Friday, April 27, 2012

Doing away with the dollar, banking on debt

Tom Jackson, left, and Traven Michaels hold up signs during a student loan debt demonstration in front of the Bovee University Center on Thursday on the campus of Central Michigan University. Demonstrators united in an effort to oppose legislation that would double the student loan rate beginning in July. (Top right photo: Traven Michaels fills in the letters on his sign. Bottom right photo: Demonstrators tried to keep the "mountain of debt" from blowing away in the wind.)

The national student loan debt is about to reach $1 trillion.

Central Michigan University assistant professor Andy Blom said it could be the national economy's next setback.

"This isn't just inflation; this isn't just the higher cost of living," Mr. Blom said. "This is a result of the decisions made by public officials at the state and federal level and also the effect on university administrators who continue to let budgets grow because they know they can grow their budgets because it's funded by debt."

Mr. Blom, an assistant professor in the Philosophy and Religion Department, said he has been concerned about the rising level of student loan debt for a long time.

"Personally, I've been concerned about rising student debt for many years," Mr. Blom said. "I didn't need to carry as much debt when I was going through undergrad (in the late 1990s)."

Classes at CMU are done the rest of the week as students and faculty prepare for exam week starting Monday. Some students who walked by asked what the demonstration was about. 

Mr. Blom said he asked students in his class to wear a white tee shirt with their personal student debt written on it. Mr. Blom's shirt stated his debt at just under $30,000.

"Our main objective is not the rally itself, it's to talk with students coming through here," Mr. Blom said. "(Student loan debt) could be the next debt bubble that could drive the economy further into recession."

Allie Young, a senior at CMU, is about to enter into her student loan payments, which are typically about $338 per month for the first 10 years.

"My dad is a union representative in Detroit and so I know what rallies are like, and how important it is to go," Young said.

Ms. Young said she does not believe current students realize how student loan debt will affect the direction of their lives after graduating college.

"I don't think (students) realize our lives are going to be on hold because they won't be able to afford starting a family, having a house and a car," Ms. Young said. "They won't be able to get married and have a house because they'll be paying student loans."

Mr. Blom said the amount of student loan debt is more than credit card debt. As universities increase the cost of tuition, students increasingly need loans, but consequently face increasing difficulty repaying.

U.S. House Bill 3826 is the legislation that would double the interest rate on Stafford loans beginning July 1. The Wall Street Journal reported that maintaining the current interest rate would result in a $6 billion loss of federal revenue.

Tom Batchelder, a psychology professor at Alma College, said he knows how bad the student loan debt situation is.

"Being a college teacher, I know the importance of this issue," Mr. Batchelder said. "The average student debt at CMU is, I think, about a thousand dollars more than the national average."

The demonstrators also used bags filled with newspapers to stack in a pile to represent a "mountain of debt" that is building in the country.

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