<p>I read this yesterday in Inside Higher Ed. Most chilling were some of the comments, the real-life experiences of people who took out large loans to get through school. Thought you might find this interesting!</p>
<p>Facing</a> Up to Debt :: Inside Higher Ed :: Higher Education's Source for News, Views and Jobs</p>
<p>momofthree - Thanks for the link. The 92+ (and growing) comments following the article are especially grim. They should be required reading for students and their families contemplating big loans for their 'dream school'. It might be beneficial to post this link on the financial aid forum.</p>
<p>It's frightening, and there are dozens of consumer and student rights organizations which can provide hundreds more of such appalling and true cases.
Collinge's group is the largest and most influential but there are others. </p>
<p>And what's more appalling is that there is no motion in Congress or by various candidates to address the problems of those caught in the claws of the edudebt industry. Perhaps that's not to surprising as a little research makes it very evident how many of our supposed leaders have taken influence money from these companies. </p>
<p>But gods there have been high profile suicides, repeated exposes in specialist papers like Chronicle and Inside Higher Education, but the watchdogs in the larger media seem to ignore the whole issue. </p>
<p>However Collinge is publishing a book about the scandalous aspects of the edudebt industry, and its possible that's what may finally break this malevolent wall of silence about this issue.</p>
<p>Thanks to this website, where I have read the raging battles over low-cost state u vs high-cost prestigious colleges and now this article, I am prepared to ignore my sister's insistence on expensive-prestigious for my d. Her own d took the cheap state u way and graduated out of debt, and my sister still thinks that was a mistake. She thinks connections her d would have made at the prestigious universities would have been very beneficial. </p>
<p>I think my sister is mistaken. The confidence to say that, however, comes from reading all the various posts on both sides of the issue and drawing my own conclusions.</p>
<p>That article sparked me to have a conversation with dh this morning about the realities of financing our son's education. I was amazed at how much debt he was willing to accrue -- more than what we paid for our house!! I told him flat-out that I was not willing to take that on or allow any child of ours to start their professional life with that level of debt. It's just so irresponsible.</p>
<p>Next step: Have this conversation with ds this afternoon!</p>
<p>The personal messages left on that link were just shocking. Youdon'tsay, I think that you have the right idea. </p>
<p>As we look for colleges we are weighing our options. OOS publics are pretty much out of the picture for our son. Our efc is less than their sticker prices over all, and they won't give much FA to an OOS student as a general rule.
That leaves us with instate schools, or private colleges. We won't know where our son will go until we see the FA and/or merit offers in the spring of senior year.</p>
<p>Kudos to parents that put the breaks on college financial debt for their students. It is absolutely horrifying to me to imagine that a 22 yr old would be saddled with debt possibly close to $100,000 or more. If the money is not there to attend that prestigious college, then look at what is affordable. It may be a bitter pill for some to swallow, but at least you have obtained an education and not at the expense of debt!</p>
<p>is not a easy concept for anyone. It is personal finance. A lot of conceptual ideas, realities, alternatives and possibilities, personal acceptance, peerage, personal disposition, ... all are juggled to obtain a personal acceptable level of education.</p>
<p>Sons and I agreed to cap debt at Sub Stafford loan level early in the process. There were plenty of schools to choose from that met our need, including several OOS publics.</p>
<p>I feel the out of state publics can still be a wonderful for the student with high enough gpa/test scores to be eligible for merit aid. For the B student with average test scores, or for the student who might not make the grade to keep the award, it might not be a good option. </p>
<p>The Stafford Loan amounts that a student may borrow keeps growing. Now a freshmen can take 3500 subsidized (if eligible) plus an additional 2,000 unsubsidized. By junior year this amount grows to 5500 plus 2,000 per year. I saw some parents of seniors raising an eyebrow over that, and others who wanted that option just to get slight financial relief. Can you imagine how the parent of a soon to be freshman might feel?</p>
<p>The other day, I heard about parents still paying off HIGH SCHOOl tuition bills of their kids who graduated from HS 10+ years prior! It is really pretty chilling how folks spend, spend and spend, then wonder why they have no money and feel like they're getting further & further behind.</p>
<p>Out governments need to re-think where and how funds are spent. Education is pretty crucial for a well-trained workforce. Is it being delivered efficiently, in the areas our society needs it? How should aid be distributed? Why? I am glad we only have one child out of state & he got a significant scholarship. Could not have afforded it otherwise. Our other child is still studying at our local U & we hope she will take advantage of some exchange and other programs available.</p>
<p>Remember too that it doesn't just end with the massive amount of debt one graduates, it's also about what the money that gets put towards paying that debt COULD have been put towards... a start on the housing ladders, retirement savings...</p>
<p>When you consider not only the total cost of paying off the debt, the the lost opportunity cost of what else that many could have gone towards it looks even more grim. People forget that most loans like these are basically selling you $1 today for $2-3 paid back 'tomorrow.' Something to keep in mind...</p>
<p>pensive 123, just want to let you know that the best colleges may be the lowest cost option for some families. I don't know where yours stands so please investigate first. </p>
<p>In general, I think there are only extreme cases where family went too deep into debt for a college education. Most of families on CC avoid debt as much as we could. </p>
<p>The bottomline is that there is always a low cost option and getting into deep debt is typically not a good thing. </p>
<p>Our DD's dream school used about 5K sub loans as part of the FA. Thanks to the tips from CC, we asked about the later years. We were told the loan will go up each year. They will also use more loans when our second kid gets to college to cover the difference. </p>
<p>As a matter of fact, we talked about $$ situation last night and she said the amount of loan was the factor for her to decline the dream school.</p>
<p>
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In general, I think there are only extreme cases where family went too deep into debt for a college education.
