Graduates drowning in debt - the Seattle Times articles

Parents Forum
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<p>This Indianapolis company surely knew about "loan sharks", didn't they? That is either stupidity or extreme hubris.</p>

<p>As for the bankruptcy thing, as we all know, 18 yr olds with no credit are not good risks for lending money to. So I wonder what came first, increased private loan offers, or tightening the bankruptcy laws? There used to be a bad problem with people walking away from their student loans and using bankruptcy as a way out. But I wonder if closing that escape hatch just made lending to students more attractive to banks, you know, the borrower is trapped so to speak. If you let students get easier bankruptcy it might dry up the private loans, esplly in the current economic conditions. My perception is the loans are drying up anyway, just like the credit card offers in the mail are.</p>

<p>Nevertheless, I am one of those who opposes taking on one penny more debt than is absolutely necessary for ug college degree. Personally, I don't think there is a single school out there worth going into 6 figure debt for, no matter the qualilty, no matter the name. State U versus Big Name Private is an argument that's hashed out here on a regular basis. I have no sympathy for anyone who drowns in debt for Big Name. Others disagree, including a friend of mine taking on about $150k for her son to go to U of Chicago. U of C is an absolutely terrific school, but not $150k of debt. And, yes, the parents have to cosign to get that level of student loans. It used to elude me how it was done, with the Stafford limits so low, but the neighborhood bank and the parents is the answer.</p>

<p>Also part of the housing loan problem. Lots of people take out 2nd mtges to pay for college, which they are almost forced to do by having home equity used to determine EFC ( I know some schools don't count home equity, but some do). If they count home equity then surely that is saying they expect you to mtge your house to pay for college. If you mtge an increase in value for your house and then the value goes down, well, you're still on the hook for the loan. Yet another reason for the housing/mtge crisis. And people get so emotionally caught up in this where to go to college thing, they sign on the line and zip off to school and don't really worry about the debt until it gets painful.</p>

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<p>I hope that all parents here on CC, whose kids are about to apply to college, are reading about that BU graduate.</p>

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<p>Fear, keeping up with the Jones and easy money is what drove up the applications & competition- which drove up tuition. $150K in debt for ug is excessive. Would our parents ever dream of going that route?</p>

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<p>The "Insanity" of the Human Race is well documented in Tomes of History. Nothing has changed. Only the circumstances. If it wasnt so sad, it would be funny. </p>

<p>ALL of this financial crisis is laid squarely at the FEET OF Fannie Mae. Fannie was PRESSURED by Clinton to change mortgage banking rules and give people no documentation 100% loans (no equity) on ARMS. MILLIONS OF THEM. And that is why were are where we are. The helium balloon blew up.</p>

<p>So think about that on November 4, people.</p>

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<p>
[quote]
Fannie was PRESSURED by Clinton to change mortgage banking rules and give people no documentation 100% loans (no equity) on ARMS.

[/quote]
</p>

<p>Got anything to back that up? I thought Greenspan like ARMs and he served during Reagan, Bush Sr, Clinton and into Bush Jr.</p>

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<p>Please lets' not spoil this thread with political bickering for the sake of keeping this thread in the Parents' forum as a reminder for current college applicants and their parents to keep financial aspects in mind or the end result migh be a disaster, as Heron mentioned earlier.
Thank you.</p>

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<p>Wow, I have participated in so many threads on this board where parents and students talk about the importance of the "dream school" at any cost. Certainly some parents have the resources to fund a dream school without much sacrifice. But taking out huge loans? Asking your kid to take out huge loans? Or perhaps raiding the retirement fund? There are many good choices out there...some MUCH less expensive than others.
Boston University?? Was that his dream school? Was it so much better than an in-state public U? Again...wow.</p>

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<p>College's have relied on student debt to keep their costs rising at TWICE the amount of inflation for the past twenty years. For colleges, student debt is a way of accessing seemingly unlimited funds for infrastructure expansion, large salaries and perks for the academic class. Administrators could delude themselves easily with the fairytale that they were doing good by their student-customers. Charging (and people paying) $150K or more for the hope of accessing a $35k job is not only unethical, it's also immensely immoral. </p>

<p>Saddling the trusting, immature and easily persuaded with decades of crushing debt using the lure of demonstrability unrealistic expectations that have purposely become associated with any kind of so called "higher education" is a sin. But it should be considered a crime as well. </p>

<p>Given the enormity of the situation that is presently unfolding in our society, maybe it will soon be viewed as both.</p>

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<p>
[quote]

Fannie was PRESSURED by Clinton to change mortgage banking rules and give people no documentation 100% loans (no equity) on ARMS.

[/quote]
</p>

<p>
[quote]
Got anything to back that up? I thought Greenspan like ARMs and he served during Reagan, Bush Sr, Clinton and into Bush Jr.

