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I'm wondering how a 21-year-old can graduate college with $100,000 in student loans? I'm wondering how a child with no job, who would normally never qualify for that loan amount otherwise, is able to be saddled with so much debt. Most 19-year-olds have only a vague understanding of finances, yet they leave college a few years later facing huge loan pay-offs. It's not until they get out of school when they realize that they now have to eat Ramen noodles for 10 years to survive.
I was just reading an article in the L.A. Times about a 57-year-old Mexican immigrant who works for $9/hour qualified for a $617,000 home loan. He got in over his head, or course, and is not unable to pay it off. He had a 6th grade education and the lender filled out a false loan application saying he made $6,000 a month as a landscaper.
So what is the difference? We're talking about giving loans away to people who don't understand what it is they are getting into. What makes a student loan any different? I think Sallie Mae preys on kids.
I don't think Sallie Mae prays on kids - because the alternative is to say to a large portion of the American population - you can't go to school.
Also, Sallie Mae primarily deals with Federal Student loans - which are still some of the cheapest ways to long term borrow money. Also, the Federal student loans are CAPPED - for an undergraduate its about $6K a year. So a typical undergraduate, who completes a BS in 4 years - will be about 24K in debt.
Now -- did that BS increase their earning potential enough to counteract that 24K in debt - admittedly it depends on what they got a degree in.. but in general, most studies have shown the earning potential of a college graduate is Significantly higher over the life of the earner. So probably that 24K was a good deal.
Now.. what if 24K won't cover it? What if they take out *gulp* private loans. Those are generally at higher interst rates, with less favorable repayment options. Also, they are much less willing to work out favorable repayment plans.. and, you can borrow more than the government caps per year.. quickly spiralling your debt.
Then there are standard graduate loans - currently about 18K a year. Most masters programs are 2 - 3 years .. so between 36 and 52K.. Again, is that degree going to increase your earning potential enough? MS in Engineering, MBA, MS Finance.. maybe..
MS of medieval literature, maybe - maybe not.
Then there are specialist graduate loans - Dr's, and Lawyers. Their caps are much higher, but their earning potential is a lot higher..
but yes - the student needs to understand that it WILL be paid off --- there's really no way to outrun the federal government, they will just garnish your wages forever..
And they need to be realistic that their future earning potential is high enough to justify the debt.
But - I don't think SL are predatory ... certainly not to the degree that mortgages or credit cards have been..
And.. I have about 90K in SLs. I'm getting my MBA. Also, my state drops the interest to almost 0, meaning I'll have free money. For me - definitely worth it. For others, maybe not..
I don't think Sallie Mae prays on kids - because the alternative is to say to a large portion of the American population - you can't go to school.
Hogwash. It just says that you need to work and that it might take you more than four years to get a bachelor's degree. It also says that you might have to go to a state university instead of an expensive private one.
There is always a way to go to school, but sometimes it requires a little more effort than kids are willing to put forth.
Student loans are relatively low cost and generally fairly administered. It appears to me that the biggest problem are the loans are to people with limited financial experience so there is over borrowing and slow repayment.
My son could have made it through college without borrowing (I paid 100% of tuition, books, and fees) but chose a lifestyle that required a higher level of funding. He had to make it a top priority to pay them off after school and it took almost ten years.
This issue is a much broader one than can be addressed with lending guidelines.
IMO, student loans aren't any different from a mortgage or a car loan. It's just another way for companies to get money from interest and late fees from people. It is so hard to get grants and scholarhips nowadays and have some no choice but to apply for loans. I work for a Student Lending company in Federal Consolidations and I see accounts go into default and economic hardship deferment on a regular basis. Kids have big dreams as to what they want to become when they graduate, but unfortunately when they graduate, some are unable to find a job in the field they were trained in. This results in the working in lower paying jobs and not being able to afford to pay off the debt.
cdelena, are you saying that your son used college loans to live a fancier lifestyle when he was in college? That he didn't use the loans for tuition and books?
My sister-in-law made her kids save half over every penny they earned or were given when they were growing up. Gifts, wages, allowances, whatever - half of it went in the bank.
My niece entered college with $28,000 in the bank (most of which was earned from jobs worked during high school), and with her parent's support for tuition she won't be borrowing a dime. She also learned a great lesson about planning for the future and spending only what you could afford to spend instead of borrowing money. She loves having that nest egg, so she's working to pay her residence hall and dining plan fees.
Imagine teaching your kids to be responsible enough with money that they graduate from college with thousands of dollars in the bank instead of tens of thousands of dollars in debt.
I have to say that when I graduated from college, I had over $100k in student loans. Everything seemed ok, I payed about $400 per month and was fine. I had private loans through Citizens Bank... then those loans got sold to Sallie Mae. I had no say in what happened with the loans. I received a piece of mail saying basically oh yea by the way, we sold you stuff to SM. Ever since then it has gone down hill. I am paying almost $700 per month now, and Ive only been out of school 3 years.
All the plans my parents and I had for my loans will not work anymore bc of SM. I can not reconsolidate, and it sucks.
Im stuck paying all this money.
I pray my kids are excellent athletes and have stellar grades!!!
If you had 100K in SL, even if you consolidated, the payment should have been a little more than 400/month. Perhaps you were in a graduated repayment program, and when the loan transferred to SM, you lost the graduated repayment privelege?
cdelena, are you saying that your son used college loans to live a fancier lifestyle when he was in college? That he didn't use the loans for tuition and books?
He also squeezed four years of college into six.
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He also squeezed four years of college into six.
