Hari A. California

Student Loans

People need bankruptcy and refinancing options on student loans.

Thursday September 1st, 2016

Dear Next President,

In the 21st Century, most teens are scrambling to get a college education no matter what they have to do. Employers in the world today are looking at what makes you better than the average Joe, and without a proper education it's something hard to prove. People go through great heights and burdens to get the proper education, and one of those burdens are accumulating student loans. Student loans are a great way for students to get access enough funds to pay for their college tuition, but people don’t look at the effects that loans have on students after they have graduated college. The financial burden always lingers behind their shoulders, and there is no way to get rid of it without paying it off. President Obama started a program called PAYE in which you only pay up to 10% of your income into the premium of your federal student loan. But the program doesn’t address the issue about people that don’t have an income or can’t even afford what their current premium is. Since the program is only taking 10% of your income it extends the term of your loan which, in the end means you pay more interest on the loan since you take longer to repay the loan.

Student loans come with a hefty interest rate; the rates can range up to 7.21% on a federal direct loan. With interest rates rising and falling each day, why should someone be stuck with a rate so high and with barely any money going to the principal of their policy. There should be a program to refinance student loans. With a student loan, you are always stuck with whatever crummy old interest rate that you received years ago. With refinancing options on federal direct loan, the borrower can enroll in the PAYE program which only takes 10% of your income without the borrower worrying that they will end up paying more on the loan because the interest rate will drop after the refinance. If we start calculating, this occurs because if a borrower enrolls in the PAYE program on a 4.66% interest on $160,000 and the borrower has an income of $100,000, there would be a payment of $10,000 each year. That sounds great, but in that $10,000 only $2544 actually goes towards your premium and the rest is all interest. Now think about if the interest rate is half of what that person took their loan out on, if the interest rate was 2.33% and if the payment was still $10,000 in the year, the amount going to the premium would be $6272. First of all, you would be paying your loan off much quicker because the amount of money going towards your principal. And you would be paying less interest on your loan, which means your retain most of your earnings. Also, there would more money to redistribute on more loans, which in the long run means more students get education.

When someone makes a payment for a student loan that is 10% of their income and only $2544 would be going to the premium I would be concerned because with only putting 10% of their income forward they increase the term of their loan and what happens if they end up falling into a financial hardship? If someone finds themselves ending up in a financial hardship, they can file bankruptcy on anything except their federal student loan. No matter what you do, until your are on your deathbed you are held responsible for repaying the loan amount. I believe that their should be a bankruptcy option on student loans because if I lose my house and car, I shouldn’t have to worry about debt when I try to rise again. Bankruptcy was created because during the 1800’s the United States faced a major economical crisis and people needed protection from corporations and banks because they owed them money. Since the government doesn’t accept filing bankruptcy on student loans, what is the difference between the corporations and banks that the United States created laws to be protect from.

I know that people would say that if we open up refinancing and bankruptcy options we would be losing revenue and losing taxpayer money, but is making money more important than someone’s education? They say that the youth are the future of the United States, but what happens when the youth aren’t educated. A country is only as smart as its people. Taking a loss in revenue on currently issued student loans would mean more loans being able to be dispersed because the repayment of the loan would be quicker than a ridiculous interest rate. If we open a bankruptcy option of federal student loans we might end up losing profits that can be recirculated, but we would be giving the person that files bankruptcy a second chance.

All in all, As our next President if you would like to better education in the United States, I would look into how kids are paying for their higher education. Everyone deserves a second chance, and with a bankruptcy program they would be able to take the opportunity and have a clean start. And with refinancing options on student loans, we can have loans being paid off quicker, and that money can move on to another student. With your help, we can change the how students pay for college.


Hari Ambu 

New Technology High School

American Studies

New Tech High's Junior class. This is a team taught US History and Literature class.

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