I watched a piece on the Today Show yesterday morning, and they interviewed a group of young people. They said, “Everyone graduates with debt.” Not true. Many do, but definitely not everyone. I am not well off, but my kids did graduate without debt. The other thing they said: “Debt should be forgiven.” Why? I just don’t understand how that makes sense. Borrowers BORROW. Which means that borrowers must PAY BACK what they borrowed.
I am all for income-driven repayment (IDR) plans, and I am definitely for requiring servicers to do a whole lot better servicing loans. I work in financial aid, and I have assisted numerous students who have received horrible advice and service from their servicers.
I am all for lower origination fees. The 4+% origination fees on PLUS loans are a huge consumer ripoff. You don’t get that 4%, but you repay it (with interest, which begins to accumulate when the loan is disbursed).
I am all for better entrance counseling in advance of borrowing, and I believe the responsibility for developing this rests with the Department of Education. They have the resources and data to be able to put together the best possible entrance counseling, which should include financial literacy-type information. Maybe students would decide not to go to a too-expensive school BEFORE they begin if they had to face the reality of what they were doing before they borrowed loans.
I am all for anything to help curb borrowing that does not add more burdensome regulatory requirements on schools. The amount of time it takes me to comply with regulatory requirements has drastically increased in the last 10 years. In my case, it means I work more & more hours … in most schools, it means more staff has to be hired (which leads to higher tuition, which leads to more borrowing).
Most of all, I wish students and parents would embrace the idea that no one “deserves” any particular school if going to that school will put you in a terrible financial position for years to come … and if there is an alternative that costs less.
What seems to be hard for many people to admit is that we have gotten to the point that, for many academically capable potential college students, college study leading to a bachelor’s degree is not a financially realistic option for them due to parent financial circumstances and choices. The cheapest path may still be unaffordable or at the very margin of affordability (including needing loans), while better academic fits may be more expensive.
I.e. it is increasingly the case that college is more of a marker of parental financial circumstances and choices rather than the student’s own academic achievement. With credential creep in jobs requiring bachelor’s degree despite not actually needing the general or major-specific skills and knowledge indicated by such, that reduces the opportunity for those born poor or to parents who make bad financial choices to move up the SES scale.
Arguments about loan forgiveness are more about the symptom rather than the problem.
Perhaps a compromise between loan forgiveness and holding people accountable is to get rid of interest/origination fees on student loans. If you borrow, you will have to pay it back, but since we value education in this country, there will be no interest/fees. This still will require a very large gov’t cost, but it seems it’s a step, in my mind, in the right direction. Alternatively, maybe the interest rate should be equal to the inflation rate.
With credential creep in jobs requiring bachelor’s degree despite not actually needing the general or major-specific skills and knowledge indicated by such, that reduces the opportunity for those born poor or to parents who make bad financial choices to move up the SES scale.
I agree with this, @ucbalumnus . I don’t know how to fix it, but I agree that it’s a problem.
Credential creep isn’t limited to the bachelor’s arena. PT and OT used to be master’s programs. Now, the necessary degree for someone starting out is a DPT or OTD (moving in that direction for the OTD). ARNP can still be obtained with a master’s, but the push is for a DNP.
And it may be beating a dead horse, but I don’t know how we can take such a broad figure, like 1.5 trillion in student debt, average it, and expect to have any sort of accurate number. What was said earlier? 30-something thousand in debt per borrower, on average? The actual average is probably much lower for bachelor’s students as the average for PhD graduates, according to the NCES, is $98800. Their debt is included in that 1.5 trillion, as is the debt of students holding professional degrees (MD, DPT, MBA, etc.) which are less likely to be funded than a PhD. The number sounds big. It sounds like it could be a crisis, and there are some people out there who borrow way more than they should, but is it really a crisis? I don’t think so. Should all that debt be forgiven? I don’t think so. (And I’m a dyed in the wool liberal.)
Eliminating debt will NOT solve the issue, which is cost. The fact that borrowing is easy is one reason costs have skyrocketed. If it is essentially w/o consequences, there is nothing to limit cost.
What happens then to the next class? Can they no longer borrow? Or do we forgive that too?
Just reinstate bankruptcy discharge and that is all that is needed.
