<p>One company, Loan to Learn, advertises on Google with this tantalizing ad: "Financial Aid Not Covering Your Costs? Get up to $50,000 in five days." The company will loan qualifying undergraduates $50,000 a year, up to $250,000. </p>
<p>After all these months/years on cc I still find myself asking this question - what legitimate reason could any institution have to loan an 18 year old kid with zippo work history and no assets this kind of money? $250,000? </p>
<p>As to the article, it does seem telling that it was a school of photography and a school of culinary arts. Many of these "professional and/or trade schools have been in trouble in the past for deceptive practices.</p>
<p>There is a difference between professional schools and trade schools. IMO, professional school is business, law, medicine, or engineering. Maybe accounting. They prepare you for a profession</p>
<p>It's awful that these private loan companies are allowed to prey on young people--tho regulation alone isn't enough, people need to think for themselves too. It makes you wonder what is going thru the minds of people taking on such debt--just seems SO WRONG! Actually, there is a striking resemblance to payday loans that have extortionate interest rates. A recent law has been passed which caps interest that can be charged to military for such payday loans to a "mere 36%" (instead of up to 360%). Yuck!</p>
<p>cur, USC was also mentioned. It's not just a specialty-school problem. Students attending richly endowed colleges , or publics which similarly have provided full-grant packages, are probably less than half of the 4-yr academic college population. Most colleges distribute loans heavily as part (typically half) of aid packages. For a student coming from a middle-income family, even half of a 4-yr. college education is a significant debt at graduation. My nephew attended only publics for undergrad & for grad; he is still in debt, though working & earning a respectable income.</p>
<p>Older D was very fortunate. I worry about younger D.</p>
<p>My husband and I were in debt from school loans to the whopping tune of close to $50k. This included two undergraduate educations from top 25 schools and a "prestigious" MBA. Without the MBA, we would have been in trouble since our earnings prior to my husband getting that degree were such that we were pretty much living hand to mouth, still in student ghetto type housing, a cheap, bare bones car, no extras, and other consumer debt mounting, and hardly a dent in the student loans that seemed to loom on forever. We were paying those loans even as we paid for our first two sons' nursery schools. Without some family supplementation, those loans are tough nuts to crack. We had good paying jobs, but with the start up costs for entering the business world, we were not getting ahead. When my husband went back to school full time on full loans for his MBA, we re-entered the world of student poverty, but I wore the business suit to work to downtown. I could not imagine going back to school--had originally thought I would go to law school. So tired of being so broke, living so poor. And the debt of ours was no where near what kids are taking on now. My friends daughter owes $120K for law school alone--thank God she went to a state college for undergrad, and those loans are minimal. I know of families worrying about med school, law school loan paybacks when traditionally those disciplines paid for themselves. Doctors' salaries have plummented from what I hear, and the loans are staggering.<br>
My kids get all kinds of mail advertising easy school loans. Well, they can't even manage their bank accounts and are painfully paying off their first creditlines and cards that they abused. What would happen with a $50K monkey on their backs is frightening considering cost of living here and earning prospects, even for a college grad from a top 25 school.</p>
<p>It is routine for doctors to graduate with $200K of debt, just from med school. Unfortunately, while there still may be some doctors who do very well, most have suffered tremendously under managed care, and are earning less than docs were earning five or ten years ago, while doing more work.</p>
<p>I also think it's important to remember that a casual comfort with debt is a relatively modern (recent) thing. I see a marked increase in the debt levels now vs. when my parents were raising a family, & a striking difference in the permeation of consumerism into all socioeconomic levels. That, to me, is why student debt has greater potential impact now than in a previous generation.</p>
<p>(Just reinforcing posts 6 and 7)</p>
