College students visit between classes at the University of Georgia in Athens. Across the US, the proportion of students taking out loans to finance their education has risen in recent decades.
(Mary Knox Merrill/Staff/File)Photos (1 of 1)
Student debt and defaults surge
Federal student debt now tops $500 billion, leading some students to ask for debt forgiveness as a form of stimulus. Washington is wary.
By Brendan Conway | Contributor/ April 7, 2009 edition
New York
[Editor’s note: We got so much response from this story that we wrote about it here.]
When Robert Applebaum graduated from Fordham Law in 1998, he took the public-interest job near to his heart: assistant district attorney in Brooklyn, N.Y., at a salary of $36,000 – despite law-school debt of $75,000. He took five years of forbearance on the loan. Bad move. Mr. Applebaum’s indebtedness today stands at $96,000, even though he fled the job he loved for the higher-paying private sector in 2003. “It’s like having a mortgage, but without the house,” he says of monthly payments just under $500. At that rate, the debt won’t be fully paid for two decades.
Student debt in the United States has surged in recent decades, with outstanding federal student debt now topping $500 billion. The share of young adults carrying some educational debt has almost tripled since 1983, according to economist Ngina Chiteji.
At the same time, defaults are on the rise. Between 2006 and 2007, the proportion of borrowers who were supposed to enter repayment for the first time and who instead defaulted went up – from 5.2 percent to 6.9 percent, according to a Department of Education report last month. That percentage is the highest in more than a decade. And the 2008 and 2009 default rates are likely to be much higher.
Some help is on the way. Sallie Mae, America’s largest lender to college students, announced last month a loan type that students start paying while still in college. The early jump on interest payments means that balances can be paid off an average of nine years earlier, with a savings of 40 percent over the life of the loan, the company says. Some provisions of a 2007 education law set to take effect this summer will also reduce interest rates on some federal loans and place others on income-based repayment plans.
President Obama’s budget, meanwhile, proposes to expand federal loan programs and tax breaks.
Applebaum and others, however, are pushing the government to go further, advocating student debt forgiveness. But they face an uphill climb. Historically, Washington hasn’t taken up their cause, and many economists don’t see it their way, either.
“I’m sure that all people wish they did not have to borrow to go to college,” says Dr. Chiteji of Skidmore College in Saratoga Springs, N.Y., who has studied indebtedness among the young. “We’d all like the things we want to be free to us…. [But] the costs of college have to be borne by someone in society, and there’s a strong economic argument for having that ‘someone’ be the student.”
Most young-adult debt profiles haven’t yet reached horror-story status. In fact, young people’s overall indebtedness as a proportion of income has not changed much since the 1960s, according to Chiteji’s research.
There is an important difference between then and now, though. Mortgage debt used to be virtually the only major debt held by young people. Now, their debt load is much heavier on schooling.
And student debt can be extremely difficult to discharge, even in bankruptcy court. (Click here to see how one former grad student did it.) That’s partly because of a crackdown on defaults following a record default rate of 22.4 percent during the 1990-91 recession.
The difficulty of discharging student loans is one reason that Applebaum has launched his efforts. If student debt is forgiven, he argues, the economy will be stimulated. That would free a great many people to buy homes and cars, he says.
Applebaum is building a student-debt advocacy organization, and in January, he started the Facebook group “Cancel Student Debt to Stimulate the Economy,” which has mushroomed to 160,000 members as of early April.
Now, more than a few members of Applebaum’s Facebook group are wrestling with the question: How much is a good education – especially a private, liberal-arts education – really worth?
In 2004, Brian Kraus graduated from Cornell College in Mount Vernon, Iowa, with a double major in business and economics and sports management – and with $50,000 of mostly private student debt. Now, he’s a customer-support manager at a Denver telecommunications firm, and he’s making monthly loan payments of just over $500. In a few years, on his payment plan, he expects the amount he owes each month to rise near $1,000.
“I signed for [the loans] and I believe in paying them, and I will do so until I can’t do it anymore,” says Mr. Kraus.
He realizes that, in a tough economy, many won’t sympathize. But, he says, “If our debts were paid – and I do believe they need to be paid rather than just forgiven, or else we are causing more issues for the loan companies – then think about the amount of money that could be directly infused into the economy.”
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Comments
2. Bob | 04.07.09
At the very least, the government should allow student loans to be discharged in a chapter 7 bankruptcy! I filed chapter 7, but I still owe 170,000 in student loans. That debt mushroomed while I was going through my bankruptcy. Sallie Mae continued to add late fees, interest, and penalties.
