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I think the end game is to make sure people who take out student loans understand that there will be consequences for nonpayment.
We should therefore learn and not issue student loans for people to pursue things not valued in the marketplace.
It is a misallocation of scarce resources to provide student loans so someone can pursue, say, a PhD in a field where there is a massive oversupply and effectively no demand. Universities post openings; if there is effectively zero demand because there are effectively no vacancies forecast in the next 5 years for a PhD in a given discipline, we should not provide student loans for that discipline in the first place.
No one and how much will you get back from a nurse not working??
is that the effect they are going for??
The effect is "pour encourager les autres". Articles like this one are part of it. Strip people's livelihood, maybe if they try to work anyway put them in jail for driving or practicing without a license, and other people who will in default will maybe think a little harder about ways to make good, like prostitution or selling an organ or something.
at 17, they are nearly adults... at graduation/18, they would be adults...
if they don't know jack about the future, what have they been doing to prepare themselves to become adults for the past 18 years?
the excuse of not knowing anything doesn't work when they are perfectly capable of doing "internet" research, they do it all the time for everything else, online shopping/online food reviews/online homework
they didn't bother doing the research is not "knowing jack", they couldn't care less about it. even if they don't make the best choice, putting in a smudge of effort into researching how to finance college, they could come up with resources and go over it with someone
i see more people get handed a loan form and say here's your "aid", they don't even question what the interest rate is, or how it works? something that they should have learned if they were actually prepared for college. otherwise, they weren't "college material" and shouldn't be attending until they learn basic skills
I don't know if it's like this everywhere, but I don't think the average high school student is prepared very well to make serious financial decisions. At the high school I attended, they had one class kind of dealing with finance, and the teacher warned us never to take out a certain kind of mortgage, but he didn't really warn us much about student loans. Had I been able to put two-and-two together, and seen that Sally Mae was the new Fannie Mae and Freddy Mack, I probably would have tried to avoid taking out a lot of money, but I did not do that. I just didn't see it as the same thing. (Why would I? At one point, I was nearly homeless and moved into the dorms just so that I would have a roof over my head.) I only really started to think about it when the money for college ran out (more or less--I think I could still pursue a PhD with a loan, but why?), I found out my deferments were limited, and I felt like I was in a position to start paying things back.
Nearly $400 per month on an income-based repayment plan is still a significant bit to budget for if you are earning regular working-class / lower middle-class wages.
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Yeah, if I had it to do over again, maybe I would:
Not have gone to a university in the same state I went to high school just because they accepted me.
It seemed like a good idea at the time, maybe, but I should have stayed with family in another state and attended college there so that I would not have had to have worried about the room and board situation. I probably spent a lot of money on rent and dorm stays. There's a big difference between paying the utility bills while living at home and paying rent to an actual apartment or the equivalent of rent to a dorm. College kids were encouraged to "get out on their own," but I should have realized that I simply could not afford to do that. I did the stupid thing, though, and went ahead and rented an apartment and moved into a dorm, just because I wanted to prove to my parents that I didn't need their help? (To be honest, I don't really know why I did it, except I felt like I had to). Plus, "not needing my parents' help" was a moot point, as I got help from my dad to move into the first apartment.
Not have gone to a university before attending a vocational college and gaining some real skills.
As a teen, I could have gone many routes to success. I didn't need to go straight to a university, and maybe I did myself a disservice by doing so. What I needed was to work so that I could save money and support myself; what I got was a piece of paper and a whole bunch of student loan debt. I didn't get the benefit of a job entrance program, on-the-job-training, work readiness skills, and all of the things that I really needed to be a successful employee. I didn't go, because I thought that the vocational training environment would be at least a little like high school. Maybe it would have been, but we were all adults trying to better ourselves, so maybe not.
Applied for and accepted other forms of financial aid.
There was a work-study program, and I could have signed up as a tutor even while I was in college and had no experience at all. I was reluctant to get started, though, and I wasn't sure how people would receive me. Looking back, I realize I probably could have done research on the internet to answer most of my questions about how to tutor certain unfamiliar subjects.
Just "hung out" and gotten to know people
I guess I was shy and standoffish. That doesn't exactly work in a place like where I was living. Some people were probably more open-minded than I gave them credit for, and they were probably willing to help me with more than I assumed, especially if I would have opened up and explained that I was just a college student trying to survive in the world.
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Let people face the consequences for their own decisions
Things were crazy, though. A really close family member whom I respected was dying of cancer. Her boyfriend was a good-for-nothing drug addict who wasn't really supposed to be anywhere without reporting it. I helped them in ways I probably should not have done. I'm lucky I didn't get in serious trouble for it.
