fear of student loans. ex.37665(a)

[scaredyclassic]

http://sports.yahoo.com/blogs/nfl-shutdown-corner/jacksonville-cecil-shorts-one-nfl-best-bargains-still-154310751–nfl.html

still saddled with loans…

[earlyretirement]

If you want to read a great but depressing article on student loans and how difficult student loans are to discharge, read this article from the New York Times from last year.

While I certainly am not advocating that student loans should be easily discharged in bankruptcy. If so, I’m sure that there would be many deadbeats cheating the system. But when partially blind people are getting turned away, it’s depressing.

Student loans are something that is very necessary for people that don’t come from wealthy families. I worked all through University and still had to get many student loans. Not just for tuition and books but more so just for living expenses, etc.

My biggest problem is that the system they have in place is basically broken. There is almost NO RISK at all for these lenders. Even social security and disability disbursements can be withheld.

Lenders are all lined up to give tons of student loans without regard to the major that will be received, the type of job the student can expect to get along with their expected salary. After all, it’s almost a guarantee that they will get paid back and the interest rates are surprisingly high on them.

And it doesn’t matter if the student already has loans out. Students can pile loans on top of one another.

Again, I’m not saying that I’m against student loans because I’m definitely not. I wouldn’t have made it out of University without them. But some of the stories i’m hearing now from friends are pretty bad.

My best friend’s sister in law graduated a few years ago. She went to some private nothing special school that was very expensive. She got some almost worthless degree. Then she went to grad school but it didn’t sound like it was a beneficial degree either.

She has something crazy like $180,000 in student loans and it turns out she has 6 separate loans out. Some with interest rates as high as 8%. She finally had to cash in part of her 401k to pay off some of them as her and her husband couldn’t even qualify to purchase a house with all her debt.

[CA renter]

The student loan situation/bubble will have to be addressed sooner, rather than later. Something is very wrong when young people are taking on six-figure debt for a bachelor’s degree.

We need to find out what the heck colleges and universities are doing with all the extra money they’ve been raking in over the past couple of decades. Like health insurance, tuition costs have been skyrocketing, but there is little (if anything) to show for these increased costs.

Thought this was interesting:

Where’s all that college tuition money going?

http://usatoday30.usatoday.com/news/opinion/forum/2010-08-18-column18_ST1_N.htm

…………..

And there’s this:

“But at least at public colleges and universities — which enroll three out of every four American college students — the main cause of tuition growth has been huge state funding cuts.”

…………….

Like others have mentioned, I also believe that the availability of these huge student loans are behind the increased costs as well. Like housing during a credit bubble, the price of education will rise during a credit bubble as more money is made available to spend on it. Student loans should be hard to get, have very low annual (and total lifetime) limits, and loan amounts should match what a student can be expected to reasonably afford given his/her particular major.

[earlyretirement]

Thanks for posting those articles CAR. Yep, I agree with you that the ease and vast availability for the typical college student to get these massive student loans is what causes these colleges and universities to keep driving up prices.

These banks and lenders are almost totally protected with the way the laws are set up. And they want to dole out as much as possible.

I also think that students taking out student loans should be required to go through some mandatory class that explains the student loans, understand the payment schedules and interest rates, etc.

So many students are clueless and don’t even know what interest rates they are paying on their many loans.

[scaredyclassic]

if they required a class like that for student loans, you would screw up the whole system…

you apply for college. you get accepted right about the time you get your financial aid package.

you accept botht he school and the package simultaneously.

then yous how up the fall to sign.

whatare you, going to back out after you’ve moved up there?

you need to require the class prior to even applying.

which seems kinda crazy cause you don’t even know if you need the loans at that point

[livinincali]

[quote=earlyretirement]
These banks and lenders are almost totally protected with the way the laws are set up. And they want to dole out as much as possible.
[/quote]

Exactly. Quickest way to break the college debt bubble is to allow student debt to be discharged in bankruptcy. Nothing will change the behavior of lenders quicker than having having the prospect of default staring them in the face. Want $100K to go to school better have the grades and major lined up that produces a positive return on investment. The non-charge nature of student loan debt came from a couple of high profile cases of doctors and lawyers declaring bankruptcy right after school and then getting a high paying job shortly after.

If you’re really worried about doctors and lawyers strategically defaulting right after school and then getting a high paying job after the bankruptcy clears then put a special stipulation in for that. You can put some kind of probationary period on the debt being discharged. If you’re income goes up after the bankruptcy during a probationary period (3-5 years) you’ll still be on the hook for some or all of the debt. Nobody is going to wait 3-5 years to start their career just to be able to declare bankruptcy and avoid the college debt.

[scaredyclassic]

no. it would be worth it to wait 3 years to discharge law school debt today.

tuition exceeds 50k, plus living expenses and ins chool interest, that’s 225,000 law school debt alone.

divided by 3, that’s $77,000 in benefit, tax free income.

i think many would take a 3 year hiatus for that!

5 years, a little tougher, but might still be worth it. dependng on the job market

[barnaby33]

I take umbrage with, “student loans are necessary if you don’t come from a wealthy family.” That doesn’t even pass a basic sniff test, me. I’m po white trash from Valley Center (pronounced with a drawl.) 3 years in JC and 2.5 at Cal State Cap N Crunch and I got a CS degree. I did get some grants, I worked and oh yes, I joined the military.

You don’t have to go to an expensive school. You don’t have to choose a non-remunerative major (though most do) and you don’t have to borrow money. It does make life easier if you want the traditional college experience.

