<p>Those are two inconsistent points. The bank would not lend at those low-low rates without the ‘no discharge’ clause. (And maybe that’s not a bad thing bcos with higher bank rates, the parents might have then turned to the Plus Loans.)</p>
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<p>Actually, for most people, that IS compassion. With no big bank loans, the masses would have to turn to their public colleges and limit themselves to federal student loan debt. Unsecured private – and federal loans – create a moral hazard.</p>
<p>“Borrowers do not read the fine print and do not take responsibility for financial longevity.”</p>
<p>That’s true. This is true of LOTS of people – I’d say at least one-third of borrowers of all kinds. So my question is, given that we know that there are tens of millions of those folks out there, what type of loan system should we set up? Is it good for everyone in the society to let tens of millions of people wade into debt up to their necks with no way out? I don’t think that’s good for the society or the economy. The main reason we got rid of debtors’ prisons wasn’t just compassion. It was the fact that it’s way more efficient to give people a chance to resume working in the economy and generating wealth.</p>
<p>The problem I see here is that the system is set up to allow this student to take this loan in the first place. No single teen mom (the first kid was born when she was 18) with a nursing job was going to be able to pay back $100k, and her pastor parents probably couldn’t either. That looks like a private school bill. The system should have steered her to a less expensive educational option.</p>
<p>That is a very sloppily-written article, and indicates that the reporter and/or the editor didn’t understand the facts of the case. One question that hasn’t apparently been asked: was she diagnosed with liver cancer when she took out those loans and they co-signed them? Or did it happen later?</p>
<p>I’m very sorry for them on many counts. But they should never have cosigned those loans unless there was a term life insurance policy on her that would pay a substantial amount of the loans. SHE should not have accepted their support without that. Someone should have counselled all of them clearly about the financial terms before they took out the loans.</p>
<p>I think they should try crowd-sourcing. I bet there are lots of people who would be willing to contribute.</p>
<p>BTW, if he is a minister, he should be able to take all of the costs associated with their housing as a housing allowance, tax free. I’ve known ministers who took their entire compensation that way. </p>
<p>Who is going to pay for the life insurance component of the loan? The interest rates are high enough as they are. I think the credit insurance should be offered in big bold print and charged for those so wanting them, so that a copy of the that could be bandied when these tragedies occur and parents like these start crying unfair. Right now, though the terms are stated in the paperwork,and these parents did sign off on the terms, the print is so small most of us can’t read it without a magnifying glass, and small print = foolers, gimmick, intent to deceive to many people. </p>
<p>The cost of protection is NOT necessarily nominal to some people. That’s another bill that has to be paid each month. Perhaps the daughter did have life insurance and the money could be used to pay off the loan, but I’m sure other uses for it could be found. She left three children that her parents are raising. Really, if she had gotten general life insurance for the loan, unless it was specifically credit insurance targeted to the balance, I doubt the family is going to pay that loan off with it. It would go for the care of the kids if there were anyway it could be so used. The PR would be no less unless it was constructed so that the credit insurance went right to the loan so that it couldn’t be used for anything else. </p>
<p>One of the moms at my kids school - her college aged kid suddenly died - 3 months from diagnosis to death. She was in her 3rd year at a good but pricey school. I hope her parents aren’t facing something similar.</p>
<p>Yep. I’m willing to bet that every poster on the thread, all over the political spectrum, could point to some existing federal law that they believe is destructive to the economy or other important values. We can also be clear (and I doubt this will be controversial) that a big, bipartisan majority of our Congress is paid off by the consumer credit industry.</p>
<p>The term life insurance to cover the loan should have had her parents as the beneficiaries. For that matter, the parents could have taken a policy out on her and paid it themselves.</p>
<p>Unless she was already sick. In which case taking out the loans was even more unwise. I can certainly understand and fully sympathize with the desire to keep on going and not live as if one were dying…but taking out $100K in loans is way, way, way over the top.</p>
<p>If we want to talk about unfair loans, talk about the usurious rates charged by the government to graduate students: sufficiently high that it is actually a <em>profit center</em>. That’s the outrage.</p>
<p>Lots of nurses on the forum I referenced go to expensive private schools because getting into nursing schools at public CCs and 4 year public universities is so competitive. Perhaps this girl had been rejected at the public options in her area/state.</p>
<p>I see both sides…no way should her parents have cosigned for those loans considering their income. I am sure there was language stating that they were responsible if she didn’t pay. You have to plan for contingencies. For example, i bet most students dont get renters insurance when they move off campus, but they should. HOWEVER, I also think the banks could write off loans in the case of death or total disability. I am sure it is probably less than one tenth of one percent of loans that this occurs. And yes the banks CAN afford it. I have NO sympathy for banks as they are getting money at practically zero interest and charging us usurious rates. There is no reason rates should be so high on student loans and credit cards. Also when banks made bad decisions they were bailed out, and they are still being helped since the fed is basically giving them money with no interest. </p>
<p>“Perhaps this girl had been rejected at the public options in her area/state.”</p>
<p>That’s true. But I have to doubt that the private schools would be so expensive if there weren’t unlimited loan money available…and there wouldn’t be unlimited loan money available if the lenders bore more of the risk. At the end of the day, I would advise a teen mom to pursue a different career, at least in the interim, if the only nursing path involves borrowing $100k.</p>
<p>Taking out 100K in loans for anything but law school or med school to be a surgeon, is absolutely insane. Actually, taking that much out for law school is insane too. She shoudn’t have taken out 100K in loans, especially with a child already there, and for a degree that pays less than half of that a year.
