If you can't do the time, don't do the crime--a cautionary tale about debt

Parent Cafe
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<p>From today's Philadelphia Inquirer:</p>

<p>"Jonathan Avidan of Langhorne pays $700 a month on $94,000 in private and federal student loans that he needed to pay for his last two years at Boston University after his father's business collapsed. Now working for a financial investment company, he said the "impact of these loans has completely changed my life."</p>

<p>"If I didn't have these exorbitant student loans, my wife and I would be able to afford a house rather than a one-bedroom apartment. I'd have money to put away for retirement," said Avidan, 25, who testified before a Senate committee on private lenders in June."</p>

<p>In the immortal words of Super Chicken, "You knew the job was dangerous when you took it."</p>

<p>According to the aforementioned testimony before the Senate, Jon states</p>

<p>"I was faced with a grim choice--to home and enroll in my local community college, or stay at Boston University"</p>

<p>Comment: What about good old flagship state U</p>

<p>He borrowed $18,000 at a low government fixed rate, and $60,000 from a private lender.</p>

<p>"I was told up front that the original 6.36% variable interest rate was capped at 10% and that it was tied to the prime rate. How many 20 year olds know what that really means,"</p>

<p>Comment: The devil made me do it. How many morons borrow $60,000 without understanding the terms of the loan?</p>

<p>I could go on, but why bother? The lesson speaks for itself.</p>

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<p>[Colleges</a> uneasy about Harvard’s deal on tuition | Philadelphia Inquirer | 01/20/2008](<a href=“http://www.philly.com/philly/hp/news_update/13930036.html]Colleges”>http://www.philly.com/philly/hp/news_update/13930036.html)</p>

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<p>One of my kids’ friends told me this weekend: “I’m going to go to XYZ college and only there.” When we talked about student loans, he said he didn’t care how much he borrowed because “he’s going to make lots of money.” He plans to be an MBA/JD. His parents have told him they’ll pay for Penn State - after that he’s on his own. Completely clueless, is he.</p>

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<p>Unfortunately, from reading CC posts, there are a lot of students out there who seem clueless about the impact such debt will have on their futures. I have lost count of the number of posts I have read by students asking where to find loans to cover tens of thousands a year. Don’t know if their parents have never talked to them about the financial facts of life or what.</p>

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<p>I heard that during the financial crisis of the late 1990s, Harvard bailed out about 100 students whose parents went bankrupt of lost their jobs. At many other colleges, including BU. the students were left to fend for themselves. Some transferred out, some dropped out and some borrowed like the student featured in the article. I wonder whether he tried to apply for finaid from BU when his father’s business collapsed.</p>

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<p>I am the student that was the subject of the article that was sited. I wish I saw these posts earlier — but I figured better late than never. Hopefully everyone reads my responses… especially to EMM1.</p>

<p>@marite - I attempted to reach out to BU when my father broke the news. They suggested borrowing from a private lender and they provided me with a “Select” list of vendors which I later found out were giving kickbacks to BU’s financial aid department.</p>

<p>@swimcatsmom - my parents are not exactly the most educated of people. Not everyone’s parents are well-educated when it comes to finances and managing money. Yes, there are a lot of students that do not understand the impact of student loan debt and the impact it can have on their lives… especially when they are 18-22 years old.</p>

<p>@EMM1 - For you, I figured I would quote your remarks, then provide a reponse. Enjoy.</p>

<p>“You knew the job was dangerous when you took it.” – I knew that getting an education from a top caliber school such as Boston University was very important and I was willing to invest in my education in order to increase my chances of having a successful career.</p>

<p>“Comment: What about good old flagship state U” – I could have gone home and enrolled in a local community college or state school. Would I have received the same top shelf education that I got at BU — doubt it. – Have you seen the rankings lately for BU’s School of Management?</p>

