I know these stories are increasingly common, but as a parent, this just breaks my heart.
This young man has $118,000 in student loan debt after graduating from Ramapo College in NJ with a bachelors in political science. He is living at home, and juggling two jobs, neither one of which has anything to do with his degree.
Can we just stop this madness!
The article is about the benefits of using Income Based Repayment to reduce his student loan payments. But while helpful, it’s missing the real point completely - this was a stupid amount of student loan debt to take on! No one should be allowed to do this to themselves!
Has anyone seen CBO scoring on how much that’s going to cost once people figure out it’s there? Do I even want to know the answer to that question?
The school should not allow him to incur this much of student loans. The school should told him that it was not affordable.
I don’t see how someone managed to rack up that much debt for a state school, even in NJ. He must have financed every single cent (nothing from parents or his own earnings), and most likely gone more than four years. headshaking.
Yes. The article states his family was only able or willing to lend him $3000 and it took him 6 years to graduate, as he was juggling school and work. There had to have been better more affordable options. His parents may not have known how to advise him, but Ramapo College certainly could have done a better job.
One thing I’ve always had trouble working out is how people manage to get six figures of federal student loan debt upon graduating. Even if they didn’t pay the interest all along and were eligible for more money because their parents were denied a Parent PLUS loan, I have a tough time imagining how they manage to draw on enough money from the Stafford and Perkins Direct Loan programs to reach this amount. I can understand how it could happen over time if they missed payments or something, but this guy graduated (albeit in six years) with over three times the federal direct loan eligibility limit. Shouldn’t he have been cut off long before that point?
They should have, but there’s no real incentive for them to do that. They’re getting paid on the front end; they have no reason to care whether or not the student is able to pay off the loans that they’re getting from a third party.
That’s also a good point. I’d be surprised if it was really all that bad though, especially since the status quo is basically trying to squeeze blood from a stone. Income-based repayment means that the loans will be paid off slower, but the alternative is that the loans won’t be paid off at all.
We usually see these stories about places like NYU, but this is a good reminder that you screw yourself up pretty bad anywhere you go. We also often encourage students to consider going to college piecemeal – do a semester, take a break to work and save up, go back for another semester, etc. Sometimes you have to do that, but sometimes that ends up costing you more if you don’t have a real plan on how to afford college.
He has both Federal student loans and private student loans.
The article does not state what the principal amounts of the federal versus private loans are, but the usual case is that the federal loans eligible for IBR are limited to a small portion of $118,000. Of course, as the student has found, private loan lenders may also be sometimes willing to adjust payment schedules.
Sadly enough, there are plenty of schools that target students showing the lethal combination of being poor and uneducated. The school offers cheap loans, easy schedules, and advertised the value of a degree to find students who will take six or more years to graduate … or drop out as soon as the gravy train stops. For many this is a proxy to an “income” and often the sole source of survival for their family.
And do NOT think this is the sole domain of for profit schools or seedy colleges. Universities with highly paid officials feast on this channel of funds. To make it worse, some nuts even put such schools on a social mobility pedestal that overlooks the tragedy that is created by greed and misrepresentation of the value of spending years in college. Want an example? Look at the rankings of UTEP by Washington Monthly. The academic wasteland in Texas has billboards advertising its 10th rank -above Harvard. The school accepts 99 percent of applicants as all that is needed is a pulse and a borrowing ability.
The bad news is that 90 percent of the billboard’s readers are eligible for the IBR programs as they struggle to repay the massive loans that supported a lazy life and the illusion of an education.
[quote The article does not state what the principal amounts of the federal versus private loans are, but the usual case is that the federal loans eligible for IBR are limited to a small portion of $118,000. Of course, as the student has found, private loan lenders may also be sometimes willing to adjust payment schedules.
[/quote]
I wish articles like this would be more clear about distinguishing between those two. I really think that it does matter. There’s a difference between a federal loan where the amount you can borrow is capped to a certain amount (aggregate loan limit), the interest rate is fixed, and the income-based repayment programs exist, and a private loan where all of those things are essentially variable.
