<p>Sk8mom, Kelsmom, others in the financial aid field, how are the lending institutions dealing with what has to be a common problem; kids borrowing way over what they can possibly repay, especially with the economy the way it is and so many with low paying jobs? I nearly posted this on another thread where the student is $70K in debt with no possibility of making the required payments. I mentioned that a friend of mine has a daughter who owes $90K and is working at a coffee shop for 30 hours a week. </p>
<p>What is happening with these kids and families who cosigned who simply cannot pay?</p>
<p>I think the interest keeps adding up and student loans can’t be dismissed in a bankruptcy proceeding so it is a noose around the student’s head forever.</p>
<p>I don’t work in the FA office, but I think it depends on what kind of loans they have and whether or not there’s a cosigner. If they’re federal loans, the student can apply for Income Based Repayment. Here’s a website that has a lot of useful info on it:</p>
<p>If you’re talking about Stafford loans or Perkins loans, the student can also do a economic hardship deferment. Or they can apply for payment reduction based on their income as mentioned by Sk8rmom. </p>
<p>Stafford loans cannot be discharged in bankrupcy</p>
<p>As mentioned, Stafford & Perkins have various repayment options. The thing is, the clock keeps ticking on the interest, though. </p>
<p>Students who owe on private loans don’t generally have options, although individual lenders may. To make it worse, these loans don’t get forgiven if the student dies … the cosigner is responsible for repayment.</p>
<p>i TRULY worry about the near future. I really think that the next financial crisis will be related to student loans (repayment).</p>
<p>kelsmom - I agree with you; I don’t think it was coincidence that when the housing market first started to tank the TV was filled with ads offering private loans of up to 40K per year for educational purposes - quick, 15 minute application and a check sent right to you according to their ads at the time. </p>
<p>Evidence shows that the “recovery” is bottom heavy with low paying jobs that won’t make a dent in those large loans and, as stated above, the interest just keeps adding up…</p>
<p>I do too, Kelsmom. That’s why I am asking this. One of the part time teachers at my son’s school has taken out a horrible amount in loans for her son to go to a SUNY. He really should have commuted from home but he so wanted to go away to school. THis was the absolute cheapest option for him and it still runs about $25K They’ve borrowed $20K to swing it just in the first year. They are not entitled to any PELL or grants, though the young man is getting some of the loans on a subsidized basis. But at that rate, between parent and student, they can easily end up owing $100K upon graduation. This truly scares me. The interest rates are not bargain basement amounts.</p>
<p>A couple years ago, a local high school guidance counselor asked me about her situation … she had taken out $17k PLUS already for her oldest, who was just starting his junior year in college at that time (at a school where most students do not graduate in 4 years). She had another child graduating last year, so wondered how she would swing it. I advised her to tell the 2nd kid she had to find a less expensive alternative. Hopefully kid #2 got a nice scholarship, because she is at a $20k/year state school now. Some people just want their kids to have what they want to have … which is not such a great idea at times.</p>
<p>I have met people working in high school education with huge loans of their own - how will they build satisfying lives for themselves when their salaries max out around 50-60K but start at 30K and their loans are 100K??? This is not a model to follow if you want financial peace of mind but the potential to rack up big loans isn’t limited to the prestige schools, now you can get into big debt for living away from home at the state U!</p>
<p>Huge debt really limits the options of the kids & families. I really think it’s predatory for loan companies to keep dangling these loans to students & families who perhaps SHOULD but often do not know better. There will be many, many young people saddled with huge debt that their college degrees & experiences will not erase or even make a significant dent in. Perhaps they will try to get jobs which have loan forgiveness, like the some with the federal government, but I’m not sure how attractive they will be to those agencies who will be responsible for the debt in addition to salaries & benefits for these young people. If I had a choice as an employer, I’d prefer the employee with no debt over one who has 6 figures. (Some of these young people don’t have college degrees because they ran out of money after the loans kept mounting and are still working at whatever low paying jobs they can snag, with not much hope of upward mobility.)</p>
<p>I know of several employers (including state & federal govt) who DO check credit histories in making hiring decisions, as it can affect how loyal/tempted these employees are, depending on other pressures they may be facing.</p>
<p>Good point - reminds me of the NY Times story about the law school grad who wasn’t admitted to the Bar because of excessive debt (apellate judge thought he wasn’t fiscally responsible enough to be anyone’s lawyer)!</p>
<p>They require judges in our state to file financial disclosure & submit credit reports annually to keep their jobs. It helps show that they are remaining fiscally responsible & be as susceptible to those under crushing debt to outside forces, I think.</p>
<p>Anyone cosigning for their kids or encouraging their kids to take out large loans to attend college in this economic climate is CRAZY. Seriously, what happened to teaching our kids thriftiness and planning over the long term? Why are some parents not bothered by the idea of their kids starting out their lives in huge amounts of debt? Is it because they did and survived? I don’t get it.</p>
<p>And kids taking out loans just to live on campus or get the ‘college experience’ at State U when they could commute are also crazy.</p>
<p>I think loans up to the max Stafford level ($27K) are fine. That’s equivalent to buying a new car and paying it over over a longer time. I wouldn’t be happy with loans above that level.</p>