They certainly are if such terms are heavily influenced by colleges’ marketing efforts. (see for profit colleges)
Businesses generally are not, but college should be. (I agree tpike on this.) And the reason colleges should have some skin the loan game is that the taxpayers are on the hook. Colleges should not have unfettered access to Uncle Sam’s bank account – the more they raise their prices, the more money they can get? Really bad debt model.
Agreed, but the current loan model enables just the opposite. For example, a MSW at USC costs $80+k. A MSW from a Cal State Univ is less than a third of USC. But yet, our public loan policy enables/encourages? students to attend the tony private school, even tho they’ll be lucky to land a job making $50k upon graduation. How does that make sense?
I do not agree with allowing people to borrow knowing they are not going to repay the amount. What is predatory about taking a loan for $5500 at 4% and agreeing to pay it back over 10 years once you leave school? Where are the hidden terms? What college student doesn’t understand that obligation, especially after completing the pre-loan advising program where it SAYS you must repay and cannot discharge in bankruptcy? Borrow money and you have an obligation to repay money. Easy concept.
Banks can make loans to students that are dischargeable in bankruptcy court right now. They are straight consumer loans without the protections and benefits of ‘student loan’ designation. Students want the protections of STUDENT loans (lower rates, payments begin after graduation) but then they have to agree to the ‘no discharge’ condition.
We had dischargeable student loans before 1986 and students discharged them! Banks were dropping their student loan lending programs because they weren’t profitable. The government passed the new rules, including student loans not be dischargeable, to encourage banks to once again make student loans. If the government changes the rules and makes student loans once again dischargeable, the nature of the loans is going to change too; the rates will skyrocket and the banks will require stricter qualifications. Once again, those who need the loans the most will not be eligible.
Where is the personal responsibility for paying for the choices one makes? The person who goes to USC for a MSW is the one who is responsible for knowing the costs and the terms of the loan.
Are you proposing that universities require those going into lower paying professions are limited to those that can pay out of pocket? Should anyone who can not prove they have the ability to pay the bill be denied entry to schools?
Are you proposing that universities provide a sliding cost scale by major? Going into teaching or social work where you will be making less will cost you proportionally less in tuition. How about room and board? A discount for those going into lower paying fields? Would you pay the professors, support personnel, facilities in those tracks less than those who work in engineering, law, or business schools?
Who is encouraging those who can’t pay to go to USC over Cal State? Someone who is smart enough to get into USC and Cal State for a MSW should be smart enough to know the return on investment and future earnings potential. Is the Audi dealer or Tesla dealer who markets an expensive new car to me responsible for my purchase because they advertised it to me? How about the European tour operators, the luxury home builders, the designer shoe store? Do they carry some of the responsibility for consumer debt? They all encourage me to purchase their tony products. It is simple. Don’t buy what you can’t afford. Don’t count on someone who is financially responsible to come and pay for the financial mistakes of others who have not been responsible.
There are other paths. Go to community college. Get an Associates degree. Get technical training or an apprenticeship in the trades. Work for a few years and attend school at night. Go to the state directional using the federal loans that are limited. I think that these other paths should be made available to many more people and funded by states. I do not have a lot of sympathy for book smart young adults and their parents who took the money, had great experiences, and now have a debt hangover. Do income based repayment and tighten the belt and forgo extras until that debt is retired.
If college loans are allowed to be discharged in bankruptcy, I would strongly suggest that those college loan bankruptcy cases have much more significant implications. Like…no consumer loans for 10 years. None.
Otherwise, what would prevent students from taking tons of loans…just to declare bankruptcy after college ends?
My opinion…unless you plan to repay loans…don’t take them at all. Find affordable options.
I also don’t agree that it’s the institutions responsibility to police where the loan is being spent or for which major. What happened to personal accountability, both by parents and students? It’s a quick search to see starting salaries and comparing COAs.
As mentioned, I had $35k in student loan debt in the 90/. I was still able to buy my first home in the late 90s and started a family shortly thereafter. The excuses are nothing but bs, and a lack of financial discipline!
@thumper1 - actually, my DD did choose an affordable option, so debt forgiveness would not benefit our family.
People on CC are quite savvy about college financing, but the majority of adults, let alone their kids, are most definitely not.
How many people do you hear about that aren’t sure how they are going to pay for the college their child chooses, but say they will just figure it out? Yes, it is stupid. These are the people that are getting abused by predatory lending practices.
Moral responsibility aside, we are staring at a huge economic crisis. Something needs to change.
@bamamom2021 - our eighteen year old children are being told by authority figures throughout society to go to college whatever it takes and we have the the biggest predators in society waiting to enable them with however much cash they ask for.
Not good. Should we teach our children financial responsibility? Absolutely, but we are not. Is that their fault or ours?
Wait what? Most kids are told CC is a good place to start and they can live at home the first two years. Many schools offer the running start options. If kids are being told otherwise, it’s by their parents or friends, not high school counselors.