If this guy was capped at $31,500 (or whatever the aggregate loan limit for fed loans are) would he be in this mess? Maybe, but it wouldn’t be as severe. Is it common for student loan servicers to also originate the private student loans? Who knows? The article doesn’t really talk about that, and we can’t tell if this is something that borrowers can plausibly expect or if it’s just a coincidence. If it’s the latter, then students like this are still in trouble; if they owe $118,000 and $30,000 of that is federal and the balance is private… they might still be in serious trouble.
I think the person who wrote the article should brush up on their math:
That’s because not all students who have “federal student debt” have high enough payments or low enough income to benefit from the plan.
In other words, 14% of borrowers are enrolled in the plans, and 6% possibly could benefit from those plans. But it’s hard to say if that 6% are not enrolling in IBR out of ignorance or as a choice – for example, my daughter’s first job included a student loan benefit and I also offered to help her partially with paying back loans- and the problem with IBR is that it may end up costing more in the long run because of higher interest over the life of the loan. So at least some students who technically qualify may simply be more comfortable paying more toward loans with the goal of paying them off sooner.
Isn’t most of that debt private co-signed debt?
And even if the banks were willing to do “some” adjustment, the adjustment isn’t going to that much.
MOST of the student’s debt is from private loans. Students get to borrow private loans … aid officers have to certify them up to the cost of attendance. Aid officers do not get to tell students they can no longer borrow because the aid officer feels that student has already borrowed too much private debt. At some point, the student (and perhaps the student’s family) must bear some responsibility in all of this.
The student’s federal loan repayment, if the student is enrolled in an income driven repayment plan, has a monthly payment amount that is far, far less than the $1,700 monthly payment cited in the article. MOST of that payment goes toward the private loans. And if the student used a private company that “consolidated” his federal and private debt, he may be paying more than he otherwise would have - I detest those commercials I see that pretend to be government- approved debt relief companies who will help borrowers “reduce” their payments.
People must learn to say no to schools that will require too much borrowing. To expect an aid officer to make that decision for the student is not the answer.
I find that most of these articles never differentiate between federal student loan and private student loan debt. You’re lucky if there’s even one sentence that acknowledges that borrowers with these massive debt loads have both.
In addition to that, a lot of it is usually because the students have trouble graduating. Even public universities in NJ aren’t exactly cheap, but I suspect another big driver of these massive debts are students taking an extra year or two to graduate. That’s something that these articles don’t really talk about either and for a lot of students trying to develop a plan to get out of undergrad ‘on time’ is almost as important (fiscally) as finding an affordable college. Even a cheap college starts to get expensive after a while, especially since a lot of grant aid dries up after a certain number of terms.
I agree, and I have heard stories from students who were unable to graduate on time because they couldn’t get the classes they needed. Neither of my kids experienced that, and both graduated in 4 years, but I know so many kids who took 5 or 6 years to get their undergrad degrees. Good academic advising is important, as is a curriculum and class schedule that allows students to get through in 4 years.
“Couldn’t get the classes they needed” is probably a blame deflecting excuse for students who did not want to take full course loads or take 8am sections, did not properly plan their prerequisite sequencing for their majors, or changed major too late.
I think getting classes may be a problem, especially at some of the California schools, but I don’t think it is as widespread a problem as many make it out to be. Neither of my kids had a problem, but they do take 8 am classes, one took a 4 pm class (on a Friday). Yes, inconvenience sucks.
“Couldn’t get the classes they needed” is probably a blame deflecting excuse for students who did not want to take full course loads or take 8am sections, did not properly plan their prerequisite sequencing for their majors, or changed major too late.
Friend’s DD hadn’t even made it to her first semester at Penn State, and paid an extra $8K for a summer program, as she couldn’t get what she needed her first semester. Mom was ticked off, luckily they have the money, but for those who don’t, that is a heck of a way to start.
Penn State is notorius for this kind of stuff.
kelsmom - I agree wth your comments in theory. But my impression is that the students who get in these types of messes do not have parents who are knowledgeable about collece costs and student loans. So while the college financial aid officer may not have a fiduciary duty to discourage the student from taking out massive student loans, I wish they would try to do so.
It’s a fairly common piece of advice to limit borrowing to the first year anticipated salary. I wonder if anyone suggested this to him?
I am also very confused my this young man’s linkedin profile - which shows him in military attire. Was he ROTC? Or did he participate in some other program? If so, wouldn’t that gave helped with college expenses? I know these articles are long on sensationalism and short on facts, just trying to understand what really happened here.