On Nov. 15, Sacred Heart hosted a virtual panel titled “The Domino Effect: Examining the $1.7 Trillion Student Loan Crisis” as part of the School of Communication, Media & the Arts’s United Hearts: Paving the Way to Financial Freedom campaign.
The event invited four panelists who work in the field of finance and provided a few tips and words of advice to students on how to better manage loans, why it is so important to be financially literate, and how student debt impacts students from historically marginalized groups.
One of the panelists, Dr. Robert Chatt, Assistant Professor of Finance at Western State University, presented an example of someone’s loan balance: the original loan balance is $14,000 and the person has paid $10,842.36 so far, but the remaining balance is still $13,715.70.
“This is the piece that I think is why it’s so important to be financially literate,” said Chatt. “$14,000 doesn’t sound like an unconquerable amount to have in terms of student debt, but the way interest payments work is that if you miss payments along the way or if you can’t make payments for some reason, then these things can drag on a lot longer than people realize and it can just be a weight on your life.”
The importance of understanding the way that loans and loan payments function so that students can properly manage them was reiterated, which, according to the panelists, most students do not understand at the time that they begin taking out loans.
“There’s a lot of different things that you need to make sure that you have a grasp of,” said Dr. Ross Riskin, Associate Professor of Taxation and Director of some financial education programs at the American College of Financial Services.
“You know what is your budget and what money you have available to actually make payments because it’s one of those things that will happen very quickly,” he said. “Before you know it, you’re graduating, you have a job, you’re making those payments, but then other financial events are going to happen in your life.”
According to the Education Data Initiative, 42.9 million Americans with federal student loan debt owe an average of $37,105 each for their federal loans. Total student debt currently totals to about $1.7 trillion, making student borrowers the leaders of debt in America.
“We’ve gotten deeper and deeper to an unpractical level and I think there will be a point where it’s too difficult for students to get out,” said junior Luke Healy.
As reported by the Education Data Initiative, Black and African American college students will owe about $25,000 more than white students. Additionally, around 48% of Black students will owe 12.5% more than what they initially borrowed.
“There’s an additional debt that’s taken on by people of color because they may have the gap between what they’re able to afford and what the school will give them financially,” said Chatt.
Along with BIPOC students, other affected groups include first-generation, low-income and LGBTQ+ students, as well as students with disabilities.
“Primarily, student loan debt really does affect first-generation students extremely heavily because first-generation students don’t know the resources available and their parents are completely unaware,” said Robert Johnson, Director of Multicultural Affairs. “If you come from a blue-collar family where both of your parents might work multiple jobs, or if you come from a single-parent home, your parents will have zero exposure to the potential troubles or pitfalls that they’re creating for you in cosigning that loan. So we have to find ways to make that information digestible to those that are of first-generation experience.”
According to Miranda Velez, Associate Director of Student Financial Assistance at Sacred Heart, the usual loan repayment plan will happen over the course of 10 years. However, there are different plans that could extend up to 25 years.
“A great source for exploring your repayment options is studentaid.gov,” said Velez. “I would advise students to visit this site as they get closer to graduation to learn more about their options for repaying their loans or loan forgiveness.”