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</p>
<p>I do not know if that is true for the family with one child in college, a B student, and the family earns under 80,000 or even 120000 in expensive areas of the country, and the family opts for a private school. Of course, there is no entitlement, so these are individual choices that people are making. The same B student could go to a CC first and then transfer to an instate 4 year public if the family wanted to take the least expensive route.</p>
<p>It seems to me from reading the comments to that article mostly relate problem that arose because of compounding interest, when borrowers are paying less than the amount needed to pay off current interest. (i.e., the loan goes into negative amortization). This is also the same problem that has lead to the current mortgage crisis.</p>
<p>I think borrowers need to be educated on one critical point: if you borrow, whatever vehicle you choose, you should never let interest run unpaid. An interest-only payment is safe, though expensive -- at least the debt isn't getting bigger. But the day you make a payment that is less than the accrued interest is the day you start digging a hole you won't be able to get out of. </p>
<p>So, at least for those of us who are borrowing or whose kids are borrowing -- keep that one rule in mind. It is also useful to pay ahead when you have the ability, even if you don't need to -- essentially just by making a couple of extra payments at the beginning, or rounding up payments (such as paying $150 each month when you owe $146) -- you can buy yourself a safety net.</p>
<p>The compounding interest is a problem, however so are the enhancement of fees. The constant reselling of loan notes to subsidiaries (which causes increased 'handling fees') is a especially problematic situation. To comprehend how bad it actually has become check out the following which refers to the questionable goings on between SMC and their subsidiary USA funds. Contract</a> Raises New Concern Over Sallie Mae's Ties To Guarantor (The Chronicle of Higher Education)</p>
<p>And the general free for all atmosphere which was caused by sweetheart regulations or the outright ignoring of those few statues still remaining only makes the situation worse. The whole thing makes the mortgage situation look like episode of Mr. Roger's Neighborhood. </p>
<p>So yes paying the interest is helpful, however given the more questionable tricks used by the edudebt contingent it won't necessarily matter all that much. The analogy to the mortgage situation is quite apt. Except the caveat that compared to the SL industry the mortgage people were much more closely watched. </p>
<p>Sallie</a> Mae's Plan of Attack | The New America Foundation</p>
<p>And as is evident from Stephen Burd's July 10th article in Higher Education Watch concerning potential reforms salient to this situation, the large players are already on the move to stop potential reforms. </p>
<p>What we have here is very different from other sectors of the finance industry. In fact what we have is the educational equivalent of a sharecropper system or a company town. Get an necessary education, if you want to work, but you'll never make enough to pay for it...</p>
<p>From one of the letters I also noticed Sallie Mae practiced questionable tactics to almost encourage borrowers to default, resulting in more fees for them.</p>
<p>Yes, it's a common practice only made possible by loopholes put into the federal regulations regarding presumed defaults. SMC and other companies collect the surety money from the federals, and still pursue the student debtor. Often in a manner which would be a violation of FTC guidelines were it any other sector of the economy. </p>
<p>The fee revenues out of such tactics are quite extensive, the CEO of SMC as much admitted that was where their real revenue was obtained. Fee revenues for that one company alone have gone up some 200% since the turn of the century. </p>
<p>Its also a standard practice on troubled loans to sell them to subsidiaries, sometimes several times over to enhance the fee revenues. SMC does such with it's subsidiaries along with the other tricks involving USA funds. NNC does the same tactic with it's pet sharks at Premiere. </p>
<p>Sick thing is that these companies, especially SMC are over leveraged and will be soon begging for another bailout. The massive influx of cash this spring to 'ensure liquidity' was simply a bailout under the disguised labels of 'saving student loans'. </p>
<p>The whole thing is a national disgrace, as a nation what we've done is turn our higher education system over to financiers who are the moral equivalent of loan sharks. Unfortunately their piggy bank is broken, insofar as many of the generation who've been subject to their abuses cannot pay too much longer or too much more. Especially given the nature of our imploding economy. </p>
<p>So if our representatives elect to bail out the edudebt industry (again) what they'll do is leave millions to fall-which could have appalling consequences for the consumer economy. And if the edudebt industry isn't brought under control, their involvement in other arenas could cause a systemic tsunami throughout other sectors of the financial industry. </p>
<p>The real tragedy is that none of this needed to happen. It was a product of people who co-opted what had been a workable system and essentially looted it...and a government which was so deep in their vest pockets that no light could get in...</p>
<p>And eventually when the situation does blow up, its going to shock an already insecure economy, and probably ruin American Higher Education. </p>
<p>Perhaps that's why Canada has already made substantial progress in reform of their educational funding...from the border they're looking down and watching the slow motion train wreck here in the US...</p>
<p>"Look out for another improvement to the loan program, coming next July 1. If you have high student loan debt relative to your income, a program called Income Based Repayment can help. It will allow you to repay your loans based on a sliding scale. So for a graduate earning $35,000 with $40,000 in loans, monthly payments would be capped at $242.50, compared to $460.32 under standard repayment. All remaining balances are forgiven after 25 years."</p>
<p>Yahoo</a>! Personal Finance: Calculators,Money Advice,Guides,& More</p>
<p>This is a proposed income-based debt program. I don't know how it would affect existing loans or how mangled it will get after negotiations but the target date for trying to get it through is late in 2008 for implementation in July 2009. 25 years gets you to about 47 years old which is quite a long time but still potentially something to look forward to. There was an excellent article in the NYT yesterday in their "Debt Trap" series. It's about mortgage and consumer credit but it mentions student loans and it describes how the banks are trying to milk income streams from people.</p>
<p>For years, I have warned parents and kids about incurring substantial debt for their " dream" school, to little avail. My thread that was started on this was a featured thread in CC about a year ago. You can find it here:</p>