Currently, the student loans are still in deferral. Hence, they continue to accrue penalties and interest. If one understands anything at all about chapter 7, they should understand that due to the 2005 legislation, it is very difficult to file chapter 7. You basically have to have nothing.
So, I ask you, if you qualify for Chapter 7, does that by default mean you are in severe economic hardship? Why in the world can’t student loans be a part of the bankruptcy? Along these lines, people who file Chapter 13 should be allowed to renegotiate their debt the same way as every other debt.
Personally, I do not think there should be a blanket forgiveness. There people for whom college did and does work out. Some people graduated at the right time, in the right major, in the right city and things worked out as planned. However, for some, life does not go as planned. For some, filing bankruptcy is the solution. We should be allowed a real fresh start in life. Isn’t that what bankruptcy if suppose to do? Isn’t it suppose to give a person a fresh start?
The government should not allow a blanket forgiveness, but it should allow any who files chapter 7, or who has filed chapter 7 since they made student loans non-discharagable, to simply fill out a one page form and have their student loans included.
That would also get the student loan providers to stop thinking the government has their back and to start practicing sound lending. I’d rather have a situation where people can’t get loans easily, than the current situation where students easily get loans, loans are even pushed…only for that student to realize that all they have is debt and a degree not worth the paper it is printed upon.
A college degree is only worth something due to scarcity. If everyone has a degree, it devalues the degree. We have to many students graduating with student loans with worthless degrees. Then we have people like myself, who go on to get advanced degrees hoping to break out of the pack and end up with over 100k in debt as a result.
The system is broke! It can be fixed by just allowing student loans to be discharged again.
3. collegeloanconsultant | 04.07.09
“Paid rather than forgiven”- no doubt to let the debtors have a good credit rating so that they can move on to the types of debt that are even more difficult to pay off.
Loan forgiveness is given in return for service. That is the basis for our current programs, federal,state and institutional. Just what type of service is Mr. Kraus planning to do? Borrow and spend more money?
4. Steve Urbans | 04.07.09
I’m sorry, folks, but this debt forgiveness is just plain unjustified. Moreover, it’s nonsense. Lot’s of people take on debt for cars, houses, food, health care, and so forth. Is the government to forgive them all? Not to mention that, in general, college-educated workers tend to earn more than others and can more easily erase their debt. Remember too that the government would basically borrow money (creating debt for us all) to cancel an equal amount of these debts. How is this to help the economy? Is there no end of over-extended Americans that claim a piece of the bail-out pie?
5. richard potter | 04.07.09
I believe the student debt forgiveness in an important moral issue in our society regardless of the state of the economy. Would it be unreasonable to have an option for federal debt forgiveness in the form of national service
such as the peace corps that could relieve a substancial portion of the principal balance on the debt. This could also apply to jobs in the governemt sector and attract some of our brightest minds into positions of public service.
7. Annelies | 04.07.09
I’m amazed at the Monitor. Could this article be any more slanted to represent the banks, colleges and student loan companies? I am no longer young, but I am still carrying an insane amount of debt from college. Without that, I could probably spend my region out of the recession all by myself.
Funny thing about those economists — they never do comparative studies. How do they explain the success of higher education systems in countries where the state assumes the burden? Unless the “success” they are really measuring is the ability of for-profit institutions to charge astronomical fees to their customers for classes taught by adjuncts.
9. College Search Guru | 04.07.09
Sallie Mae’s new private loan has a couple of problems. One - the credit criteria are strict - so many will not be eligible. Two - Most people can’t afford to make payments while they are in school. Of course, the argument is that these are good things - only the people with income and good credit will be approved - however, this leave a large group of people who don’t have funding.
The Parent PLUS Loan has a fixed rate - but is in the parents name only. Home equity used to be an option - that is no longer. There are a variety of other private loan options. Private student loan comparison sites like http://www.privatestudentloans.com, eStudentLoan and Simply Tuition offer a variety of loan options.
Private student loan companies are active again. Shop around and talk with your financial aid office.
10. mike schmidt | 04.08.09
“In fact, young people’s overall indebtedness as a proportion of income has not changed much since the 1960s, according to Chiteji’s research.”