Looking back, I'm not sure I can tell you WHAT was going through my head.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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I think the kids know what they are getting into
Think about it, Mom and Dad are the source of money to them. All of a sudden they say we can't pay for your college, you have to get a loan if you want to go.
Doesn't it cross the kid's mind that if Mom and Dad don't have the money then it must be a lot. Plus if mom and dad can't afford to get a loan to pay for the kids college it must be a lot or hard to get. Mom and Dad are working and can't get the money, so the kid has got to know they are not working themselvesso they are sticking their necks out pretty far themselves.
It seems that should make a kid think twice about how serious taking a loan out is for college, especially when it is well know it's hard to escape that type of debt. Heck it's been in the news for a long time now.
If one thinks "how are kids supposed to know what kind of trouble they are in when they are barely 18", I think today's kids are much more knowledgable than we give them credit for. Plus it's not like student loans are new and no one knows about them. Heck, back in the 70's my sister had to get financial help to go to college.
I never had a student loan, so I don’t know what the paperwork is like. I have had mortgages which detail very plainly the amount borrowed, the interest rate, the total amount of interest that will be paid, the total total (amount borrowed plus total interest), and the monthly payment amount which for me included principal and interest and property taxes and homeowner’s insurance.
Do student loans not disclose similarly relevant information?
There are a few inaccuracies in your post. Just so that people don't get confused, let's correct them.
Quote:
Originally Posted by Oldhag1
In the past student loan interest was subsidized while they attended school or were deferred, that no longer exists.
Federal Subsidized student loans are still very much available for undergraduates. With these loans, the Federal government covers the interest until six months after you graduate or leave school and you don't have to begin payments until six months after graduation. See: https://studentaid.ed.gov/sa/types/l...s-unsubsidized
Graduate students do not have access to subsidized Federal loans, but undergraduate students do.
Quote:
Originally Posted by Oldhag1
That average includes everyone who has student loans, whether they graduated today or 20 years ago. Between 2004 and 2014, not only did the percentage of students with student loans increase, but the amount they owed almost doubled - well exceeding inflation rates.
The Institute for College Access and Success (TICAS) that you are quoting from does great work, but they have an agenda. They'd like to see college made free for all students, so sometimes they spin things a little. TICAS also doesn't update their data as often as they might.
I much prefer using data from the College Board's annual Trends in Student Aid research report because their researchers slice and dice information about ALL forms of financial aid, including student loans, a little more finely and the information is updated each year. They also do an excellent annual report called Trends in College Pricing that provides good updated information as well.
- College students received $125.4 billion in GRANT aid to help pay for undergraduate and graduate education in 2016-17, 74% more (in inflation adjusted dollars) than a decade earlier. (I know the subject is loans, but it is important to understand how the entire picture of financial aid in order to understand student debt.)
- In 2017, 50% of the outstanding federal education loan debt is held by the 12% of borrowers owing $60,000 or more.
- In 2017, 57% percent of borrowers with outstanding federal education loan debt owe less than $20,000.
- The 60% of bachelor’s degree recipients (i.e. undergraduates) from public and private nonprofit institutions who borrowed graduated with an average of $28,400 in debt. Between 2010-11 and 2015-16, average debt among borrowers grew by $2,500 (to $27,000) at public four year
and by $1,200 (to $32,000) at private nonprofit colleges and universities
- Undergraduate students and parents borrowed 2% more (after adjusting for inflation) in 2016-17 than in 2006-07, but 18% less than in 2011-12. Graduate students borrowed 31% more in 2016-17 than in 2006-07, but 3% less than in 2011-12.
- The share of federal loans going to graduate students increased from 31% to 39% between 2001-02 and 2016-17. The percentage of FTE postsecondary students who were graduate students
increased from 13% to 14% over these 15 years.
-Total annual borrowing of subsidized and unsubsidized loans from the Direct Loan (Federal) program fell by 23% ($21.7 billion in 2016 dollars) between 2011-12 and 2016-17, but was still 23% ($13.2 billion)
higher than in 2006-07.
- In 2017, 28% of borrowers in repayment on federal Direct Loans were enrolled in plans that limit their monthly payments to an affordable percentage of their incomes. These borrowers held 48%
of outstanding loan balances.
[quote=Oldhag1;50513116] Plus they changed the way the interest is accrued, so many are not even paying down the principle if they make the minimum payment. [quote=Oldhag1;50513116]
The way interest is accrued on Federal student loans hasn't changed. Student borrowers still have 10 years to pay off their loans. Depending on whether they took out subsidized or unsubsidized student loans, they will have different interest rates. The interest rates for student loans have always been adjusted (or at least looked at) annually, but once you take out a federal student loan, it is a FIXED interest rate (in other words, it doesn't change).
