(I am using the pronoun “they” to hide gender for add’l privacy)
I have known this 20-something young person for about a year, and I knew that they had student loans and had not yet graduated from college.
I also knew that the student had started college at a small private LAC, but didn’t know how long they went there or how costs were paid.
The student, I believe, has senior standing but didn’t go to college this semester…got a full time job in late Dec and didn’t return to school. The full time job pays pretty well for someone w/o a degree, but advancement, etc, is very limited.
And, worse, they’re going to be facing the loan payments for ALL THESE LOANs…which I’m guessing will be payments of at least $1000 a month for 10 years.
The major was Criminal Justice. When I’ve asked what the career goal was, I’ve gotten vague answers. I suspect that there may have been a career goal at one point, but now interest in that major has waned. Either way, a career in CJ could never have justified even half that debt.
Now I’ve learned that this person has …omg…over $115k in student loan debt…a mix of federal and (parent co-signed) private loans. (I want to smack the parents for being so stupid…but that’s another story.) The student also owes about $7k in credit cards.
The reason the student mentioned this to me is because the grace period is ending and payments will soon come due.
I guess I just wanted to vent, but seriously I hope that anyone out there that reads this and is considering significant debt (no matter what the major is), really stops and thinks about their post-college years and how hard and how interfering that kind of debt will be.
That is really sad. I’m always careful about suggesting that other families take on debt, especially when they start expressing doubts about whether or not it’s a good idea, but you have to wonder what it takes for some of them to get to that point. Why was $115k the cut off? Did $60k, $70k, and $80k+ really seem all that reasonable?
On the plus side, I’m sure you’ve convinced many students to avoid that trap over the years, @mom2collegekids.
I really don’t understand what people are thinking. If the parents haven’t had enough money left over in their budget to save for college all these years, why do they assume (a) they will have money left over in their budget to pay off a college loan or (b) their kid will have money left over in his/her budget to pay off a college loan. Makes no sense to me.
I have a friend, like me in her 50s, whose husband, in his 60s, has more than $200,000 in student loan debt. He graduated from professional school in the 1990s; previously, he had stopped just short of getting a Ph.D. in an unrelated field.
Perfect example of what not to do. These are the people who expect the government (you and me) will forgive their loans because they were hoodwinked into borrowing money. If the current administration doesn’t pass some legislation that forgives those debts, there’s always bankruptcy sometime after they buy their first nice car and furnish their new apartment with high-end designer furniture. Self-responsibility. And for a criminal justice degree?
There were some very deceptive practices going on there for a while, but the bigger piece (imho) is that an18 year old can sign for student debt on their own. They are not mature or responsible enough to drink a beer, but they can sign up and be held legally responsible for debt that they will paying off for many, many years (if ever).
Usually when you peel back these stories you find layers of mistakes or misfortune. People frequently changing majors, changing schools, trying to support themselves using student loans for general living, entering forbearance, etc. Sometimes those phony vocational schools are involved too, the ones that promise you a career as a paralegal or a well-paying job in medical billing and coding… except not really.
You might have an anachronistically rosy view of how bankruptcy works for student borrowers. As far as debt forgiveness goes, there are already old programs on the books to alleviate these issues. However hardship-based debt forgiveness is taxable to the borrower; they only cover federal loans; and all of those programs require regular payments over an extended period of time, which means that the borrower is getting hit with more interest as an indirect cost of the plan. It’s not exactly the free ride that some see it as.
Even income-based repayment schemes require a lot of fiscal discipline since you have to keep making those payments; the people who are buying designer furniture and nice cars that they can’t afford probably aren’t disciplined enough to keep up with any government loan help programs.
We need more financial literacy courses. To me, leaving high school without a respect for debt is like leaving high school without knowing the alphabet. There’s no excuse.
I think it might depend upon the demographic. That’s not what I’m seeing at all. I’m in an upper middle class area and most kids I know graduate in four years. These are students who qualify for no meaningful financial aid and are on the hook for the full amount at all the top schools.