That means his research is flawed. I went to college from 1988 - 1992 paying $500 tuition a semester in NC with a pizza delivery job at $12/hour paying my way. I graduated with a BS in math after 4 years and no debt. When in graduate school I got an assistantship which was barely enough to scrape by without going into debt. Those were the Ramen noodles days without health insurance.
Now, 20 years later the same pizza delivery job still pays around $12/hour but tuition has gone up to $2500 a semester. There’s no way I or anybody else could work while being in college, pay for all expenses without going into debt and graduate in 4 years. Education in science, health and engineering is the future of this country. If we as a society want this country to prosper we better make sure we pay for the education of those that are WILLING and CAPABLE to pursue a worthwhile education. We have enough English majors and MBAs. Getting a free education should be a priviledge for the academically gifted, not a right for every youngster that is too lazy to work.
11. Dr Ted Dyke | 04.08.09
The question is when do you become an adult with responsibilities. These students are more than happy to take money to provide them with higher earning job skills. But when the time comes to pay back the loan, it’s suddenly an unacceptable burden - not so paying for the Starbucks latte and a vacation in Belize. Life is a burden with choices and consequences. First it will be let the taxpayers pay for my schooling; then it will be let the taxpayers bail me out on my mortage so I can live better than they do. I spent four years in college and three years in graduate school; worked 40 hours a week, year round. Graduated with money in the bank, no debts. It can be done but partying is so much easier.
12. dave | 04.08.09
pay your debt… learn to live within your means…how many of the youngsters went on spring break each year…as father of two college students I fight that fight every year…. so far I am 1-1
13. DebtSlave | 04.08.09
I agree with one thing. College expenses are astronomical and have no basis in reality. The problem is one of debt built on availability of credit. If credit was made tighter, the universities would be forced to reduce their tuition. There’s hidden inflation in almost every aspect of American life, be it health care or education. Salaries have not kept up with this inflation. Take away credit (which results in life-long debt slaves anyway) and many of these services would be much cheaper. But the Fed doesn’t see it that way. They are running scared of deflation because the banks lose money when that occurs. Actually, deflation can have its benefits. As for debt, each one of us would like free money. That’s of course not how the world works.
14. Ivan Petrovsky | 04.08.09
It’s a tragedy that America will lose it’s brightest to usury. There was a time when this country was great, when it had the best universities and research etc etc but now it has slipped into serfdom to corporations and to the greed of the financial elites. As a Brit who has been coming here for over two decades and who now lives here, it’s sad to see the demise of this once great country. It’s amazing how some of the comments posted here link car loans and house loans with education - how naive and small minded. Until Americans en masse really begin to understand that it is not all about money, until they begin to fight back against unrestricted capitalism, the vast majority of Americans will continue to see their standard of living decline. The American Dream is a myth for most Americans - but the powers that be allow a few people to move up from rags to riches to keep the rest of the population on the leash of false hope. Come on people -WAKE UP - you’re better than this!
15. Teri J. Dluznieski M.Ed. | 04.08.09
I just watched ( part of- snogged off) America: Freedom to Fascism. It was a far scarier look at what is happening in our country than anything I have yet heard or seen. It also, indirectly, gives insight into the plight of our young. Kids who are going to college, and borrowing- under the premise/belief that they are investing in their future.. that with their education they have better prospects for employment and quality of life.
The movie/doc looks at how the Federal reserve and banks have been eliminating the middle class, almost systematically. I don’t know if I completely agree that these shifts are deliberate; with an anthropology background, I can appreciate how organizations, can assume an almost life-like quality of their own.. a personality(?) and marketing even uses the term branding.. who is this corp.. what kind of personality does it have.
Anyway- based on the corporations underlying drive to survive, esp in western paradigm.. where surviving implicitly entails growing, added profits ( and rewarding those who create profit- even when false, inflated or dishonest).. these corporations do not have the best interest of our culture, or our young as their primary goals. Nowhere in a corporations bylaws do they state as a founding-guiding principal.. anything other than self perpetuation and profit to their vested interests.
As a result- they and banks work closely together.. to squeeze all profitability from every source. Jobs are going overseas- even our skilled labour. Look at how Insurance companies are paying for their patients to go overseas for surgical procedures. And this is just one example.
What is the solution?