What has changed is that the Federal government began offering the OPTION of income-based repayment plans. If a person elects one of these plans, they will most likely end up paying more in interest, but the goal was to allow people who are struggling to pay off their loans the opportunity to have smaller payments over a longer period. In exchange, they end up paying more in interest.
The concept is similar to mortgages and car loans. You can opt for a 30 year mortgage or a 48 month car loan instead of a 15 year mortgage or a 24 month car loan. Opting for the longer term repayment means you'll pay less each month, BUT you will accrue more interest because you'll be paying over the longer term.
No one seems to complain about THAT concept, so I don't know why people who opt for this for their student loans should be side-swiped by the idea either.
Quote:
Originally Posted by Oldhag1
By the way, if you have a couple that is $60K in debt. That might not seem like much to you, but for a young couple with a child or two it is crippling and will prevent them from being able to buy a home.
Oh, and don't forget, not all those with student loans graduated. At $7/hour that $300 represents over a week's pay.
Yes, this is correct. But no one is forced to attend an expensive private school or drop out of college. Or, for that matter, is anyone forced to take out student loans. You don't have to opt to go to the "dream" school that gave you a crappy financial aid package that requires you and your parents to take out more loans than the local public U. might.
I do know from personal experience that *some* colleges do a better job than others of explaining how student loans work and what the student will be required to repay once they take out the loan. For Profit colleges in particular are NOTORIOUS for making it *seem* like a student loan is somehow "free" money when it isn't in order to entice students to enroll.
But, again, taking out a student loan is no different than taking out any loan. You can buy a house you can afford and get a mortgage you can afford, or you can opt for all of the bells and whistles and a bigger mortgage payment.
However, you still have to figure out a way to pay the mortgage (or car loan) or your house or car will be repossessed.
You can't just say, "gee, I want to stay home with my six kids so I'm not going to pay the mortgage while I do that" and not expect there to be any consequences.
While I don't support the concept of states using licenses as leverage to force repayment of student loans, in the end, when you think about it, they are repossessing what you bought with the student loan, just like your house or car would be repossessed if you don't pay those loans.
Don't get me wrong: I do have sympathy for a husband and wife who have $60,000 in student loans and can't afford to buy a house because they can't get a mortgage. But, life is all about choices.
When you decide to borrow to finance your education, you are making a choice. When you opt for the more expensive college that requires more loans, you are making a choice. When you choose a career that doesn't pay well, you are making a choice. When you decide not to pay off your Federal student loan in the normal 10 year period, you are making a choice.
At some point, personal responsibility for the choices you make has to come into play.
I don't know if it's like this everywhere, but I don't think the average high school student is prepared very well to make serious financial decisions. At the high school I attended, they had one class kind of dealing with finance, and the teacher warned us never to take out a certain kind of mortgage, but he didn't really warn us much about student loans. Had I been able to put two-and-two together, and seen that Sally Mae was the new Fannie Mae and Freddy Mack, I probably would have tried to avoid taking out a lot of money, but I did not do that. I just didn't see it as the same thing. (Why would I? At one point, I was nearly homeless and moved into the dorms just so that I would have a roof over my head.) I only really started to think about it when the money for college ran out (more or less--I think I could still pursue a PhD with a loan, but why?), I found out my deferments were limited, and I felt like I was in a position to start paying things back.
Nearly $400 per month on an income-based repayment plan is still a significant bit to budget for if you are earning regular working-class / lower middle-class wages.
High school shouldn't be teaching personal finance in any depth. Personal finance is not an academic area of study. It's a life skill like cooking, keeping up with current events, cleaning, etc.
Now, not everyone is the same, but based on your post above, we can see that you grew up without parenting in your life. Understanding finance, loans, reading a news paper, understanding the job market, etc. are things that your parents (should they have been a part of your life) should have taught you at home. By 17, you should have all the knowledge your parents have of the world without all the experience they have to back it up.
So, how would have known to make wise financial decisions? Well, your parents would have taught you and given you some real world experience. How would you have known about Sally Mae? You would have read it in the news paper just as your parents do. You can't expect to live a successful life without knowing what is going on in the world.
I never had a student loan, so I don’t know what the paperwork is like. I have had mortgages which detail very plainly the amount borrowed, the interest rate, the total amount of interest that will be paid, the total total (amount borrowed plus total interest), and the monthly payment amount which for me included principal and interest and property taxes and homeowner’s insurance.
Do student loans not disclose similarly relevant information?
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(Why would I? At one point, I was nearly homeless and moved into the dorms just so that I would have a roof over my head.) I only really started to think about it when the money for college ran out (more or less--I think I could still pursue a PhD with a loan, but why?), I found out my deferments were limited, and I felt like I was in a position to start paying things back. 
