after seeing all the recent comments in the blog world about student loan debt, much of it stemming from this article: http://www.nytimes.com/2010/09/04/your-money/04money.html/?src=ISMR_AP_LO_MST_FB and others like it, I feel the need to comment on student loan debt.
It's no secret that I have lots of student loan debt from undergrad, and that said debt has been in deferment since I graduated in 2006, because I've been in grad school the whole time. Some of that debt is in federal loans, and some is private. I also had a half tuition scholarship for all four years I was at BU. Even with that, the amount of loan debt I incurred is staggering/appalling/what have you.
Many people have posted wondering about how students could be as naive to not realize what they were getting into and other such things, and my response to that is: I certainly didn't think about it. It didn't occur to me that the debt I was getting into was going to affect my ability to buy a house one day, or that I'd probably be paying it off until I was 60 (yikes). Because I was at a school where that kind of student loan debt was common!
I find it a little disturbing that an undergraduate education in the USA could possibly cost as much as it does. I know that I chose to go to a private school instead of a state school, and I made that decision knowing that I would be going into debt. But I made the choice willingly, to leave Arizona because I thought I'd have better opportunities available to me by going to school in the East, in a big city, and I don't regret it. I'd even argue that I was right. I was a National Merit scholar - a program designed essentially to give kids from areas with not-so-great schools who excel on the PSATs the opportunity to go elsewhere for college, and I took advantage of it (hence, the scholarship) - but even with that, my loan debt is high. If you didn't have that scholarship, it would be RIDICULOUS to get a degree at BU or somewhere like it.
I guess the bottom line is, I don't know how much you can blame these kids who are 17 years old for going to the best college they can get into, even if they incur debt to do it. We all grew up thinking that that was the way to do it, right? And even if kids do understand that they are taking out loans and getting into debt, I don't think that an 18 year old just graduating high school who has never paid rent/bought groceries, even if they did pay for other things in high school, can understand what they are doing when they sign on the line for those loans. Maybe we need to make more "financial understanding" type classes mandatory in high school - I think that would at least be a start.
I totally agree. I had no idea how my student loans would translate into monthly payments when I graduated. What's worse is that most undergraduates don't even know what they're going to study, much less what they'll make in four years once they graduate, so how can they make important decisions about student loans?
ReplyDeleteTo some extent money was a factor for me when choosing my undergraduate school, but only in the sense that I picked the school that would require me to take out slightly less in student loans, but nonetheless still a substantial amount of money. Then again, I loved BU so perhaps I would have picked it even if I had to take out much more money in loans.
My high school didn't even offer economics courses, much less financial responsibility courses. Perhaps this would be a good starting point, because I certainly don't think that enough parents are educating their children about these types of financial issues. Better yet, perhaps the student loan lessons learned by our generation will translate into our children being better educated about these very issues... let's hope so :)
Time to get back to law school...
I hear you! I knew I would have loans but I had no idea what that would mean in relation to my monthly income/expenses. And I 100% agree that instead of statistics/calc/etc students need courses in personal finance. Perhaps we could avoid or reduce financial crises in the future if people were more educated.
ReplyDeleteThe relationship part of it is tough too. I came in with debt; Ross did not. Even when we took loans for the fire academy, it was less than $5,000, barely a drop in the proverbial bucket. What I feel strongly about though is that while this debt is mine, its part of the deal. Everyone goes into a relationship less than perfect; my imperfection (the only, right?) just happens to be some debt that manifested itself into a career.
And while I'm on financial tangents, I find it abhorent that you can declare bankruptcy because you bought too many purses and shoes, but not because you got a quality education. What values are we teaching people when those are our rules? I'm personally opposed to the ability to cry "bankrupt!" and avoid any payments of any kind but if the ability is going to exist, shouldn't it apply to education loans too? (Did you know that's the ONLY thing you can't get out of via bankruptcy?)
Oh the backwards way of our world. But it begs the question, do you think you'll counsel your kids to not take loans or tell them that you did it, they can too?
Bankruptcy is one of the ways our system ensures that lending involves risk. If you loan somebody money, the interest isn't free money, it's the reward for taking the risk that they won't pay back some or all of it. Bankruptcy isn't a get out of debt free card, it has serious long-term financial ramifications and often comes with a payment plan not a balance of $0. Debtors need a formal structure in which to default, to protect them from unfair practices.
ReplyDeleteI think as a country we need to consider what exactly an "education loan" is. I mean, some educational paths have a clear return on investment, others don't. And the point that this post raises is a good one -- how can young people know what kind of financial outcome they will have after college. The pressure to go to college seems pretty much universal in the middle class and above; if the jobs of the future are skilled, and jobs that don't require a college degree continue to have poverty-level wages, then it is essentially a given that if you want to stay in the middle class you will go to college, nevermind the risk.
As a country I think it is worth increasing the *grants* we offer to people attending college, since although for individuals college may be a risky bet, on the whole it's good for the country if we increase the percentage of people getting quality educations.
Additionally, there needs to be a way to make affordable schools respected, and help employers understand when a high-cost degree (e.g., ivy league) is better, and when it isn't. If students didn't feel so much pressure to go to the most expensive school they can get into, then the problem of debt would be ameliorated.
-R
Cheryl- the plus of ending up with a BU guy...we both have debt, though I have more. In a similar way, the combined debt is going to be a problem for both of us when we get married - though to be honest, I may have a hard time with that! Since my parents didn't give me any money for college or anything else, I'm very used to doing things on my own, and not having anyone else be responsible for my decisions. it kind of seems unfair that Chris will have to pay for MY debt - even though I logically understand that it will be both of our debt at that point! It's going to be interesting.
ReplyDeleteAnd with the other question - My plan (if I ever finish paying off my own loans...) is to save as much as I can a year for retirement, and then, money permitting, save some for college. I would also love if relatives gave our kids money towards their education as presents, at least when they are too little to be bummed about it - you know, 1 or 2, where they are just as likely to enjoy a box as an expensive present. Once our kids hit college, I'd love to come up with some amount a year we can afford to pay, and if they choose to go to a school like the one both their parents went to that costs a fortune, loans it is.
Though who knows, by then maybe there will be a better way.
R- I think if there was a way to make affordable schools respected, that would be a good start. And I think some are - but not all of them. Increasing grants needs to happen too.
Saving for retirement and paying off debts at the same time is going to be really tough. I haven't even tried to work out how we would set aside money for a child's future education. There are vehicles like 529 plans but it's hard to get excited about tax benefits when my income has been so low for so long :)
ReplyDelete