<p>For the first time, the amount of student loan defaults exceeded that of credit card defaults. Colleges are starting to sue their past students who default on loans. For example, both Yale and Univ. of Penn have filed dozens of suits. One school. George Washington University, filed a suit against a student for $4,000 of unpaid Pell Grant money. It is becoming a HUGE problem. Even worse,student loans can't be discharged in bankruptcy! You are stuck with them for many years!</p>
<p>This confirms what I have always said for years and have published numerous posts on this: No matter how prestigious the school, don't go there if you are going to incur substantial undergrad debt! There is nothing wrong with a state university. In fact, top students might be able to get full or almost full tuition from these public schools..</p>
<p>it’s not pell, it’s perkins (loans for students who have the highest amount of need). these suits will hit the students who are the poorest. students who probably had to stop attending school due to finances to begin with.</p>
<p>Can a parrallel thread be put in the FAid section of the Board? Students and families really need to know that the loan is REAL and that it needs to be REPAID. There are many who think it’s “free money” and don’t see any problem as long as someone is willing to write them a “loan.”</p>
<p>A relative said that she has at least one classmate who take out the max loan every year in podiatry school, has bought a car and gone on expensive European vacation with loan money because she’s thrilled to have money for once in her life and figures she’ll be making buckets of money as soon as she’s done with school. The relative cringes but has been unable to do anything to curb friend’s behavior.</p>
<p>Schools are suing due to unpaid Perkins loans. Unlike Stafford loans, the Perkins loan is given to the school as a lump sum. The school then awards loans to students from that sum of money. The school is also responsible for collecting the money when it is time to repay the loans. The government requires schools to collect the money, and these schools that are suing are trying to meet that requirement. Other schools contract with a collections agency to collect Perkins loans (the schools suing may have tried that first; I don’t know).</p>
<p>In my experience, students seem to be incredibly clueless about their loan repayment obligations. Federal loan servicers exist to work with students in repayment. Making schools the “servicer” for Perkins doesn’t always work out so well … which is why some contract the repayment with an outside company (but of course, this isn’t free for the school). I have run into more than a few students who “didn’t know” they had Perkins loans. They get confused by everything that has to do with repayment, and they don’t realize they have loans in different places. They are required to do exit counseling when they leave school / graduate, but they don’t pay attention.</p>
<p>Back in the dark ages when I graduated after college and grad school, I recall having a mandatory one on one meeting about my loan and repayment obligations. I was specifically asked about any and all debt I might owe other than my student loan and they seemed surprised when I told them I had only my National Direct Student Loan, of a very modest amount. I then volunteered that I could pay it off in full that day with money in a checking account that was generating far more than the 3% simple interest on my loan. Was advised to pay off my minimum $90 every quarter, there by building a stellar credit history and earning money on my interest. I followed the instructions and indeed have always had great credit history. </p>
<p>I’m not sure exactly why the students aren’t repaying, but strongly suspect some (often along with their families) got swept up with the idea of prestigious dream U and the idea that “things would work out” and of course they must be able to pay back since they were loaned the money. </p>
<p>Suspect many of these borrowers and family are struggling to pay other bills and daily expenses, not realizing that at some point loans do come due.</p>
<p>Some may be unemployed or only have part time jobs. One of my staff members told me last night that she’s 40 and still has tons of debt that she needs to repay so she can get a newer car. She has a good full time job with benefits and a BF who has two jobs. I suspect part of it is that she’s very generous and helps family and others. She’s working lots of overtime to try to get things in order. </p>
<p>I think many drunk and continue to drink the koolaid that sacrifice all for dream U and magically all will live happily ever after. Magical thinking.</p>
<p>I am seeing complete cluelessness and a hint of lack of responsibility in many students. There is hope, though. I recently held a mandatory loan repayment meeting with my second-year grad students (82% attendance!!), and prior to the meeting I had them: log into NSLDS, update contact info, record all loans/servicers/servicer contact info on a worksheet, create an online account for each loan servicer. We discussed repayment options, and I told them that income based repayment options are available to those who can’t afford payments based on specific requirements … meaning that they won’t necessarily qualify for IBR if they are living beyond their means. So the point was made that loan repayment must be an integral part of a budget (yes, the B word). We talked about how nice IBR is, but that it does increase the total cost of the loan. I even gave them the name of a non-profit debt counseling agency that wants to help students & will help them decide if consolidation and/or IBR is right for them. The students were so receptive, and I am very hopeful that they will remember my mantra: There is no excuse to default on a federal loan.</p>
<p>There seems to be an endless amount of sympathy out there for people who borrow money and then don’t pay it back.</p>
<p>I have a news flash for you. When you borrow money you are expected to pay it back. If you don’t pay it back the lender will take legal action to try to get you to pay.</p>