<p>Cptofthehouse, our story is similar to yours. $55K in loans between u/g and DH's grad school, and he had major merit aid from an Ivy for both degrees. (and we thought that was a huge amount of debt in 1989!) He worked for almost five years before heading back to grad school, but neither of us were making a whole lot. Happily, I landed a terrific (though not terribly well-paying job) just as he started grad school, but because he was so busy studying, I spent time focusing on my career development and things worked out better in the end. We were married fourteen years before we had the money to buy our first house -- between the student loans and day care expenses, there wasn't much left!</p>
<p>DH and I both put ourselves through school -- there has been no financial support ever from either of our families, either for undergrad, grad school, paying off the debt, or in buying a house. We vowed we would help our kids as much as possible and that the cost of a school would not be a limiting factor, but they know that they will still be responsible for some loans and getting jobs to help pay the bills. They just won't be shouldering the burden alone.</p>
<p>These instant loans to desperate students strikes me as extraordinarily predatory -- the kids most likely to take them are the ones who have no other options or safety net. That kind of debt could all too easily become an albatross around their necks that could affect their lives for years to come.</p>
<p>Wow, this is amazing. I don't know how you begin a life being in a debt hole this deep, even as a lawyer or doctor! </p>
<p>We are paying for our kids' undergrad so that they have no debt. S is at a public university (a great one) and D might be also in a couple of years. We'll try to help for grad school, but it will be necessary for them to self-finance, which will mean loans, if they choose that route. Both my H and I have master's degrees in our fields, plus I have a teaching credential. Our parents paid for undergrad, except for a small PLUS loan of $5,000 that I used to finance an extra quarter of senior year because I'd spent a year studying abroad and needed to finish classes back home in my major. I remember the payment was something like $67 a month and it seemed like a lot when I factored in car insurance, rent, food, utilities, the basics. Got married to H a year after graduating and we paid the loan off over four years while living dirt cheap and raising a baby. Ten years ago, we paid our own ways through grad school (actually, I did; H's employer paid his tuition...forgot about that nice perk) but still managed to buy a house and put some money away for kids' colleges.</p>
<p>I don't know. I just read in today's paper where a bachelor's degree equates to $23,000 more per year (average) in salary than a high school degree. (But it takes years of earnings to reach the 23K differential; you won't be getting it the first year out of school). I guess if you lived the lifestyle of a high school graduate and used the extra earnings to pay off loans, it might be okay, but what college grad is willing to live that way? After college, you are just anxious to get on with building a life, not paying down vast debt. It's one thing to owe a couple hundred grand on a house, which will generally appreciate -- and heck, you can live in it-- it's another for a young person to owe that kind of dough on a degree that they could have gotten cheaper elsewhere.</p>
<p>This is where the prestige factor versus costs really should be examined with cool heads, for those of us in upper middle incomes with no hope of financial aid and who are paying as we go.</p>
<p>It just seems horribly wrong that lenders are allowed to lend that much unsecured money to students so early in life with no obligation to have the student receive any counseling or anything to help them understand what they're getting into.
My niece's BF had $60,000 in student loans BEFORE he started law school. Never found out how much he owed after he was done with law school--they broke up (I suspect in part because of $$).</p>
<p>Well, I think this is where parents and high schools have failed to educate their children. 18 year old adults are fair game to anyone lending money and handing out credit cards. I am sure companies are tripping over each other to get their business.
I don't think 18 year olds realize there is no "do over" or "restart game" when they get into financial trouble. Nor do they realize how much money one has to make before there is any "extra" money to pay off loans etc.
It is very difficult to teach when they have no real background but we somehow have to get it across to them. They all think they are easily going to make $60,000 out of school ....and have $60,000 to spend.