The story @mom2collegekids tells is scarily common. Particularly when the kid is a really good student and gets in and wants to attend a highly ranked school. I truly know more young college graduates with six figures in debt than I do college grads with zero debt. Generally, parents have co-signed and can and do help their kids with the payments, but it’s a burden that’s onerous for all of them. These stories don’t make the papers, because ultimately the parents, barring any catastrophe, can afford to help their kid pay off 100k over 10 years (even if they have to delay retirement by 5 years).
To me, and to what I believe is an increasing number of upper middle class parents, that kind of education debt is lunacy. I know a remarkable number of kids (many of whom are excellent students) going to Temple this year. It looks like Temple is becoming the urban school of choice for full pay talented students who five short years ago would almost certainly have chosen Columbia, BU, or NYU.
@DmitriR, I think financial literacy courses are a good idea, and would hope that those lessons are also being taught at home. If kids see their parents borrowing and not saving, that’s what they think is normal.
In HS economics, my son’s teacher pulled up his mortgage info on the classroom computer to show the students how much interest and principal he paid each month and what it did to the outstanding principal balance. Great lesson, except that he then told the students that everyone has debt, it’s the American way, blah blah. My son spoke up and said not everyone has debt, and then explained our philosophy. They ended up having a great classroom discussion but those students would not have heard the opposing view had my son not spoken up.
Our high school offers a seminar class and all seniors must take it. They covered this subject. It really hit home with my daughter who chose her school accordingly. I’m not sure it really sunk in with a lot of the kids because many are going off to colleges that I question are really affordable for those families. Of course I have no idea of who can afford what so hopefully they got great packages or have savings and are not heading into troubled waters.
A lawyer friend who does bankruptcies tells me that she sees many people who are ruined by college debt (their own or perhaps their kids’ college debt). She advocates for the tax payer bailing these people out as they will never crawl out from under it. It is ruining their lives. Personally I’m not too keen on chipping in for other people’s impractical major at their dream schools since my kids are choosing their schools based on the cost. On the other hand, some people- especially kids, make decisions without fully understanding the consequences and I certainly sympathize with them.
People often use the metaphor of digging yourself into a hole. But digging a hole, especially a big one, is a lot of work (just put a tree in). So it’s a lousy metaphor.
Going into debt for college is too easy. Getting out is very, very hard. The for-profit colleges in particular benefit from the ease with which families can accumulate vast amounts of debt for education.
I think you’re right about that. My description was based on the stories that I have read on articles about student debt. Pretty much none of them graduated in four years. I’m sure that kids from affluent families will find some way of living beyond their means even if their means are higher than average. No one really has to go to NYU or BU in order to survive; the students who end up backing themselves into that corner usually had other options that they chose not to pursue for whatever reason. It’s the same cost as the kids who go to cheaper schools and putter around for 6 years without graduating though.
A lot of it though involves people willfully closing their eyes to what is going on. It has never been easier to get information about how debt works, how student financial aid works, and what life is like with debt. You can’t go more than three or four days without seeing another article about this topic from another newspaper. You can see the beginnings of the issue when you read some of these threads, where the student is so locked on a certain school that they get angry when anyone even suggests that it might be too expensive.
I know a lot of people who don’t think it is a big deal to borrow the $30k Stafford loans, or even a little more. “It’s no different than a car payment.” Yes, a luxury car payment and guess what? You don’t get the CAR! I know someone who is allowing her daughter to borrow away and that bothers me, but what is really sad is this student is not maximizing summer earnings or term time earnings. Another friend’s daughter is doing an unpaid internship while borrowing. My kids aren’t scrubbing floors, but they are expected to contribute especially for the extras - clothing, books, study abroad. They have to pay for any of their own luxuries like travel or dining out and those will be the first to go if the money runs out.
I remember more than a few college students went to Alaska for the summer to work in the fish canaries when I was in school. They made $10k, worked constantly at a hard, smelly, dangerous job. On the “what is your student doing this summer” thread, not one student (including mine) is going all in and working to build a big bank account. Camp counselors, lifeguards, unpaid research are all listed in multiple posts which are fine if the student has other ways to pay, but I don’t agree with borrowing money and then taking a part time job to make up for lost sleep or travel to the beach with the family.
Lifeguarding and teaching swim lessons can certainly be ‘all in’ full time summer work paying $10-$12/hour, resulting in adding $4k-$5k to the bank account.