That’s the problem with living in a free country, isn’t it. If you take out debt, you have to pay for it. If you can’t afford it, don’t buy it in the first place. Many college students do just that. They spend 2 years at a community college debt free and transfer to an in-state university, because 99% of what they do is going to be learned on the job anyway.
What’s happening here has nothing to do with debt. Politicians are bribing you with empty promises to buy your vote. Don’t be fooled.
The linked article wasn’t about lending but about predatory (for profit) colleges.
That problem can be solved by taking federal aid (loans, Pell grants, GI Bill money) away from those schools. Where will those students go to college? Is the Harvard study going to find that Harvard need to accept more of them?
Earlier on in this thread someone said that students in the NE look down on community colleges. So? How does this translate into their college debt should be forgiven because they think they’re too good for cc? If the supposed sob stories the media shares are the best they can find to promote debt forgiveness, they are doing a horrible job. You borrow it, you play it back.
I’m really late to this thread. I read all the comments, and I get a distinct feeling that many of us don’t know people in our own lives who have taken stupid student loans. I know several. The common thread among the people I personally know, is that they were first generation college students, or that their parents were just so distracted by their own personal problems and so darned thrilled about the college acceptance that they fell into the “We’ll figure it out later” mindset. Examples:
One kid solved the loan problem by only taking out one year of loans for a very expensive private college, and then securing an ROTC scholarship for the last three years. This was after I sat down with his mom and told her this was crazy, that they could not afford this college.
One kid took loans for four years of a good very expensive Jesuit college… and then loans for that same college’s law school. He is really crushed by the debt, which he will be paying off for a very long time. His parents were and are clueless.
I agree with posters above who stated that students and parents should be required to have financial counseling before loans are given. I think they should be required to have face to face counseling every year, and be required to look at exactly how much the monthly payments will be, and exactly how much they will pay over the lifetime of the repayments. And maybe go over expected salaries for people with their majors.
People can be financial idiots. I know the parents of the two examples I gave above were not really aware of what they were agreeing to. And neither were their kids. Both sets of families were going through rough personal times, and the parents were just thrilled that their kids had been accepted to these colleges.
One of the families I mentioned above also got sucked into an interest only adjustable rate mortgage back in the days when that was a thing. But they were able to refinance once a family member figuratively slapped them upside the head and pointed out the problem. They had assumed that the mortgage lender wouldn’t lend the money if they couldn’t afford it. I think that mindset is what sucks people into taking out more in student loans than they should.
@coolguy40 - While I totally agree that personal responsibility is at the heart of it, I struggle with why student loans are treated so differently. Why aren’t people allowed to borrow whatever they want for say a house or car? Shouldn’t they just figure out on their own what they feel they can afford and not have all this prying into their finances with underwriting? For some reason with student loans we don’t feel the need to worry about their ability to repay or question any decisions on the part of the borrower. Like paying triple for out of state or getting a degree in something with very little market value. It’s all good with student loans!
I am not opposed to this sort of forgiveness … it’s not just forgiveness for the sake of forgiveness. It’s forgiveness because the borrowers have chosen to sacrifice what they could earn to assist a group of people who might not otherwise have healthcare. This is a fair exchange, and I would like to see more such programs. PSLF and Teacher Loan Forgiveness are similar programs.
@kelsmom
Yes, I totally agree. Targeted programs such as these are an entirely different proposition than blanket forgiveness for all student loans with “pie in the sky” ideas of how it will be financed.
They CAN! All they have to do is find a lender who is willing to lend them the money at a rate they agree to repay. Student loan lenders make loans to those who would be unable to get a lender to make that loan because the government has guaranteed the conditions, and if it is a direct or Plus loan through the government, the rates.
Lenders are in business to make money. They usually set their rates, fees, and terms on the repayment history of their customers. If the student loan programs change, the lenders will have to decide if they are willing to make unsecured loans to borrowers (students) without a credit history, and if so, at what rates. I think we’ll find there won’t be many lenders who will do it, and if they do it will be at high rates.
Financial illiteracy is big part of the problem. Compound that (pun intended) with the “need it now” generation and here we are.
As a financial advisor working with clients from the kitchen table to the board room, I can definitely say our country would be far better off if we provided basic classes in finance (household, investing, debt) during high school. I personally would enjoy teaching that and would volunteer my time. Not so easy getting the school system on board. I think I’ll make a concerted effort nearing retirement as it would be a fun way to give back.