Student loan interest rates on the rise

America often prides itself on encouraging and awarding those who pursue post-high school education. However, now this very source of pride is becoming a serious financial problem for those who are supposed to reap the direct benefits from education: students. The financial hardships stem from student loans, and are especially a problem for students living in Mississippi.

At the beginning of July, the student loan debt crisis worsened for students throughout the United States, including in the state of Mississippi. The interest rates on subsidized federal loans doubled, increasing from 3.4 percent to 6.8 percent. The doubling interest rate is projected to have startling effects on students and post-graduates, who are already struggling to make manageable payments and eliminate debt. Furthermore, as of right now, it is unclear whether there will be any relief from the interest rate hike. To date, the legislature has been unable to reach an agreement on possible debt relief as related to the increasing interest rates.

Mississippi students are particularly affected by the financial challenges caused by these doubling interest rates. Here, over 50 percent of students have some sort of student loans and the average debt of these students is nearly $25,000.

In addition to the hike in interest rates on student loans, one of the main reasons that these loans pose a significant hardship is that they cannot be avoided in personal bankruptcy. In other words, a bankruptcy court cannot discharge the debt, even when an individual files for bankruptcy. Furthermore, it is nearly impossible to modify or refinance the loans under the current law. Essentially, a student loan debt is not discharged until it is repaid.

The inability for students to seek debt relief from their student loan debts is having and will continue to have a significant impact on society. Instead of education contributing to things like corporate development and technological innovation, it appears that student loans may actually stifle contribution. Individuals with student loans may be more focused on repaying their debts than on invigorating local communities.

Source: The Nation, "Student Debt Crisis Deepens," Whitney Barkley, July 12, 2013

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