<p>I’d be curious about the default rates at so called “dream schools” versus “average” state schools. I have a hunch that the bulk of this problem isn’t students overextending for dream schools. I feel like the world where possibly attending and paying for a dream school is a possibility may apply to a lot of us here but not most average people. While taking out loans you can’t repay is wrong in either case, it’s a lot easier to say, “just go to a state school” than it is to say “just don’t get a bachelors degree.” I think the former may be an oversimplification of the problem that isn’t very helpful.</p>
<p>Proudpatriot, that’s a head in the sand attitude.</p>
<p>Of course students are expected to fulfill their obligations and pay back their loans. However, the whole student loan operation has been a scandal in the making for a generation. As long as the government was making loans relatively easy to get and guaranteeing that lenders would be repaid and making a nice little profit, no one in charge put much thought into making proper and THOROUGH financial counseling available to these 18-22 year olds.</p>
<p>Remember the “steering scandal” uncovered by the NY State Attorney General and officials from other states, when they discovered that schools were getting paid (kickbacks?) to direct borrowers to specific lenders? Students Loans seemed to place greater emphasis on everyone else getting something out of it before students did. President Obama has rightly stated that the seemingly unrestrained rise in tuition appears in part to be tied to the student loan program free-for-all. The whole system needs reform.</p>
I’ve been saying this for years, and it’s only more true as time goes on: living expenses are not the issue.</p>
<p>Podiatry school costs approximately $30,000 per year in tuition; that does not include books, fees, and living expenses. ([Frequently</a> Asked Questions, Podiatric Education, Career Zone, American Association of Colleges of Podiatric Medicine](<a href=“http://www.aacpm.org/html/careerzone/cz3_faqs.asp]Frequently”>http://www.aacpm.org/html/careerzone/cz3_faqs.asp)) Over four years, that’s $120,000 in tuition alone; add in fees, books, and interest that gets capitalised throughout the schooling, and you’re at roughly $150,000 before a single living expense gets paid.</p>
<p>if a person takes a luxury vacation and buys a nicer car (well, nicer than they would need to get to/from places while in school), and packs on an unnecessary $5,000 worth of debt - well, that’s roughly 3% more. Three freakin percent. </p>
<p>Complaining about “students living like doctors/lawyers” not only ignores the real problem, it exacerbates it: student then logically think that they can manage their loans if they are frugal while in school. No, they can’t - because tuition alone is too much money.</p>
<p>I do have a “head in the sand” approach to all of this. If the truth be told I don’t think the government should be in the business of giving student loans TO ANYONE. However, if the government is in the business of giving out these unwise loans then the people who take them should pay them back. If it causes them harm to take out excessive amounts of debt that is THEIR PROBLEM, not mine, not yours, and not the schools’.</p>
<p>I don’t see why anyone should get all spun up over other people who take out ridiculous amount of loans and live like paupers for the rest of their life because of it.</p>
<p>Because we’re talking about kids, Proudpatriot. Sure, some young folks are inevitably going to make mistakes in judgment, even egregious mistakes, but does it make sense that we burden these young people for essentially the rest of their productive lives for errors that others in society are given a pass on? Two wrongs don’t ever make a right, but their are many unclean hands in this student loan affair.</p>
<p>We are talking about ADULTS. Yes they are young but they are adults. One of the biggest problems the US is facing is that we treat our young adults as if they are children. If you treat them like children they will act like children.</p>
<p>They are adults. Some of them will make mistakes. They will have to live with those mistakes.</p>
<p>I am against easy money for student loans. But-people who make poor decisions need to live with the consequences of those decisions. College aged students should be expected to be adults. Just because some of them have been raised to believe they are still children at 18 that does not mean that they are actually children at 18.</p>
<p>^highlights the sad issue that prospective college students face: pursue their academic potential or settle for financial reasons. Sure sounds like a way to educate society.</p>
<p>Ironic how Yale promises to meet 100% of financial need.</p>
<p>I’m on the same planet as VillageMom and Proudpatriot as well.</p>
<p>Way back when I was looking at colleges, I faced the same choice. I could attend my state flagship on a scholarship that covered tuition, room and board, and then some. My favorite acceptance was from CalTech. But the cost would force loans for me, and significant payments for my parents who had just started making good money for the first time in their lives after many years in poverty. I chose my state flagship. It wasn’t parental pressure, but lessons over the years that money should not be wasted. </p>
<p>I did attend MIT later for grad school. I loved the experience, but quite frankly, I don’t think the education was any better.</p>
<p>Nope. The problem can impact other people, too. Even fiscally responsible people.</p>
<p>For example: there was a big article a few weeks back (NY Times? WS Journal? one of those) about students taking out massive loans for vet school. It’s an ugly picture.</p>
<p>What was far more interesting was reading a letter written in response by a veterinarian nearing retirement age. Many vets build up their own private practices with the intent of selling them to younger vets, using the proceeds to fund their retirements. If that new crop of vets is already massively in debt from school loans, they won’t be able to buy those practices. Which then means that those older vets aren’t going to be able to afford to retire at the age (or with the lifestyle) they’d planned.</p>
<p>Let’s extrapolate, shall we? Many people are planning on using proceeds from selling their homes to help fund their retirements. If people are paying off student debt, that’s going to impact their ability to buy a house.</p>
<p>I’m not arguing in favor of forgiving student debt. Just reminding people that just like the housing bubble this is going to impact many more people than those who overborrowed. :(</p>