Josh

[earlyretirement]

[quote=livinincali][quote=earlyretirement]
These banks and lenders are almost totally protected with the way the laws are set up. And they want to dole out as much as possible.
[/quote]

Exactly. Quickest way to break the college debt bubble is to allow student debt to be discharged in bankruptcy. Nothing will change the behavior of lenders quicker than having having the prospect of default staring them in the face. Want $100K to go to school better have the grades and major lined up that produces a positive return on investment. The non-charge nature of student loan debt came from a couple of high profile cases of doctors and lawyers declaring bankruptcy right after school and then getting a high paying job shortly after.

If you’re really worried about doctors and lawyers strategically defaulting right after school and then getting a high paying job after the bankruptcy clears then put a special stipulation in for that. You can put some kind of probationary period on the debt being discharged. If you’re income goes up after the bankruptcy during a probationary period (3-5 years) you’ll still be on the hook for some or all of the debt. Nobody is going to wait 3-5 years to start their career just to be able to declare bankruptcy and avoid the college debt.[/quote]

Bingo. Bingo. We have a winner. Totally agree.

[quote=barnaby33]I take umbrage with, “student loans are necessary if you don’t come from a wealthy family.” That doesn’t even pass a basic sniff test, me. I’m po white trash from Valley Center (pronounced with a drawl.) 3 years in JC and 2.5 at Cal State Cap N Crunch and I got a CS degree. I did get some grants, I worked and oh yes, I joined the military.

You don’t have to go to an expensive school. You don’t have to choose a non-remunerative major (though most do) and you don’t have to borrow money. It does make life easier if you want the traditional college experience.

Josh[/quote]

Josh,

First of all, thanks for serving in the military for our country. You make a good point that there are other options but the vast majority of people don’t want to join the military. I too worked during college but I still had to get student loans.

Yes, there are options for Junior college, etc. But I guess the point I wanted to emphasize is the tremendous cost of University these days. And it’s not just special schools that are expensive. Many State Universities when you add up tuition and just cost of living, etc. are $25,000 or more if you’re in-state and out of state is more like $40,000 per year. And these are State Universities.

Yes, there are other options but the main point I wanted to make is the cost of a University education these days.

[CardiffBaseball]

Kid is thinking of playing baseball at a “traditionally African-American” university. With his HS grades, he gets merit money. Whatever he gets in baseball money could cover a good chunk of the rest. Strange way to go, but most of the team is either white or latino. If it means very little SL debt, what do I care. Not sure how valued the education will be, but hell if he ever applied to law school he’d have an interesting diversity story to tell. Who knows, it’s just one of the options available, we shall see. Paranoid as hell about Loan debt since we still owe so much.

[NotCranky]

Why did I have to grow up in a time when we were supposed to be ashamed of our “diversity stories”? Woe is me.

[livinincali]

[quote=squat300]no. it would be worth it to wait 3 years to discharge law school debt today.

tuition exceeds 50k, plus living expenses and ins chool interest, that’s 225,000 law school debt alone.

divided by 3, that’s $77,000 in benefit, tax free income.

i think many would take a 3 year hiatus for that!

5 years, a little tougher, but might still be worth it. dependng on the job market[/quote]

You assume that a lender would still let a prospective law student borrow $225K when they could default and declare bankruptcy. That’s the key right there. You need to find a balance between the risk of strategic default and what you’re willing to let someone borrow. Of course I’m sure that will be seen as evil and mean behavior by the banks. How can you possibly deny a kids dream.

[earlyretirement]

[quote=livinincali] How can you possibly deny a kids dream.[/quote]

I’m sure for law students or medical students with good track record, good grades, etc. you will still see student loans even with any possible change in the law.

However, a kids dream of racking up a 6 figure + undergrad degree in Anthropology, Art, History, Philosophy, Drama, Religion, Archeology, etc that has mediocre grades, I think better plan on getting their dreams shattered if there is any change in the law where students can write off student loan debt in bankruptcy.

If so, you won’t see lenders doling out this kind of cash for semi-worthless degrees.

[livinincali]

[quote=earlyretirement]
I’m sure for law students or medical students with good track record, good grades, etc. you will still see student loans even with any possible change in the law.

However, a kids dream of racking up a 6 figure + undergrad degree in Anthropology, Art, History, Philosophy, Drama, Religion, Archeology, etc that has mediocre grades, I think better plan on getting their dreams shattered if there is any change in the law where students can write off student loan debt in bankruptcy.

If so, you won’t see lenders doling out this kind of cash for semi-worthless degrees.[/quote]

I agree completely. There will be money for law students and doctors, but it may not be up to $225K. It could certainly be less and if it’s less those universities providing those degrees will be forced to compete and likely have to reduce prices. That’s the entire goal of changing the way student loans work.

[an]

[quote=livinincali]I agree completely. There will be money for law students and doctors, but it may not be up to $225K. It could certainly be less and if it’s less those universities providing those degrees will be forced to compete and likely have to reduce prices. That’s the entire goal of changing the way student loans work.[/quote]Not only will it be less but my bet is, the interest rate would be higher. After all, student loan would then be not much different than any other un secure debt, like credit card. Just because it’s a doctor and lawyer doesn’t mean they can always easily repay the debt. These are kids who just turn 18 and have no credit history. It doesn’t matter how much you make, if you spend more than you make, it’ll be just as hard to pay back your credit card/student loan debt.

[Author]

Posts