In part- we all need to start waking up to how we have been systematized to believe in the goodness of those in power. All life is governed by self interest. Is it possible to change that? Yes. But in the interval, it is essential to continually ask- whose interest is served by ” whatever.”
stop living on credit. Stop buying the most expensive house we qualify for. Less is better. We deride indigenous cultures for their less advanced lives. However, from an anthropological perspective.. their quality of Life far surpasses our own. Western cultures spend 8-10 hours every day to sustain their ” way of life.” Horticultural societies spend approximately 2 hours every day. Who has the better life? We work very hard, to get ahead, so that we can have more time to relax, recreate and ” live the good life.” that is what many cultures do every day, bypassing the work hard to get there. They are already there.
Is that feasible for us in our current culture. Probably not. But there are many things we can do that move us in that direction. Growing our own food- even if it is fresh herbs in window boxes, tomatoes in a pot on the porch. turning off the television that is bombarding us daily with a way of life we are buying into.
It is a way of thinking.. assessing ourselves, our lives and our worth.. based on a different parameters, a different set of values.
We can learn to live, like Bhutan.. not by the gross domestic product, but rather, by gross domestic happiness.
Like the Native Americans in our country- they look ahead, seven generations.. and ask- how will this affect our children, our childrens’ children. When we buy the most expensive house, and continue to live on the very edge of our financial means.. when we choose to buy the cheapest item at the bargain big boxes….when we go overseas for surgery.. all these seem like little things.. but we are contributing to the culture that is bankrupting our childrens’ hope of a viable future.
If we want to change the end, the answer.. we need to ask a different question. Not ” is it right to default on student loans,” But rather, how can we help protect and create a productive future for our children.
16. ANONYMOUS | 04.08.09
My loans have been sold so many times to me that they are now over two and a half times what I’ve borrowed. i have tried to negotiate with them but they are persistent that I pay a very large sum of money which would be 80 percent of my income.
Something needs to be done. Maybe not forgiveness but some sort of reform which would restructure payback methods.
17. Simone Baribeau | 04.08.09
Great article, Brendan! A movement to think about on the 15th of every month…
18. Groadio | 04.08.09
Say, how do you suppose the students in the rest of the developed world deal with their student loans. The answer is that they don’t have any. University education is mostly free to the students as it once was here in the US as a practical matter.
Cancel all these debts. Cut the Pentagon budget and send our youth to college rather than Afghanistan.
19. Margaret Crandall | 04.08.09
For people who have tons of student debt, there *is* some good news: It’s called Income-Based Repayment (IBR), a new payment option for federal student loans, and it’s designed to help borrowers with high debt relative to their incomes. The application for this program will be available on July 1st. IBR can help keep monthly payments affordable with caps based on your income and your family size.
There’s also a new program called Public Service Loan Forgiveness, designed for people who work in nonprofit, government, or other “public service” jobs. Public Service Loan Forgiveness will forgive remaining federal student loan debt after 10 years of qualifying payments. For more information on Income-Based Repayment and Public Service Debt Forgiveness, check out IBRinfo.org, a site from the private, nonprofit Project on Student Debt.
20. Jombi | 04.08.09
I paid for my own education by working several part time jobs and going to a college I could afford. Yes, it took me a little longer, but I graduated debt free. Why now should I have to pay for someone else? Those who took out student loans knew they would some day come due. If you don’t know the difference between a loan and a grant, perhaps you should have stayed in school a bit longer. It’s called a LOAN for a reason. Forgive the student loans, forgive the mortgages, forgive any other loan someone took out that the either can’t afford or just don’t want to pay. When do the entitlements end? These bailouts are doing nothing but supporting the idea that your choices and decisions have no repercussions - someone will take care of the dirty work for you. That is not reality, it’s welfare and avoidance of self responsibility.
21. A Non E Moose | 04.08.09
As a former college student who has student loans that I pay monthly for, I believe that I should be responsible for paying them off. However, the issue I have is with the interest rates that companies *sallie mae, cough, cough* place on the borrowed money. Seriously, 7% interest is quite a hefty rate to have to pay on once you complete you college degree. And by the way, just because you have a degree doesn’t mean that you are going to make an astronomical amount of money. Thank God I am married and my wife graciously shares my student loan debt with me. If I were single, I’d have to live with my parents again! American dream is more like an American scheme.
22. Roger | 04.08.09
I think there needs to be some sort of relief for the truly those truly overburdended by student debt. I think there should be bankruptcy adjustmentts avaialable to those who have been in repayment (and making some sort of payments) for ten years (excluding any periods of forebearance). The judge should be able to set a reasonable repayment schedule and amount to be repaid, and only in severe case dismiss the entire debt. The private loan interest rates currently charged students do not justify the non-dischargability of the student debt. (The rates ar roughly comparable to the other consumer loans that are dischargable.)