<p>“Comment: The devil made me do it. How many morons borrow $60,000 without understanding the terms of the loan?” – First of all, I am far from a moron and you should not insult people that you do not know. Second, unless you have been hiding under a rock for the past ten years, you should know that one of the major issues with student loans today (or in 2004 when I graduated) is that the terms of the loan are very unclear and misleading. Moreover, schools tend to only provide you with loans from providers that they are getting kick backs from.</p>

<p>"I could go on, but why bother? The lesson speaks for itself. " - Does the lesson speak for itself? Or are you assuming most of your information? I am glad I made the decision that I did. I made the decision with the information that was provided to me. I hope that since 2004, new regulations and laws have been put in place to better educate the student and to assist the student in making a more informed decision.</p>

<p>Where am I now? I work for a multi-billion dollar investment management firm in Manhattan as its Operations Manager. Who can I thank for the success that I have had and will continue to receive? My Boston University education, my need for excellence in everything that I do and my drive to be the best in my field.</p>

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<p>OK, so have you now fully repaid your loans, javidan11, and would you recommend that others follow your footsteps, javidan11? What happens to those many others who try to follow your path but don’t get hired as Operations Manager at a multi-billion dollar investment management firm in Manhattan?</p>

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<p>^^^^Congratulations on your success. Perhaps you were premature to complain about your student loan since you went on to get a lucrative position in a top notch company which made your loan a good investment in your future.</p>

<p>BU is certainly a great school. However, “with a need for excellence” and a “drive to be the best in your field”, one can achieve great personal and professional success without going to an expensive prestigious school. My husband went to a state university (not our flagship), got a good education, graduated with zero debt, and with an incredible work ethic and focused ambition to be very good at what he loves doing, has been a very, very successful man in terms of husband, father, and businessman. Not knocking your expensive education, just stating that it’s not required in order to succeed.</p>

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<p>Thanks for posting. Are you now earning enough to pay down your loans more comfortably? </p>

<p>I think that perhaps the OP for this thread did not understand that the purpose of your testifying before Congress was not to gripe, but to provide information that could influence and inform legislation. For example, I think it is inexcusable that BU was receiving [url=&lt;a href=“http://www.ag.ny.gov/media_center/2007/mar/mar22b_07.html]kickbacks[/url”&gt;http://www.ag.ny.gov/media_center/2007/mar/mar22b_07.html]kickbacks[/url</a>] from the “preferred” lenders it recommended. </p>

<p>But what would you have done if the private loans had not been available? Is it possible that you would have taken a somewhat different path? I mean, if you needed an extra $60K to stay in school over two years… what would your options have been with the legal reforms that you would like to see in place?</p>

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<p>@HImom - I have not repaid my loans. I have approx. $90k remaining. My point in letting you know where I am now is that I have put myself in a position to be able to pay the loans off whereas most students with large amounts of loans are having trouble just putting themselves in a position to pay them off.</p>

<p>@Nrdsb4 - I agree with you 100% that one does not need an expensive education to be successful. Unfortunately (or fortunately – however you want to look at it), I went to a school that initially my parents could pay for and then was thrown into a situation that in which I needed to cover the bill. I have been married since 2007 and I have a 3 year old daugther. I hope that my path to success is a glorious as your husband’s!</p>

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<p>^^^^3 year old daughter. You have my sympathies :D. Just kidding, I have two girls and it doesn’t seem long ago that they were 3 years old. Enjoy these times. I’m here to tell you that they go by in a flash. Before you know it, you’ll be here on CC giving sage advice yourself!</p>

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<p>Not saying that you meant it this way, but I thought this statement came across as entitled. Only 67% of Americans own homes, and the average age of first time home buyers is 34 years old. You were 25 when you made that statement. We bought our first home at age 27 and were one of the first of our friends to do this. How old are you now and do you own a home?</p>

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<p>@javidan11 – You sound perfectly smart. You say you are grateful for the education you received at Boston University. I know a few people who went there and they loved it. The gratitude you feel for the foundation that they laid for you will be with you for the rest of your life. That’s worth a lot and it is probably worth the student debt you now have.</p>

