Student Loans
Published on Aug 11, 2007 at 3:04 pm.
8 Comments.
Filed under college teaching, politics.
The Fall Semester is soon going to begin. Once again the campus will be filled with students looking for their classrooms and filling up the parking lots. This is going to be happening all over the country. But, these students are going to have to pay for their classes. In this country, taxes pay for public education for all students through 12th grade. However, when they to off to college, they are expected to pay for it themselves. True, there are state colleges and universities, but we also charge tuition. In fact, here in Texas, the state funding for colleges and universities has been cut substantially since our current governor took over. He even used his veto to cut state healthcare benefit payments to college employees, making the colleges themselves pick up the cost. Where does that money come from? The students wind up paying more tuition. Every time the state cuts college appropriations, then tuition rises. Tuition increases have for a number of years averaged far above the inflation rate. This means that today’s students have an ever increasing burden put on them that is far out of proportion to what previous generations have had to shoulder. Oh, and let us not forget textbooks. The publishers press authors for new edition, solicit new authors for new textbooks, and charge an arm and a leg for their books. They can get away with charging far more than such a book would be otherwise worth because students need the books for their classes. All this costs students money.
But, how can students pay for all of this? Many students at my college are working to pay their way. But, you can’t work full time and be a full time college student. Being a full time student takes so much time that most any work, other than a very light part-time job, would cut into time that should be spent on studies. For my peers, our parents largely footed the bill for most of us to go to college. But, the cost of college has gone up so fast and so much that many parents today can’t afford it without a fiancial hardship. That is paricularly true if they have two or more children that they are trying to put through college. So, we have a financial impasse.
The very wealthy can afford to send their children to college. Government assistance programs, in the form of grant, help the disadvantaged. However, the middle class, as usual, is left to fend for itself. So, a number of years ago, someone got the bright idea of allowing students to take out loans to go to college. Now, the only problem with that is that those students are young, often have never worked before, and have no credit history, and no assets. So, how can they get a loan? Along comes the student loans. They are backed by the government, so lenders are willing to loan money to students, who otherwise would have no credit history that would allow them to get loans. Students loans were a wonderful help to me. I would never have made it through college without them. The idea behind student loans is that the earning potential for someone with a college degree is much more than that of someone without such a degree, so the college graduates will be able to pay off their loans. I’ll address the falacies of that argument later.
The income limits for grants have not kept up with the cost of living, and the cost of tuition has been rising far in excess of inflation and income. So, more people are being pushed out of the income levels that got grants, and the costs of a college education are increasingly unrealistic for them to pay. Students loans are easy to get. So, more and more students are relying on them to pay for their education. Virtually ever college and university that I know of has a financial aid office. This office is supposed to help students secure some assistance for college. All too often, the only suggestion that the financial aid office has for a student is to get a student loan. In fact, they seem to almost push those student loans. But, they don’t fully inform students of the pitfalls of those loans.
With the costs of a college education rapidly becoming too much for the average student to afford, and with students loans often the only available means to get money for college (and by far the easiest), more students borrow to pay for their education. Recent reports suggest that about 2/3 of all college graduates have incurred at least some debt in getting their undergraduate degree. A much higher percentage of graduate students have to borrow to finance their education. The student loan program was never designed for most students to borrow. Furthermore, the student loan program was intended for students to borrow enough to assist, not to finance their education. But, for the 2/3 of students who borrow money to get their degree, the average debt load is about $20,000. That number can be a bit higher or lower depending upon who does the statistics and what they count as a student loan. There are now a bewildering number of different types of educational loans. But, the fact is that the substantial majority of students graduate with debt, and that debt is typically $20,000. Nearly a quarter of students owe over $25,000, and about one in ten owes more than $35,000. (These numbers come from Finaid.org.)
And, this is just for an undergraduate degree. If the student wishes to go on to graduate school, then they can expect to have to borrow another $27,000 to $114,000! The average person getting a PhD winds up owing $50,000. A PhD in the sciences or engineering takes longer, and there is a greater corresponding debt, perhaps $75,000. Someone getting a medical degree may expect to owe upwards of $130,000 upon graduation. That’s like a mortgage! (Only, you can’t live underneath your diploma.)