23. Maureen Ray | 04.08.09
I went to public universities for my undergraduate and graduate degree and teaching credentials. I was a single mother and worked, and the first in my family to graduate high school and college. I have about 73,000 in student loan debt that at $320 a month will probably never be paid off.
My daughter is in college, I help as much as I can but she too is taking out loans.
I am an ESL teacher at a low income school, next year, my fifth year of teaching here, I will be able to deduct about $4,500 from my loan. That’s it! There is little to no opportunity to delete student loan debt through service–if you have large amounts of loans. A portion of the interest is tax deductible.
I am grateful for my education and I would never have been able to get a graduate degree without loans–even though my second year as a graduate assistant was tuition free.
I think we should and need to make it easier for lower income students to pursue higher ed. The more educated a society the more we all benefit. Many low income families fear debt and would not take out college loans to send their children to college. So their children do not go.
I am all for the government more fully supporting public colleges. But I do have very mixed feelings about public funding of expensive private school education.
24. Dopes | 04.08.09
Yeah, all those folks working at Burger King and Walmart ought to subsidize all these educated folks with loan forgiveness via their tax dollars, so the college crowd can stop paying back their loans, buy nice houses, and pad their bank accounts while these folks continue to have sucky lives and two jobs.
25. Dan | 04.08.09
I lost my financial aid award in 1991 due to flagging academic performance caused by the onset of major depression, in the same year that the chair of the Academic Performance and Review Commitee was taking his sabbatical, and have never been able to begin to address my student loan default.
Without healthcare or steady employment, psychiatric treatment is beyond my means. Without treatment, steady employment is beyond my capability. Through all of this, I have avoided applying for welfare or Social Security benefits, as I know that there are others who have greater need of those resources.
Truly, we are just beginning to tease out the strands of a many-layered tangle of problems that interconnect in various ways. It is past time to reinvent how we approach these issues on a fundamental level.
26. Michael Chrispell | 04.08.09
All Americans need to take responsibility for our actions, that includes signing for any loans. It should not be the taxpayer’s responsibility to bail out companies or individuals.
Speaking as a person who worked a full time job while completing college, I do not believe anyone needs to go into debt to complete college.
27. Stephen | 04.08.09
“In fact, young people’s overall indebtedness as a proportion of income has not changed much since the 1960s, according to Chiteji’s research.”
This totally defies common sense. Wages have been stagnant for over a decade but total public university costs (not just tuition) have been increasing every year. We’ve been reading articles for years by college financial aid advisers about the amounts of student debt far outpacing grants & scholarships.
Students do leave school with a student loan debt over 200% of their annual income. I know, I was one.
28. New math | 04.08.09
As an attorney in the private sector, Appelbaum is probably making at least twice what he did in his old job, and probably at least a third more than his non-attorney peers. If he’d just live in the manner cusomary for his non-attorney peers, he could increase his payments by 50% (and progressively increase his payments at 15% of his take-home pay) and pay off his debt in less than half the time.
What of students that decided that taking on that much debt didn’t make sense and chose to work and delay gratification/graduation? What will Appelbaum pay them for their good sense?
29. JEFF | 04.08.09
I’m not saying people shouldn’t pay back their debt, but when Sallie Mae’s interest is worse than a Mafia Loan Shark, then we have problems. I borrowed $5,500 in student loans, but kept going on forebearance because I coudn’t afford to survive after college with the high cost of living, since all the boomers decided their houses were made of gold & rents had to be increased so much to screw over younger generation. After paying back my loans for over a decade now, I still owe $14K & by the time I pay it back it will be well over $35K that I will have paid Sallie Mae for $5,500 borrowed. Sallie Mae makes loan sharks look like choir boys!!!
30. Otis Page | 04.08.09
Why borrow to consume luxury items? Now the borrow is the slave to the lender. Joining the armed services the debtors education would have been paid for. Not all military jobs carry guns. The military even pays your post graduate school like medical school. Americans want things without work.
31. Frank Jones | 04.08.09
The root cause of the problem is, as #13 implies, the ridiculously high cost of college. Fancy facilities and extravagant sports programs and other frills are of little benefit to the loan student who just wants to get a good education. I would also argue that today’s believe that almost everyone should go to college is flawed - there is too much emphasis on the four year degree even if it is in a non-rigorous field of study.
