EDITORIAL: Student loan debt triggers a financial black hole

Managing their finances is something people have been dealing with for generations. Add in the cost of a college loan, and bills suddenly sky rocket before many recent college graduates even have a chance to start professional careers.

In 2003, Governor Rick Perry and other Texas lawmakers were trying to avoid a general increase in state taxes, due to a budget crunch, by deregulating the cap on college tuition. Perry signed into law the bill that allows public universities in Texas to set their own tuition rates and raise them at will with almost no legislative oversight.

Although removing the tuition cap may have avoided an increase in state taxes, it has caused tuition and fees amongst Texas public universities to increase tremendously. The main reason why tuition is rising is because the amount of government funding is decreasing.

The Texas Higher Education Coordinating Board reports that tuition and fees in Texas have risen by an average of 72 percent since Perry removed the college tuition cap.

Students graduating high school have heard it over and over again that in order to make it in this world a college degree is essential. How do most students manage to pay for college when the cost of tuition is outrageous? They take out student loans.

American Student Assistance (ASA) reports that in the United States today there are nearly 20 million people attending college, and 60 percent of them are borrowing annually. There is currently between $902 billion to $1 trillion in outstanding student loans in the United States.

The common misconception for people attending college is that accepting a student loan is no big deal. Students think they will be able to pay it off with no problem once they have their dream job.Sadly, that is not the case for the average person.

Six months after graduation student loan agencies will begin the repayment process. Consumer Financial Protection Bureau and ASA reports that the standard repayment schedule for a student loan is 120 months, or 10 years, and during that time period two out of five student loan borrowers are delinquent at some point in the first five years.

Once the borrower becomes delinquent on his or her student loan, it can get out of hand very
quickly. If the borrower does not make any payments on the student loan or make arrangements with the lender within 270 to 360 days their loan can become defaulted.

The most common reasons for someone who has defaulted on his or her student loans are: delinquent payments, bankruptcy or insolvency.

There are two types of student loans, federal and private. Once the borrower defaults on his or her student loan, the loan terms can be accelerated and the lender will require the entire balance of the loan, as well as interest, to be due in one single payment. Once the borrower’s payment plan has been accelerated, the lender can turn over the loan to a collections agency. The difference between a federal student loan and a private student loan is: a federal student loan’s default is defined by federal law, and a private student loan’s default is defined in the loan contract.

Once the student loan has been sent to a collections agency, the agency will constantly send the borrower collection letters and phone calls. They also have the power to collect from the borrower’s salary, federal income tax refunds, Social Security payments, and other federal payments. The collection agencies will do whatever it takes in order to collect the money owed on the student loans.

The best way to pay off student loans is to only borrow what is necessary, and to start saving immediately. It is extremely difficult to work and attend college, but in the long run, even if it takes the student a little longer to finish school, the chances of he or she defaulting on his or her student loans will decrease.

The government needs to realize that by cutting funding for Texas public universities, it is requiring students to pay more in tuition and fees to make up the difference. It does not take a college education to realize that when state appropriations for education decreases, universities have to increase the cost of tuition and fees to cover the budget gap. The trillion dollar amount of debt still owed in this country for student loans is evidence of the never ending black hole of debt, rising costs of tuition and fees they are creating.