But, the story gets worse. The premise of the student loan is that college graduates make more money over their working career than non-college graduates. That may be true, but those high paying jobs don’t typically start as the first job after graduation! In fact, for professional degrees, medical degrees, science degrees, etc, the first job is a sort of internship with only somewhat better pay than a graduate student teaching assistant! But, loan payments start then. Graduates with other degrees also seldom start making big bucks with their first job. So, when they are getting out of college, starting their carreer, wanting to buy a car, buy a home, and get married, they are saddled with a crushing debt. And, heaven forbid that anything bad happen. If ill health, accident, or a family crisis happens, then there is not sufficient income to handle the debt load. But, they can also get laid off, their employer can go out of business, etc, and that, too, brings a financial crisis. It has been reported that nearly 40% of graduates have difficulty managing their debt.
Students managing debt is nothing new. Credit card companies prey on students. They don’t have experience with managing debt and they are often away from their parents and are making financial decisions on their own for the first time. So, it is not uncommon for college students to find themselves in deep debt. They often don’t look at how much debt they are in. Worse, college financial aid offices seem to push student loans, and most students just sign on the dotted line, without thinking of how they will pay off their loans. For students in private colleges or in graduate school, the loans mount up quickly. But, many students in public universities are financially strapped to start with, so any debt at all is too much.
Then, they graduate. But, their first jobs don’t bring in enough income to handle all of their payments. Sadly, a great many graduates miss payments, have late payments, or worse. Bankruptcy is not unheard of. But, here is a problem. Several years ago, the laws changed. Officials were tired of former students defaulting on their student loans. There were classic stories going around about students who graduated, got very good paying jobs making $100,000 per year, and deciding to simply not pay their student loans. They viewed the loans as free money for college. Yes. This happened. But, it was the exception, not the rule. Most students paid their loans, often at great hardship for themselves. The ones who defaulted mainly did so because they simply were unable to pay off the loans due to various hardship reasons (loss of job, illness, family illness, disabling accident, etc.). But, to catch the tiny percentage that were abusing the system, the laws made it tougher to get out of student loan debt if something like that happened. And, that makes student loans different from other loans. If you don’t pay them, they can garnish your wages. If you declare bankruptcy, then the student loans are exempt — they can not be discharged or reduced by bankruptcy. They follow you for the rest of your life.
Now, I know of several people who have run into problems with their loans. They are so in debt that they can not qualify for a reasonable house or car loan. They can’t make payments. I know of a couple people who have had real reasons for not paying their loans: one lost his job after one year and has had difficulty getting another one that pays anywhere near enough to make student loan payments, and another has had major medical problems that kept her from working. Both people declared bankruptcy. In both cases, their student loans terms were not changed. They got forbearances, but interest still accrued. The one guy made payments at first until some months after losing his job. Now, he owes more than he started with. The person with medical problems now wants to go to graduate school. But, that means more loans, and since she has been out of school sick, she was no longer getting deferments, and that meant that interest was accruing, and now they won’t continue the forbearances, so she has to either default or get a hardship discharge (she is eligible due to her medical disability), but either case means no more loans and no graduate school. Without her graduate degree, she won’t make enough money to pay off the loans. Catch 22.
The options for refinancing students loans are also nowhere near as good as for other loans. So, many student loan holders are facing a shock when they graduate and great hardship as they pay for their loans. Yet, college is so expensive that they need loans to finance their education. And, most of the better paying jobs require a college degree. So, you see, we have a problem. The matter gets even worse when you consider that a great many students drop out of college for one reason or another (medical reasons, family reasons, job-related reasons, etc.). They still have to pay back the student loans, but now without the extra income that the college degree was supposed to provide to help them pay for their loans.
So, what do we do? As I see it, we need to rethink how we fund higher education. The educational philosophy in this country for a long time has been to fund public schools through 12th grade. At one time, a high school diploma was all you needed for most good jobs. A college degree was for the specialized jobs. Now, though, the college degree is needed for many of the good jobs. But, we expect students to pay their way through college. They are adults, the argument goes, so we don’t need to take care of them as if they were children. They will make more money with a college degree, so they can afford to pay for it out of future earnings (the idea behind the student loans). But, with the cost of a college education going up so fast, it is becoming increasingly difficult for them to do this. Public colleges and universities used to have low tuition because they were supported by the state. But, now, state budgets routinely cut funding for the colleges and universities. As our governor here in Texas said, the colleges have other sources of income besides state funding. Yeah. That is called tuition. So, why do he and the legislators act so surprised when tuition skyrockets after they cut college funding?
There is no easy solution. It involves money. But, it is high time that we quit saddling our students with crushing debt to get a college degree. If I were trying to go to college today, I don’t know how my parents could have afforded to send me. And, were I trying to get a graduate degree today, I don’t know how I’d afford it. I would wind up with a debt more than I currently owe on my mortgage. And, that is NOT right. Thankfully, I’ve paid off my student loans. But, I really worry what we are doing to an entire generation of college students right now.
