Your Life After High School - Getting Ready for College

College and Student Loans

written by; Jessica Harris

Public (Federal) Loans

• There are several different Federal Loans, including the Stafford Loan. This is the most common Public Student Loan. The Stafford Loan's current fixed rate for undergraduate students is 5.6% interest. A fixed rate means that the interest will not change.

• The Perkins Loan is a Federal student loan for undergraduate and graduate students with an "exceptional" or greater need. The Perkins Loan has a longer grace period (the time between graduation and when you are required to begin paying your loan back) than the Stafford Loan. The Perkins Loan interest rate is fixed at 5%.

• The PLUS Loan is a Federal student loan specifically for parents of undergraduate students who as dependants. (A dependant, legally, is someone listed as a dependant on tax returns, a person who cannot fend for him/herself.) Parents can borrow the amount of your entire tuition, excluding the value of any other financial aid (both loans and scholarships) that you have received. According to the official website, PLUS Loans disbursed on or after July 1, 2006 have a fixed interest rate at 7.90 for Direct PLUS and 8.50 percent for FFEL PLUS.

• There are advantages to taking out Federal student loans as opposed to private loans. Firstly, the interest rate is fixed (in all the loans mentioned above). So, unlike a tricky credit card company that can increase your interest whenever it so desires, you can rest assured that your interest will never go above what you signed for so long as you stick to your payment plan. Additionally, the interest rate is lower than the rates found on the private market.

• However, there is one major downfall with Federal student loans: it is extremely difficult to discharge (basically, â "get rid of") them through bankruptcy. This is found in the US Bankruptcy Code at 11 USC 523(a)(8). Here is a link to the code: http://www.law.cornell.edu/uscode/11/usc_sec_11_00000523----000-.html. This website explains it in more detail: http://www.finaid.org/questions/bankruptcyexception.phtml. Here

I find it extremely unethical that student loans are virtually the only loans unable to be discharged through bankruptcy. If a person is bankrupt, it is obvious s/he is unable to pay back a loan. What can we do about this? Most importantly, our generation needs to show we will not tolerate this unfair treatment. Send letters to politicians, organize marches, and basically, voice your opinion on the matter in any (nonviolent) demonstrative way.