This week the credit crisis is about to hit home for many students entering college and graduate school. Sallie Mae, the largest private lender to students, announced that students will be required to begin paying back their loans while they are still in school. This dramatic shift in procedure will impact students who are looking to find ways to fund the increasingly expensive college experience; many will likely find it unfeasible to take out these loans.
Up until now, students did not have to pay back their Sallie Mae loans until after graduation, allowing them to secure a full-time job before paying down their debt. By delaying the repayment period, the loan company allowed students to focus on school. Under the changes, students could be forced to pay as much as $160 per month to Sallie Mae by the end of their sophomore year; they will become more concerned with not defaulting on their loans than performing well in their classes. A good academic performance is likely to translate into a good job right out of school, and a higher paying one at that.
In this troubled economic climate, it is easy to see Sallie Mae’s logic: by making students pay sooner they will dramatically increase the flow of short-term capitol into the company. In addition, the new, stricter lending requirements will lead to fewer defaults, ensuring that Sallie Mae is not losing out on the money that it lends. Yet this doesn’t make up for the harm the new policy will inflict upon countless families throughout the country. Sallie Mae will be responsible for preventing an untold number of students from attending college, and even many of those who are able to attend won’t be able to take advantage of all the opportunities that a college education offers them because they will already be up to their necks in debt and worry.
It is rather ironic that students and their families are being asked to bear the brunt of an economic crisis that was caused by the poor lending practices of large banks and financial institutions. The supply of intellectual capitol in America will largely determine the country’s future economic prosperity. Thanks to Sallie Mae, we won’t be operating at full capacity in the years to come.