-Astroprof
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Jessica on August 11, 2007 at 5:34 pm: 1
I keep getting people trying to talk me into student loans. I always tell them that I’d rather take my time getting through school than strap myself with that much debt, because I’d pretty much have to borrow enough to completely cover my costs and money lost from not being able to work full time anymore. I’m not ever going to make buckets of money, period, so starting out in that much debt seems like a BAD PLAN. It’s nice to finally see a “grownup” who understands that.
jame on August 13, 2007 at 1:59 pm: 2
Thank you for saying this. It should be published in every student newspaper on every campus in this country. Tuition is outrageous, and student loans are ruinous. Instead of spending trillions invading and occupying other countries, we should be funding student tuition (and infrastructure and universal health care). Yes, I must be dreaming.
Michael Grasso on August 16, 2007 at 8:19 pm: 3
Amen to this! Saving and showing this to people NOW.
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JR on November 27, 2007 at 2:45 am: 5
I am in about 60,000 worth of student debt right now. I dont see a way of paying it back in the proper amount of years because of the interest that is going to be tacked on. I don’t know what to do, and I dont see a way out
DEFAULTED STUDENT LOANS on December 13, 2007 at 2:50 am: 6
When I think of defaulted student loans, I get vexed because I would not like to fall prey to this embarrassing scenario, not for one second! Defaulted Student Loans can get you so devastated that it irks for the rest of your life. Yet it may not be your willpower for it to happen. It may have been an unavoidable reason, like problems at home or incapacitation. But then you can not ignore the fact that some of us disregard responsibilities to pay for the student loans and as a result keep a bad credit history. Poly Muthumbi is a Web Administrator and Has Been Researching and Reporting on Student Loan Consolidation for Years. For More Information on Student Loan Consolidation, Visit Her Site at DEFAULTED STUDENT LOANS
Tee on February 16, 2008 at 10:13 pm: 7
Yeah. I was wondering if I should drop out of school because of the the high tuition costs. I don’t want to be in debt like that. I just wanted to go into the nursing profession. LPN alone is costing me about 15,000 to 20,000 dollars just for the 10 month course. Thats crazy. Not to inculde the course is advanced and they don’t recommend a person to work during the clinical portion which will last 5 months with 40 clinical hour weeks. How can you survive and go to college to get ahead. This system is terrible, frustrating and impossible. Is this debt worth it when I have been offered a job making what LPNs make a year. I wanted the LPN degree for the growth potential and to be in a professional environment.
Moneyless on March 13, 2008 at 1:09 pm: 8
With each degree, I became more Broke even with a JOB (Just over broke). If I knew the whole country was about to go through a paradigm shift (Industrial Age to Informational Age)when I was in my Masters and going into my doctorate, I would have stopped at my Bachelors degree. My family thinks I am a LOSER. I kept going for another degree, and I held on for dear life thinking I was doing the right thing. I was a single parent with four children pursuing a college/graduate degree, and living in Hawaii. Presently, I feel lucky that my life came tumbling down in my first semester of my doctorate program or I would still be on the path to complete Financial Destruction! You are right, it’s ok to go to college if someone pays for it but if you reach a level of middle class (workaholics!), then you’re forced to be a workaholic to make ends meet; but you never do. If I could do it all over again, I wouldn’t have gone to school. I would have changed my thinking to be a 5% individual, instead of being like all the other 95%er’s (working 40hrs a week for 40 to 60 years of your life - 40/40 plan).
Although it was advised not to work, in the doctorate program, I had to!I had to pay for gas, including outrageous amounts for parking at school in downtown Honolulu, there was rent, car payments, about close to a $1000 for books (1st semester - required to have books before you get your loan money), and just too much to mention everything. (I am only explaining my situation but I’m not in any kind of victim stance). I chose to do college, and now I have to take responsibility for my past choices). I owe about $95 thousand; my loans are at $365 mo. (but I’m not even paying on the principal). In less than a year, I’m suppose to start paying $500. How do I do this if I became diasabled during the process of trying to pursue an education that I couldn’t afford. But I am a recovered workaholic, and schoolaholic but I am recovering rather nicely except for the fact that I will soon be owing $500 a month with only about $800 income. I used to work 60 to 80 hours a week, and I thought school was the answer to make more money; but for me, it was just the opposite.
Thank you for your article. It was absolutely on the “money”. Why does the USA make money off of students who will improve the conditions of the USA?
Signed,
Moneyless