<p>College</a> graduates struggle to repay student loans - USATODAY.com</p>
<p>Thank you for posting this article. I’ve really been horrified this year, listening to the level of debt kids are taking on in order to go to college. I never realized this was such a huge issue. I also think it would be good if people would begin to understand that loans are not financial aid for students. They are financial aid for the colleges which the students then pay for through diminished lifestyles for decades. They allow institutions to keep thier costs artificially inflated on the backs of naive borrowers who would never, under normal circumstances, be allowed to borrow that kind of money at those rates…So, the government guarantees the loans and guarantees there will be no debt forgiveness, making it attractive to lenders to lend at usururious rates, with all sorts of hidden fees, and the banks make out and colleges make out and the kids walks out of school, like “What hit me?” But, it isn’t Financial AID for the students.</p>
<p>poetgrl, well stated, and I agree 100% with your POV. The amounts of loans that some of our young people are signing on for are just huge. Even though they are over 18, I feel that life experience just is not there in most cases to understand the burden that they are assuming.</p>
<p>The saddest thing is that these kids don’t even get the ramifications. They don’t understand the basics of what a loan means and entails. They have an over-inflated sense of their earning power short-term. They have a misconception that “the most presitigous institution” equals “high earning power” so it’s “OK” to take out huge loans and what really concerns me is that many times there feels, from some of the posts, to be a lack of parental engagement. And the ones that make me really cringe are the posts where when cautioned, the kids have an almost “doesn’t pertain to me.” response. Having graduated from a very good school in the middle of the recessions of the 70s in what was then, a large boom of college students and high unemployment I know what it takes to find a job and I know that those conditions deflate starting salaries and I didn’t have loans to deal with.</p>
<p>The saddest ones to me are the kids who are first in the family college students who have been in school all these years and have really bought into the “best education you can afford” rhetoric, and who are going to major in the humanities and borrow amounts of money the banks KNOW they can’t afford…I feel they have no good advice, no wisdom in the adults around them. I almost feel as if the college presentations at schools should ALWAYS be preceded by a mandatory meeting about financing your education, and the mandatory meeting should really stress the cost of an education relative to what these kids can actually afford. For example, you cannot come to the college rep days unless you can show that you and your parent also attended a financing seminar. Maybe that’s over the top, but I’m not sure that it really is.</p>
<p>Even a finance seminar does not give young people an idea about what a $200 vs. $600 loan will feel like when the bills come. Most 18 y/os have not paid electric, insurance, rent, food bills, etc. They might have had to pay for their clothes or a mobile phone bill, but most have been and are dependant upon their family to support them. A finance seminar is better than nothing, but I think that something really needs to be done. As you said poetgrl, loans are not financial aid for students, but are financial aid for colleges!</p>
<p>Student loans dominated the discussion with my son and his friends during the month of April when they were deciding which schools to attend. A lot of numbers were crunched as they tried to figure out what would be the best financial deal – as well as which school offered the best educational opportunities for them. Many kids do not look long-range, and yes, they will be in debt for many, many years. What that potential debt will do to this country is also cause for concern.</p>
<p>I’m surprised that this isn’t getting more play given what we’ve been through with housing.</p>
<p>Perhaps if colleges stopped utilizing the “loans” in the same context of “financial aid” it might be clearer to kids. A “here’s how much we’re going to discount your tuition and here’s how much you need to come up with and by the way here are the loan options” is a much more realistic presentation of the actual financial picture. Even I have to mentally block out the “PLUS” loan amount line from the financial letter each year so I don’t get sidetracked on the actual costs. Imagine how a young person views that letter. Also there is universal confusion regarding what EFC really means judging from the number of “whoopee I have zero EFC” posts. Expecting the colleges and universities to “self police” their marketing techniques when they are facing business adversity is a pipe dream. The loan counseling required of kids is not a stopper either. My S1 is utilizing Stafford loans, but the on-line counseling was click/click/click skim over the words boom you have your loan and it’s renewable every year without any further discussion or clicks. Have you ever watched a teenager on line signing up for something! I was explaining to my 87 year old multiple degree father how it “works” these days and