In an interesting post, Jennie Phillips over at WalletPop.com recently discussed her disbelief for Sallie Mae’s new ambitious student loan repayment plans:
On Tuesday, the loan provider announced new features for its Smart Option Loan, including incentives for students to pay off more of their loans while they’re still in school. Starting May 10, the incentives include lower rates — based on today’s London Inter-Bank Offer Rate, known as Libor, the rates would range from 2.88% to 10.25%. The program also would waive application fees, and it would allow loanholders to “earn back” 2% of their in-school interest payments if they make on-time payments.
“By paying the interest while in school, families can save a lot of money and pay off their debt much sooner. This goes a long way in managing your finances responsibly,” said Scott Kahan, president of wealth management firm, Financial Asset Management, in the Sallie Mae press release.
It’s great in theory, but where is that money supposed to come from? Selling blood?
She then goes on to provide her own suggestion for helping college grads with their debt loads POST college:
President Obama is probably too overwhelmed to get the student loan discussion back on track, but I have an idea for an easy fix. Put the onus on the educators. If after graduating with a reasonable GPA – say 3.0 – a student doesn’t land a job that earns him enough money to pay off his loans and still have enough leftover to pay his bills and keep a roof over his head, the school should forgive his student loans.
Like the automotive lemon laws – if it education doesn’t work, you ought to get your money back.
I must admit that when I first found out about Sallie Mae’s goal, I was impressed but very skeptical myself. I instantly begin to think of all of the recent graduates I work with on helping them with their debt issues. After the 100th kid, I began to notice a reoccurring theme amongst them: “I think I was scammed”.
Now we all know that ultimately, success is determinant on what we put in to achieve it. But do you believe college students are being misled as to the typical post college career results? Do you believe there should be some sort of responsibility to the university or lender to ensure employment and ability to repay these hefty debts while still being able to keep a roof over their heads? Or how about during the recruitment process, implement strict laws forcing the colleges to do more to educate potential enrollees on how debt works along with how it will affect them post graduation?
Some of my favorite illustrations on the subject:
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