That may be true, but what will people think when you file bankruptcy? People shouldn’t worry about keeping up with the Jones’s and should worry about staying in their budget. My oldest is at an in state option and the next kid was told apply OOS if you want, but make sure they have merit equal to IS tuition prices.
I’m not sure how people want it to work out if people are allowed to discharge student debt in bankruptcy. Do they then want future students to find it more difficult to get loans?
Do they want a student’s major, grades, and career goal to play a part in deciding how much the student should borrow? I can understand why (even now) there should be limits on borrowing when the student’s career goal doesn’t suggest that he/she could make $300-$1500+ per month loan payments.
Do they want it to become much more difficult for parents to qualify for Plus loans (I already think this should happen…income, FICO score, income/debt ratio, should all be considered, along with the projection of how much the parent would be ultimately borrowing to cover 4 years of college. The idea that a lowish income parent could borrow full COA for - say 3 children - is silly. And this does happen. I personally know a single mom who earns less than $40k per year who has taken out full Parent Plus loans (no merit, but did get some Pell) for her 3 kids to attend an expensive OOS public. Her oldest will be graduating next May, and the twins will soon follow. The agreement is that the kids are to pay the loans back; this is a common agreement made between parents/kids and Plus loans.
I don’t think the idea of canceling student loans or allowing them to be completely erased in bankruptcy is fair to those who made careful decisions, chose less expensive schooling, didn’t insist on dream schools, etc.
Really? I have never known anyone to come out of bankruptcy and begin accumulating wealth. Many can’t get jobs without a good credit rating, can’t buy a home, still have debt for autos or other secured loans.
I used to work for a high risk lender. Our favorite new customers were those who had recently come out of a bankruptcy case because they couldn’t file again for 7 years. Yep, just like those student loans are not dischargeable, the new debt wasn’t either. Line them up and give them a new loan at 36%, that’s the American way. They begged us for loans because the traditional banks would not lend to them or give them a credit card.
If the debt is just forgiven as proposed by some running for office, the IRS will be first in line to collect on that income. Also not a fresh start.
The dept of education sometimes gives students at closed colleges a choice: 1) take the loan cancellation (even better than forgiveness) but then get no credit for the courses taken, or 2) pay the loans and get credit. Can’t have it both ways. If the degree is worthless then you don’t have to repay the loans, but if you want the diploma, you have to pay for it.
While I agree that student loans are a drag on the economy but what about the effects on the economy of loan forgiveness? Someone has to pay. For federal loans that means the taxpayer. Will our government be willing to pass a tax increase to pay for this. Look at the national debt and the impact of the recent tax cuts before answering.
My take on this is that we need to focus on improving our state systems. Some states do a decent job. My own state has a strong system that the state tax payers have supported. Most of the students here have the state flagship as thier dream college. Unfortunately many states do not support their state schools. Part of this is the residents don’t want to pay more taxes. Understandable but then don’t complain about the cost.
I think that income based repayment (which exist for federal loans) is the better solution than bankruptcy or striaght out loan forgiveness. Rather than bailing out every student, use the money to support the state schools and to expand options such as online courses.
@mom2collegekids - Plus loans are crazy. You can borrow up to the cost of attendance no matter what your income or debt load as long as you don’t have any major flags on your credit like bankruptcy or foreclosure. I make about 40K/year and one OOS school cranked out 35K/year Parent plus loan as our “financial aid”. LOL HTH would I ever pay that back? It would not be possible.
School choice has the biggest effect on college affordability. It seems like a lot of people like to do it backwards though, choose the school and then figure out how to pay for it.
@tpike12 “our eighteen year old children are being told by authority figures throughout society to go to college whatever it takes and we have the the biggest predators in society waiting to enable them with however much cash they ask for.”
Parents are eighteen year old children’s ultimate authority figures. Tell them No, you are not going to this completely unaffordable school, consider these other options instead.
@bamamom2021 I think the phrase “debt hangover” is completely accurate. Santa Claus doesn’t fly in his sleigh and provide everything wanted, so buy now, pay later. But, wait a minute, I was supposed to think about the fact that I would have to pay for it vs. having it now bc I wanted it?
@twoinanddone Now that is an idea. Forgive the loan but revoke the degree and cancel all course credit associated with the loan forgiveness. I wonder how many takers there would be. Maybe some, but doubtful that most students would want to go back to the equivalent of a high school diploma. If their jobs are going to be revoked bc they are no longer qualified for the job…
Private loans, yes. (The current federal limits are reasonable.)
Yes, otherwise attend a less expensive college. Lower loan limits would also encourage colleges to watch costs. Does a MSW for $80k really make sense for anyone but the wealthy? Is it in the public interest to crank out more MFA’s with significant debt when we know with certainty most grads will not be able to find a job in that field?