he just couldn’t believe it. People that say you can’t compare “purchasing a college education” to “purchasing a car” or buying a house are dead wrong. Remember how car loans went from 48 months to 60 months to 72 months and entry level car costs rose well into the 5 digits and rebates and leasing for 2 years came on the scene? No one knew what a car would cost when they stepped on the lot because no one knew what the “sale price” was really going to be and very few ever figured out what the true cost was over time. Look at the industry now. Housing, too, with it’s myriad of financing options to get people to buy and very little disclosure or understanding of the over-time ramifications. I don’t think they are really all that different scenarios from a business perspective for the consumer or for the businesses…after all colleges and universities and banks are in “business.” I say, forget worries about transparency in admissions it’s just secondary with over 3000 institutions to choose from and concentrate on transparency in the financing of an education where the choice is much more potentially impacting for most people over the long-term.</p>
<p>Momofthree–I think you really hit on the crux of the con job. The colleges put the loans in the finaid packages because it allows THEM to keep thier costs artificially inflated. The cost of a college tuition is much more than what the market will actually bear…But, schools have no incentive to change this fraudulent practice. Making student loans LESS accessible to these kids, and they are kids, imho, will effect what they can charge, as a school. I agree transparency in lending is SUCH a massive issue for the entire economy! I bought a new car the other day. I always pay cash. They ran a credit check on me anyway, and I had to spend half an hour listening to them try to convince me to FINANCE my car–how they make more money! I finally just got up to leave and said I’d go somewhere which wanted my cash. I can’t tell you how difficult it was to make a pure cash transaction. Horrifying. REally. And for kids who do not understand the cost of debt? It’s really criminal. Transparency in financing! I agree. Or how about just, “No. I’m sorry. You can’t afford our school.”</p>
<p>Poet - I pay cash for cars too…ironically the other day my Husband went into our local bank to get his debit card replaced. The customer service rep says to him “oh I see you paid off your mortgage last year and proceeds to try to sell him a new mortgage.” I told my husband it would be a cold day in you know where before I’d take out another mortgage! I wrote every single check to pay off that mortgage every single month for what felt like an eternity! My S2 is interested in a pretty pricey school. I really have no idea what it will cost us. I can run the calculators like anyone, but the bottom line is I have no idea what it might cost us. How can we plan??? That just feels “wrong” to me on so many levels. I really hate the “system” with a passion. It’s not good for the consumers and it’s not good for the colleges either as a business model.</p>
<p>Yep. Lending is a business. A very lucrative business, too. It is not AID of any variety. And, somehow, somebody who cares about these kids needs to get that message to them BEFORE they sign on the dotted line. Credit can be soooo tempting, especially when you are still to young to understand what life costs. I can remember what it was like to live on cash instead of credit when all my friends were living on credit. Same income, incredibly different lifestyles. Today, the same but in reverse…But, are 18 year olds, who have very little capacity to see the future ramifications of thier action capable of making these choices? We have a drinking age. Maybe we need a credit age. Just a thought.</p>
<p>As a student, what I see from my peers is that they get their financial aid letter from the school and they only look at the bottom line; how much money they “get” to put towards the cost. Of course, in that bottom line is included all the loans, work-study, and even PLUS loan amounts,but they don’t separate that out. If it costs 40,000 to attend college xyz and their package totals 39000, they think they hit the jackpot and will announce that they got a “free ride.” It’s only when you look at the package and see the loans that you realize they did not get a free ride.</p>
<p>From the student’s POV, they got enough to walk through the door and that’s all they care about. When I mention that the loan portion will only increase each year, the response is either “college is worth it” or “everyone has loans, so what?”</p>
<p>I’ve chosen to attend a lower ranked (if ranked at all, LOL) university that will not require me to take out any loans. A much higher ranked school gave me a decent package overall but I would have student loans. I have had friends look at me horrified that I wouldn’t take the loans and go to the “better” school. Even relatives have said "isn’t that school worth the extra “22,000 or so in loans?” The mindset that college is worth spending any amount of money on is very prevalent.</p>
<p>I must admit that I am still somewhat disappointed that I cannot attend some of the fine schools that I was accepted to, but I hope in 4 years I will be happy that I made the choice I did.</p>