32. Ladell | 04.08.09
Their are many programs that can help these students. Section-8, Wellfare, Food Stamps, and many low income subsidy plans for bills. They should look into these and not try to weasel out of debt that they freely exposed themselves too.
Dial 211 and government aid workers are waiting to help; oh, and the call is free!
33. Joan Rosen | 04.08.09
I clearly see both sides of this argument. I work for a large public research university so I know the debt that can be racked up even with our lower tuition rates–especially for graduate professional degrees.
However, I think there has to be a careful evaluation process for which loans will be forgiven. Some of the students I know have taken unpaid internships in foreign countries or lived in really expensive cities abroad as part of their graduate education. Therefore, they qualified for student loans for living expenses during these internships. And they enjoyed the dollars from those loan while some of their peers took a more austere route. I think many people played like grasshoppers while others worked like ants.
Oh, I took out student loans and paid them in full before I went to grad school and then got scholarships in grad school.
34. Steve | 04.08.09
Give me a break. Our colleges have turned into playpens for frat boys and girls who don’t want to grow up.
What once was a culture of learning and academia has de-generated into something completely different over the course of the last 25-30 years. Any body who has been in a dcollege environment knows this, be honest.
I’m not saying there aren’t serious students, but I do not suspect those are the ones crying for student loan forgiveness.
The culture needs to change back. All the emphasis on sex, partying, drinking, drugs, frats, sorotities, social clubs, video games, television etc, needs to go. Folks who want to do that don’t need to go to college.
I’m sick to death of all this whining and crying, if you didn’t want to pay back the $$ don’t borrow it…there are no “victims” here.
Also what does this mean “My loans have been sold so many times to me that they are now over two and a half times what I’ve borrowed.”
That doesn’t even make sense..your loans are over two and half times what you borrowed because you AREN”T PAYING THEM BACK.
Deal with it.
35. Jeff | 04.08.09
The problem here is that the government got itself involved in higher education. Colleges and universities saw that any student can get approved for a government-backed loan, and tuitions and other fees skyrocketed. I think that there is a bubble in higher education, just like there was in real estate. Prices are skyrocketing way outside inflation and the wages that are made. IMO, a real solution would be for the government to get itself completely out of the student loan game. It would still be possible to go to college, but a loan would be much more difficult to get. But, the benefit would be a huge decrease in tuition. Colleges would be forced to cut the bureaucratic fat, and would be much more open and accountable than they currently are.
As for students suffering from not being able to pay back their loans, I would go one step further than making it easier to make student loans part of bankruptcy. For any student going to college, he or she should only be expected to pay the principal balance. Usury should be eliminated.
36. Freewriter | 04.08.09
If my wife and I had our student loans forgiven, we could afford to buy a house. I doubt we’re the only ones. Wanna see some growth in the housing market? Get rid of our combined $100,000 in debt!
37. Bernd1964 | 04.08.09
The money-creating elites are the true owners of modern society just like kings were the owners of ancient kingdoms. They secretly usurped the creation of value in industrial civilizations and improved their scheme of value creation ownership over the last decades. I am convinced that we could invent a better fabric of society without money as debt and environmental destruction by over-consumption of natural resources. Human life is of course not designed by nature to be a free meal but if it remains within certain natural limits it can be free of debt and a far better experience than being a debt slave in a society that must have economic exponential growth.
38. Tom | 04.08.09
Great article.. It’s really sad to see these numbers go up month after month. I think colleges and high schools really need to implement some sort of mandatory finance classes to better inform kids on their finances.
39. Joe I.T. | 04.08.09
I’m a bit older…my first degree(of 3)was in the early 70’s, I did pay/finance ALL of it (nothing available from parents)
What was very different then was 1/3rd was paid by my summer work in a foundry, 1/3 from scholarships, and I borrowed the rest. But that third, THEN, about $3,500 total for the 4 years, was still a little less than HALF my first jobs’s annual pay.
The Federal student loan rates THEN were about 3%. I was able to pay down my loans down, I think in 8 years. Today’s student loan rates are way too high! We need to get those interest rates down for student loans, they are the future, we all as taxpayers need to pony up for that. It’s smart money!
40. Jay | 04.08.09
Why is it OK for people to be allowed to discharge debt on McMansions and luxury cars they bought and then couldn’t afford, but a young person who followed the advice of his elders and borrowed to get an education that turned out to be of lesser value than expected should be unable to get back on his feet through a Chapter 7? How is that remotely fair?
