<p>You weren’t stupid, you were just typical. I don’t think anyone really understands how all those little bills add up until they are out on their own. I know that my own kids didn’t have a clue when they were 18; fortunately, both kids were willing to defer to my judgment on whether a college financial aid package was workable or not. (Both turned down their first choice schools because of inadequate aid). </p>
<p>If parents are confused by the process … then why would anyone expect an 18 year old to figure it all out? I mean… if the law doesn’t think you have enough judgment at that age to be allowed to buy a beer, how are you supposed to suddenly supposed to be an expert on finances in the short window of time between the arrival of your financial aid packet and the May 1st deadline to put a deposit down?</p>
<p>Latest “news” about woman who graduated $100,000 in debt with degree in women/religious studies in 2005. She stays in night school to defer payments.</p>
<p>After taxes she takes home $2,300/month yet she still is taking night classes (while interest accrues) to avoid paying even a single cent back on the loans. This lady has a sense of entitlement. She feels someone else should pay back her loans.</p>
<p>“It’s good these loans are not dischargeable. Otherwise most students with a large debt would simply declare bankruptcy.”</p>
<p>Which would mean that lenders would have an incentive to make only smart loans to people who’ll be able to pay them back. Right now, they have the opposite incentive. If student loans were dischargeable, people who can pay them back would still do so, because having a bankruptcy on your credit record cripples your ability to buy a house just as the student loans would. If you’re able to pay your bills, declaring bankruptcy will end up hurting you financially.</p>
<p>It is bad for the whole economy to have workers perpetually mired in debt from which there is no escape. If the debt is so large that there’s no hope of paying it back, it makes sense for the debtor to give up and live in the moment rather than getting a second job to try and empty the ocean with a spoon. She won’t be buying a house, she won’t be buying a car, she will probably delay or skip having kids…there’s a ripple effect to all this. Bankruptcy protects everyone, not just the insolvent debtor.</p>
<p>Bankruptcy hurts everybody. Not only do other people have to pay for a person’s mistakes (and living beyond their means), bankruptcy options encourage people to be irresponsible with a “I’ll live the good life off my credit card, go bankrupt, and then start over” attitude. </p>
<p>There is a sense of entitlement in America today that is out of control. I am not talking about people who are hurt by illness of tragedy. I am talking about healthy people such as this lady who will put off paying anything on her loans as long as she can.</p>
<p>*The mistake I made, … was not that I didn’t look at what the loan payments would be or what my salary might be, but that I didn’t look up what phone bill, car insurance, groceries, etc would be. Without that additional step, knowing you’ll have $800/mo loan payments doesn’t do you any good. I was really only thinking about rent and groceries, the rest I figured was not that much, and it isn’t, but all those little bills add up …</p>
<p>but for whatever reason it didn’t occur to me that six different “small” bills a month add up and then that 800/mo is a bigger problem. …</p>
<p>I thought I would have more money per month than was realistic.*</p>
<p>This is such a common mistake. </p>
<p>Kids sometimes think…I’ll be making $50k when I graduate, so no big deal if I have to pay $10k per year in loan payments. I’ll still have $40k to live on - no problem! Yeah!! </p>
<p>And, some of those “little bills” aren’t so little. A car payment, insurance, and gasoline can easily be $700 per month. A cell phone bill can be $70k per month, internet bill, cable bill, utilities…and some entertainment…it all adds up.!</p>
<p>@catseyemarble: “It’s good these loans are not dischargeable. Otherwise most students with a large debt would simply declare bankruptcy.”</p>
<p>I totally agree with you. If student loans were dischargeable through bankruptcy it would incentivize students to take out the maximum loans possible, live high on the hog for 4 -8+ years, and then walk away. Actually, if students loans were dischargeable through bankruptcy there would be no such thing as student loans, because there would be no lenders stupid enough to lend money to a student. Oh, wait…the government added a rider to the “Health Reform” bill and took over the student loan industry, so now there IS a lender stupid enough to lend money to those they know have no intention of ever paying it back.</p>
<p>^^I disagree. If PRIVATE loans were discharge able, they would not exist. No bank (or college endowment) would lend that kind of money; there would be too much risk.</p>
Of course there are engineers working at Sonic. Of course there are women’s studies majors making a lot of money. But these scenarios are not the norm. On average, engineering will pay more, and this trend is especially pronounced soon after graduation.</p>
<p>For what it’s worth, I don’t personally support taking on a single penny of debt unless the only alternative is not attending college at all. That’s a personal value judgment because I don’t support making promises without knowing whether they can be kept.
I’m not going to disagree with that scenario. $60k is a lot of debt, and I wouldn’t support taking it out with any major unless the situation was very unique. However, that debt load would be more feasible for someone with a high starting salary - not necessarily advisable, but still less of a problem.</p>
<p>“No bank (or college endowment) would lend that kind of money; there would be too much risk.”</p>
<p>These are the same banks that have been letting unemployed people rack up $50k on their credit cards? I doubt that they’ll be so cautious, but if they’ll only lend the much smaller amounts necessary for in-state public tuition, that would probably be a good thing. No one should be borrowing $100,000 for any undergrad degree, from any source.</p>
<p>Remember the story of that man who was denied admission to the NY bar because he had never made a student loan payment in 20 years? Between continuing to go to school and pleading hardship exemptions, or maybe just not paying–he’s managed to avoid payment for decades. The young woman in the article is just starting…</p>
<p>@Gardna: The government took over the student loan industry in late March when the Health Reform bill was signed into law. The provision was tacked onto the bill as a rider. Here are some links that explain the ramifications of this change:</p>
My point is that it is not appropriate to make an individual risk-bearing decision based on an “average”, future expectation.</p>
<p>An “average” by definition means that some earn less, some earn more. The “less” can be a lot less. The numbers can be skewed sharply upward if pay is extremely high for a small segment. If you look at medians rather than averages, then by definition – half of all grads earn less than the median (and half earn more).</p>
<p>It’s not the Bank of Lake Wobegon doing the lending (where everyone is above average).</p>
<p>CASMom – the student loan provisions of the health care reform apply ONLY to federally subsidized loans – NOT to the private loans being discussed in this thread. The federal system has limits on what an individual student can borrow, so I don’t think there are many cases of graduates whose debt via those programs becomes unmanageable. </p>
<p>The US Government is just cutting out the middleman on the federally-financed loans. It was always government money going to those loans – either in the form of direct lending or as guarantor to the private lendors – and the government needing to be paid back – but under the old system the private lenders were getting a cut of the money and there was a history of some abuses, such as kickbacks. Essentially it was no-risk industry for the private lenders, because if the student defaulted, the government was on the hook.</p>
<p>This is NOT the same as the loans being carried by the NYU student. It’s likely that about one-third of her loans are federally subsidized – the rest are private loans that would in now way be impacted by the reforms that were passed by Congress.</p>
<p>Sure, and the risk of default is built into their 18-20% interest rates, which many employed adults pay each and every month; in essence, spreading the default risk across millions. In contrast, we’re discussing unemployed (unemployable?) teenagers incurring thousands upon thousands in debt for an education. Car lenders won’t even do such deals, even when they know that they can repossess the (depreciated) asset.</p>
<p>But you are probably correct hanna, in that 100% of private lending won’t dry up. Lenders just may cap it at say, $5k per year or some such. In any event, colleges like NYU would scream bloody murder, and get the NY Times to write wonderful articles on their behalf about all the kids who won’t be able to live in the Village.</p>