[/quote]
</p>

<p>actually lending agencies were forced to lower their lending standards (consider welfare income among other things) because of cries of racism from minorities and illegals who had no savings...they got their loans, subprime arms, and with the money bid up housing prices but soon realized they couldn'y pay and started defaulting once the arms came home to roost and helped cause the bubble. Everyone was now forced to pay more but thought nothing of it since they saw housing prices go up up up. So they bought too much house thinking nothing of it and the problem is spilling over to middle america</p>

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<p>Priceless...</p>

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<p>I have zero sympathy for people straddled in debt because they went to a private university with an unmarketable degree. Most of my engineering buddies are <em>still</em> able to get jobs even in this environment.</p>

<p>In the future I hope private lending is given with SAT scores, school, & major selection being the primary criteria.</p>

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<p>As state budgets shrink due to revenue problems, it appears that state universities are getting scrutinized on salaries for professors and administrators. It may be that the budget axe hits public universities too. I see less willingness to cut budgets at community colleges as their prices and costs tend to be lower.</p>

<p>Public Universities provide a lot of hidden benefits to communities but the higher salaries for Professors always makes for a popular target. I recall budget cuts in MA a few decades ago which made it difficult for students in certain majors to graduate on time.</p>

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<p>I have warned kids and parents till I was blue about AVOIDING large amount of debt for ANY school, no matter how prestigious. CC even made my thread into a featured thread unitil they stupidly thought that the thread wouldn't be useful any longer,which they do about all threads.</p>

<p>Here is the thread that I started a year ago:</p>

<p><a href="http://talk.collegeconfidential.com/parents-forum/476132-should-you-incur-substantial-debt-dream-school-even-pay-dream-tuition.html?highlight=subtantial+debt+college%5B/url%5D"&gt;http://talk.collegeconfidential.com/parents-forum/476132-should-you-incur-substantial-debt-dream-school-even-pay-dream-tuition.html?highlight=subtantial+debt+college&lt;/a&gt;&lt;/p>

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<p>Taxguy: my favorite part of your thread is "invest at 8% (gain)"</p>

<p>Kindly sent me the link to how I do that!</p>

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<p>We know people who are in the financial end of college administration and they are being warned of bad times ahead for two reasons. One is demographic; apparently the largest group of entering freshmen is the current crop. The number of 18 year olds in general is expected to start dropping this year and continue downward for some time. Student enrollment is going to decline across the board for sometime, and hence any revenues associated with enrollment. Second, student loan lenders are disappearing at an extremely alarming rate. If your student is/was lucky enough to get a loan for next semester, don't be surprised if the lender is out of business before next fall. As loans disappear students are predicted to either drop out of school or transfer to a cheaper school. Colleges who lose students w/o a way to replace them will experience a drop in enrollment among upperclassmen at the same time as they get a drop in enrollment among freshmen. Overall result is a drop in revenue. They are being warned about this right now.</p>

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<p>I'd be happy with .5 over rate of inflation.
:)</p>

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<p>"Taxguy: my favorite part of your thread is "invest at 8% (gain)"</p>

<p>Kindly sent me the link to how I do that!"</p>

<p>Warren Buffett found a way to do better than that. He's getting 10% from Goldman and General Electric!</p>

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<p>I know someone who has completed 2 years of school at, what amounts to a community college, and is 120k in debt. She just had a baby and is now a single mom with pretty much no life in front of her. The "adults" around her just kept co-signing her into oblivion. It is ultimately all on her but there must not be any checks and balances on the system. The cost to attend this school is about $15k a year tops. She should have been able to get a freaking PhD for the money she has borrowed. BK is no option. The monthly payments are $1,300 a month. It's all very sad. I'm not excusing the stupidity of it at all but these will dog her, likely, the rest of her life.</p>

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<p>msudad, Long term, 8% is very doable. It may not seem like that now,but with a diversified portfolio of bonds, foreign and US funds, real estate investment trusts , real estate in certain areas etc., it IS doable over the long term. Yes, I understand that things are down now. However, they won't stay down forever.</p>

<p>I bought some real estate in the Washington DC area in 1981. I bought with very little down payment. However, that was a time where real estate didn't appreciate for over 10 years! Even worse, my rents were dropping giving me negative cash flows. My shorts were getting real tight!</p>

<p>However, I am a believer in long term holding of assets if they are good assets. Eventually, my properties appreciated six times over what I paid. It took time,but I did make a lot of money.The same can be said for a good diversified portfolio.</p>

<p>For what it's worth, I am still in the game,but I am very careful about what I buy especially in real estate.... I insist on getting at least a 9% cash return or I don't touch the property. </p>

<p>If I lived in states that have high foreclosure rates such as California or Nevada, I would be looking at foreclosures now as long as I can get a very decent cash flow from the properties. If I can get 10% cash flow, I won't get hurt in the long term in my humble opinion. However, as you can see, I am a contrarian to what most folks do.</p>

<p>Also, the thread that I mentioned above about incurring substantial debt for a dream school had a LOT of good information posted by other posters. It is, in my opinion, a MUST READ by all parents and kids before they fall into the "spend at all costs" mentality that seems to pervade CC.</p>

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<p>I've got some pretty good experience with the downswing, now waiting for the upswing. Afraid I won't be here long enough to find it.</p>

<p>Warren Buffett drives companies. I can't do that with my little 401k.</p>