<p>the problem with this article is that the author mixes undergrads and grads together. My guess is that the article would have been a lot less interesting if it was pointed out that most of that large debt is for grad school. Thus, it’s not 18-yeard-olds making a decision. (Not to mention, I still would like to know which lenders give Frosh unsecured loans w/o a parent co-signer.)</p>
<p>Sure, I empathize with the single mother who quit her job to care for her mom. But, the alternative is that everyone else pays off her debts.</p>
<p>Bluebayou-- great sn, btw, I don’t think the issue is the kids who have already gotten themselves into this problem, from my perspective. Though, it will probably go the way of subprime loans, anyway, since we have a socialist president. The issue is how to keep kids from making this mistake in the future, from borrowing away thier whole future for 4 years at an institution while aiding the system in keeping the cost of post-secondary education artificially inflated. I’m glad to see one student making this choice, and I’m sure there are many more, and I hope, really, given the banking industries refusal to be responsible around this type of lending to kids…there would be a way for them to be educated and to come to understand the true cost of that much debt. Because it isn’t only the cost of the debt…it’s the loss of the opportunity, while paying off those loans, to build up equity and investment income of thier own. It’s really much more brutal than many people recognize in terms of building real net worth.</p>
<p>Very timely article, Suze Orman was talking about this the other day, all these young broke kids recently out of college who can’t pay off their loans.</p>
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It is awful the way the loans show up as if they were part of the aid package.
That is what we should do. In the University of Texas forum here, frequent poster zircushio (who has an efc of 0) reported on a received “financial aid” package - zircushio was trying to transfer into UT as an out-of-state student -
The financial aid office including $40K per year in loans in this student’s “financial aid” package… Augh!
(Don’t worry- zircushio is not going to borrow that money. I am with poetgirl. “You can’t afford our school” would have been a more accurate message than an aid package that said, Sure, you can come here! Just borrow $40K per year!)</p>
<p><a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/711340-need-financial-opinion.html#post1062513024[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/711340-need-financial-opinion.html#post1062513024</a></p>
<p>Nothing wrong with a small loan. I think the subsidized staffords are fine. Paying off a reasonable loan could be a learning experience. All those extra loans they put in the financial aid letter can just be ignored. I think the assumption would be that the parents or family has done some saving over the years for college. And parents would be joyfully willing to foot certainly part of the college bills for their children. But on these forums the total cost is tossed around like it is to be accounted for totally by scholarships, grants, and loans. If there are no savings for college who is being irresponsible?</p>
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<p>I get the point poetgrl, but before building a crying room (or changinb bk laws), I need facts that prove that kids are “borrowing away their future…” And, there are none in this article.</p>
<p>Sure, many colleges include parental loans in undergrad financial aid packages, but I’m still looking for a college that gives an 18-year-old $50k with no collateral nor co-signers. Let’s not blame the “system” if the adult parents or co-signers make bad decisions.</p>
<p>The link that midwestmom posted supports my point. The kid accepted to UT was offered a loan requiring co-signers. Thus, he could not assume that debt even if he wanted to.</p>
<p>I admit I’m tired, so I may be missing something…but isn’t the amount undergraduates are limited to borrow $5500 a year? Stafford (combo of Subsidized & Unsubsidized)<br>
So assuming a 4 year degree = $22000 or $23000.</p>
<p>Personally, I don’t think that’s an overwhelming burden. It’s about a new car payment amount for a reasonable car. Cars depreciate & College Educations are invaluable. Ideally, if you’re smart enogh to get through college, you’re not going to go lease an expensive BMW!</p>
<p>My experience has been the parents borrow the greater amount for expensive undergraduate degrees and participate in the decision if it’s made. I don’t disagree with much of whats been said in this thread, but it’s more complicated, I think, than just devious universities tricking people & artifically inflating the cost of education. i.e. worth it for a chemical engineer? maybe? not for french literature or dead romance languages?</p>
<p>Also – there are community colleges, state 4-years, more prestigious University of XXX State, various privates. There are many levels of education available, depending upon what you want to pay. To suggest that young helpless 18 year olds can blindly borrow into the highest priced education out there, so apparently completely uninformed, and unaware of repayment expectations etc. seems a bit extreme to me. I have a hard time thinking eveyone who does it is a victim…</p>