<p>$700.00 a month doesn’t sound that bad to me. Buying a house, especially in such an expensive area, is a big financial commitment. Right off the bat there are extra monthly costs. Then a house has to be maintained. They need to be painted, the plumbing needs to be fixed, the roof needs to be replaced. I know you know all of this but knowing it and actually living with it are two different things.</p>

<p>If you like your job and you value the degree you received and you are able to manage your monthly payments then I don’t think your student debt was a mistake.</p>

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<p>@calmom - “Are you now earning enough to pay down your loans more comfortably?” Unfortunately no. I am on a special plan in which I am currently paying 1% of the loan per year with no interest. Turns out to be $69 a month. If I was not on this plan, my monthly payment would be approximately $800 a month.</p>

<p>“I think that perhaps the OP for this thread did not understand that the purpose of your testifying before Congress was not to gripe, but to provide information that could influence and inform legislation. For example, I think it is inexcusable that BU was receiving kickbacks from the “preferred” lenders it recommended.” Thank you for noticing! My whole intention of speaking in front of congress was to tell my story. It makes me very happy that someone sees that!!</p>

<p>@Bay - I did not mean it in that way – you are correct. My wife and I bought our first home in March 2008. I was 26. We were the first of our friends to buy a home, as well. Luckily, I have had jobs that paid me very well… unfortunately, not well enough to pay down the principal amount of my students loans.</p>

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<p>If anyone is interested, below is the link to my testimony in front of Congress in 2007. My life is better now than it was then… but I still have over $90k in student loans. $150k total if you include my wife. Enjoy.</p>

<p><a href=“http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=968a0caa-a03f-4287-a5a3-e4294076d042[/url]”>http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=968a0caa-a03f-4287-a5a3-e4294076d042&lt;/a&gt;&lt;/p&gt;

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<p>javidan11, after reading the posts and your responses, my questions to you are these :</p>

<ol>
<li>Would you take the same loans out today for your education, or transfer to state u? </li>
<li>Do you feel you got your moneys worth from BU? </li>
<li>Would you recommend these loans to other students (realizing that they are a little different now thenin 2004). </li>
<li>You are now in investment management. How would you counsel clients that asked your advice about college financing?</li>
</ol>

<p>obviously hindsight is 20/20, but I am curious for others that are trying to make the decisions between state u (or other affordable options), and the higher priced educations out there.</p>

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<p>So, at the rate you’re paying, are you making any dent in the principal? Is the balance actually rising because you’re making such small payments? Do you have a plan to pay off the loans?</p>

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<p>Yes, I would imagine that your principal balance & your wifes are INCREASING. It amazes me that with that much student debt you were able to purchase a house. Can you please answer the questions of post #16? These are issues that many on CC are grappling with. Owing $150K in student debt + a mortgage would be a huge sum.</p>

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<ol>
<li><p>Would you take the same loans out today for your education, or transfer to state u? I would not change anything. I would make the same decision to stay at BU. No regrets!</p></li>
<li><p>Do you feel you got your moneys worth from BU? Yes. I feel that I would not be in the position I am in now without the education I received from Boston University.</p></li>
<li><p>Would you recommend these loans to other students (realizing that they are a little different now thenin 2004). I would recommend trying as hard as possible to NOT take private loans. Max out your federal loan options, look at grants, talk to the school… try anything possible… THEN go for the private loans.</p></li>
<li><p>You are now in investment management. How would you counsel clients that asked your advice about college financing? Save early, save often. My daugther is 3 years old… My wife and I opened a 529 account for her when she was 3 weeks old! I will do everything in my power to make sure she does not have the financial burden that I have.</p></li>
</ol>

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<p>That is amazing. How are you able to be on this plan? With this payment, your life really does not seem to be impacted at all by your loans. When are you required to start paying down the principal?</p>