High schools should have a mandatory life skills class...one that really gets the information across to them and tests them on it. Whatever we are doing now is not working. And as parents we need to go over this stuff again and again......and again.</p>
<p>In the meantime, I bet if the federal government made educational debts dischargable in bankruptcy, lenders would be a LOT more careful about who they gave out loans to & how much they offered. The feds are enabling these predators, which to me is reprehensible. Having credit card debt run amok is bad enough, but this is an even heavier burden that will follow them MUCH longer.</p>
<p>Absolutely agree and yet another thing to explain in black and white to each and every 18 year old you know. They can and will be exploited if they allow it to happen to them.</p>
<p>This is a multi-pronged problem: young people's lack of financial education; predatory loan practices; outrageously priced schools and - yes - rampant consumerism which encourages living beyond one's means through debt. It takes discipline and some self-denial to live financially responsibly. And these are outmoded values that go against the grain of current lifestyle popularized by spoiled babyboomers and their children. (And yes, this is a boomer speaking.)</p>
<p>katliamom...excellent post. Now how do you make a young adult get it? You can let them make the small scale mistakes to learn but it seems like they are in a position to make huge mistakes before they can even make and learn from the small mistakes.</p>
<p>Here's what my kids in my neck of the woods, recent college grads, most paying off school loans, consider neccessities:
big screen tv; cell phone, enhanced cable with multiple channels for sports and movies, hybrid car (can't have the neighbors thinking you're not green enough....); high speed internet and a laptop for home even if you get a computer at work (which everyone does); trip somewhere exotic on the first "real vacation" (unlike Spring break to Aruba or Costa Rica which apparently doesn't count); a latte every morning on your way to work.</p>
<p>I hate to sound like I'm 200 years old but these things did not exist when we graduated from college. We doubled and tripled up in scuzzy apartments; were careful not to make long distance calls very often; we used public transportation (even Greyhound and Amtrak which are apparently so 20th century); we only ate out when the boss was paying or when we found a bar which had a free buffet; we entertained by making tuna casserole and buying beer. Many of my friends endured jobs that we hated if we knew they'd pay to send us to grad school; everyone counted down to the day they got vested (it took 7 years back then!)</p>
<p>I think predatory lending is terrible, but at some point, you've got to look at the lifestyles that kids think they can maintain on $30K per year in that first job and think, "where do these people come from?" I've been in the work force for almost 30 years and make a good living-- I can't imagine thinking that I could afford some of the stuff these kids have. Moreover, I wouldn't be as flip about leaving a job I disliked without the next one lined up... we were all terrified about being unemployed and pretty much understood that drudgery was what those first few years of work were all about.</p>
<p>Nobody believes in "saving up" anymore when you want some item or luxury. Nobody makes a cup of Folger's in their own kitchen when Starbucks is right around the corner. It is bad form to take public transportation when cars are so much more convenient. Does anyone besides me eat ramen noodles???</p>
<p>I absolutely hate that these loans are dangled like carrots in front of some of these kids. Many of these kids think that borrowing these large amounts of money is necessary so that they can go to the school of their dreams - instead of realizing that they could probably still achieve their career goals by attending a less expensive (often instate), yet good, public.</p>
<p>
[quote]
This is a multi-pronged problem: young people's lack of financial education; predatory loan practices; outrageously priced schools and - yes - rampant consumerism which encourages living beyond one's means through debt.
[/quote]
All are excellent points but there's another key point that I'll lay on the colleges, the parents, and the student's own naivete - unrealistic expectations of firstly obtaining a job in their chosen field and secondly having it be a well-paying job. All too often the grads are surprised at the low offers they receive and even more surprised at the purchasing power of it (as another poster stated - they expect $60K of income and expect it translates to 60K of spending). Combine the lack of income, overspending, and the above points, and there's a major problem. Many seem to express the 'follow your dreams and the rewards will follow' paradigm blindly but it can come back to bite them when reality hits.</p>
<p>Rather than turning to the government though, I think the parents and the students themselves need to do the simple math and understand what they're getting themselves into and the points should be taught in HS as well - it'll have far more value to them than some of the other required coursework. All too often the students can handle calculus and statistics but can seem to figure out what it means to borrow $50K at 18% interest.</p>