial difficulties.

For this, the government is required to go all-out to tap more financial resources to provide more loans to students at cheaper borrowing costs. Besides, it must provide more financial support to colleges and universities in a move to reduce their dependence on tuition for their school operations.

The government currently sets aside 0.6 percent of the nation's gross domestic product (GDP) for financial support for higher educational institutions. The figure is only half the average 1.2 percent of the 30 countries belonging to the Organization for Economic Cooperation and Development (OECD). And 75 percent of local colleges and universities' budgets come from tuitions paid by students, far higher than the OECD average of 25 percent. Against this backdrop, the nation's higher learning institutions cannot join the ranks of the world's prestigious schools, leaving students stripped of their right to better education.

Together with the loan program, the government plans to place a yearly cap on the increase rate of tuition in order to keep colleges and universities from hiking tuition excessively. According to official statistics, tuition fees skyrocketed by 115.8 percent between 1999 and 2009. We urge colleges and universities to refrain from tuition hikes so that the burden on students and their parents can be eased. Instead, they must make efforts to diversify their sources of income in order to ensure that there are no students who quit their studies due to financial difficulties.


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Student Loan Reform: To Help Students Or To Enrich Government?

Sallie Mae just recently made an announcement that in the fourth quarter which just ended Dec 31, 2009 it reached a core earnings basis of $249 million. Chief Executive Albert L. Lord also hoped that earnings in 2011 will be higher than 2010. I guess it is ‘bravo, Sallie Mae’ – while America’s future is struggling to gain higher education, somebody is swimming in profit for it.
In the meantime, Huffington Post Investigative Fund published a very interesting article which is the first of a series of articles regarding the student loan reform. Back in February 2009, Obama announced his plan to overhaul the student loan industry and bring in a student loan reform which seemed like a hopeful relief for students. The plan caused dozens of nonprofit lenders to fear that their business was doomed. But apparently, Huffington Post Investigative Fund has dug deep and found that the same nonprofit lenders are now on the verge of winning a protected position in the higher-education business.The Senate Health, Education, Labor and Pensions (HELP) Committee is considering the Student Aid and Fiscal Responsibility Act which would eliminate the Federal Family Education Loan (FFEL) program. FFEL loans are federally subsidized and make up approximately 80 percent of the student lending industry.
In the 2009-2010 fiscal year, 14.3 million of the 17.5 million student loans were federally subsidized according to the Department of Education. Under Obama’s plan to overhaul the student loan industry, the government would consume the entirety of this industry. In 2009-2010, this is a total of $103 billion.


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