Don’t get me wrong, student loans are awful, and banks are predatory, but it seems like she was lacking in basic common sense, and so were they.
Loans = bad
Loans + kids = worse
Loans + kids + low paying job = as bad as it can get</p>
<p>Student loans are unsecured credit - essentially the same as credit cards. The typical interest rate for a credit card is from 15-22% - for a credit line a fraction of the size of student loans in this story. Student loan interest rates are only lower because the debt can not be discharged in bankruptcy! If you want to be able to discharge student loans in bankruptcy, be prepared for 20% interest rates. </p>
<p>I think that arguing about who was at fault and whether we should feel compassion for the parents misses the point. Student loan debt, nationally, is propping up our system of higher education, and with more and more people unable to repay their loans, this is not a sustainable situation. It doesn’t matter if the loans are not dischargeable in bankruptcy – if people don’t have money to pay them, they don’t get paid. Presumably this causes financial strain somewhere farther upstream, and eventually it will be the US treasury, i.e. the taxpayers, who will bear the cost. Just as with the mortgage crisis, all the finger pointing at stupid people who should have known better does not change a damn thing as to who actually pays the price when all the shouting is over. </p>
<p>We ought to want the current situation to change for our own good, not because we feel sorry for the poor people who can’t pay. They should never have been in that situation in the first place. And yes, I am aware that this means that kids who have their hearts set on going to this or that pricey college will be denied. That’s another thing that needs to change – we need to stop telling our kids that they can go to whatever college they want because the money part will work out somehow. I have literally heard principals and other authority figures telling a roomful of kids that “there’s money out there” and that they should shoot for the stars. It’s all very well to encourage ambition, but when the prize we encourage them to aim for carries a $250K price tag, that’s a problem because what, you’re going to tell your kid who worked so hard and did everything he was supposed to do that even though he won the prize by being accepted, he doesn’t actually get to take the trophy home?</p>
<p>Bottom line, something needs to change, and it’s not going to be the parents who want to show their kid that they’re proud of him and that they believe in him, and it’s not going to be the kid who’s been told for years that going to a top school is the best path to success in life. The colleges should be the ones demanding the change, frankly, because if the student loan bubble bursts, it will be colleges who will feel the brunt of it as their class sizes shrink.</p>
<p>I agree but the problem is, if I understand the facts correctly, that the students who attend “top” schools have a rather good record of paying back their loans. It is the students at the marginal institutions who wind up in default. </p>
<p>“If you want to be able to discharge student loans in bankruptcy, be prepared for 20% interest rates.”</p>
<p>What we might see is rational limits on lending, like we see in the credit card market. Banks don’t hand out cards with $100,000 credit limits, not at ANY interest rate. Even when I was a big-firm attorney with a nice six-figure income, they never tried to push a card on me with a limit higher than $20,000. It just doesn’t make sense to make huge unsecured personal loans unless they are non-dischargeable. So in a dischargeable system, the problem of people taking out gigantic student loans they can’t repay would not exist, and schools that wanted to stay in business would find a way to function at more reasonable prices, like federal loan limits.</p>