41. not in debt | 04.08.09
@ richard potter
i like your idea, sir.
@ dr. ted dyke
last line is so true.
42. Bob | 04.08.09
Steve,
I beg do differ! Some college students do earn more, but many do not. Add in the student loan payment and they make less than had they never gone to school. The issue is not as you frame it. The bottom line is that bailouts ARE happening. You should ask yourself if it is best to bailout GM, or bailout people with burdensome student loan debt. The money given to GM probably could have wiped out a decent chuck of student loan debt. Where would it have the most impact?
To say, well…we should bail out GM either (I agree) doesn’t fly. The fact is that we are bailing them and others out. Is that the best use of the money? Is that the best way to stimulate the economy? Should we reward companies? This way, at least you are helping people who have tried to help themselves. The money is getting in the hands of people…real people… Not greedy businesses. Some banks have already raised interests and feed and closed accounts of people that pay their credit cards on time because they make no money from those people.
Now they are talking about bailing out Met Life and others…I say put the money to work by bailing out individuals. As I said before, at least just allow them to be discharged again.
43. Bob | 04.08.09
Dr Ted Dyke
I’ll bet that when you went to school that school cost a lot less and there was far more free aid, wasn’t there? Easy to preach when you are not in school in an era when tuition is astronomical and out of whack with its value. Easy to preach when you are not in school in an era when the only real form pf aid available to a graduate student is student loans. Some will get lucky and get a fellowship, or a GA, however, some get only loans.
Ah, I bet you are saying that if a student does not get a fellowship or a GA that student should not go to graduate school. Funny, how come these schools find money to give to foreign students, but not citizens? I lost my GA during the last two years of my graduate education. The excuse was there was a budgetary cutbacks from the state. FUNNY, how the Korean girl sharing my office(and other foreign students) kept hers.
When I asked about it…they said, well, she does not qualify for student loans. She would have to return to Korea. Gee, I, an American citizen gets to have the burden of student loans, but a foreigner gets to go to school for free.
And yet, I read people on this board stating how they do not want their tax dollars to go to this cause…but, you do want your dollars to go to give foreigners a free education…NICE TO BE AN AMERICAN!
And , don’t give me garbage about how the money that goes to foreigners is not tax money…it is MONEY. If they can give it to foreigners they can give it to Americans. Foreigners can go to school for free in their own country.
I don’t mean to sound racist, I am not, I just think the situation is unfair and that those of you who do not see the unfairness are still living 20 years ago when the aid system and costs were different.
44. Russ Watjen | 04.08.09
America is being very shortsighted by shifting the burden of paying for higher education to the young. Everyone benefits from an educated population. We would not be the strong nation we are today if our forefathers hadn’t convinced the populace of their day that high school should be for all at no charge. The result - America prospered. Today the educational bar has been raised. We have forgotten the lessons of the past and want to shift the burden of paying for educating our youth to those in college. The result will be that we fall father behind the rest of the world and the gap between the haves and have nots will widen.
A better educated educated citizenry pay taxes, obey the laws and improve the quality of life for us all. “A rising tide lifts all boats.” Horace Mann knew this and his legacy is with us all today. We need another Horace Mann to step forward today. Increasingly I hear college students bemoan the investment they made. We are in a lose-lose scenario and can’t seem to get beyond our narrow self-interest. It’s not a “zero-sum” game. When one person’s son or daughter prospers it doesn’t mean my son or grandson has less - everyone has more. A better quality of life and the ability to help our nation compete. The rest of the world learned from us and now will pass us up if we don’t wake up.
Just my opinion.
R. Watjen,
Savannah, GA
45. K. Austin | 04.08.09
Took me 15yrs, but I paid my college loans off. Perhaps college students should give a little more thought to their majors and the job prospects after graduation. It’s irresponsible to rack up $100K in debt for a degree in a field that only pays $36K/yr.
46. EM | 04.08.09
The solution ot this problem is to get rid of federal subsidies of student loans and force them to compete more on a market footing. Without this free money, schools would actually have to charge for their “product” based upon their “customers” actual ability to pay.
Whoever heard of any business or industry who consistently prices their product at a price that many or most of their customers cannot pay? The only place where that happens is in an area that is as distorted as education, health care and housing and the one thing they have in common is excessive government involvement. It’s ridiculous and these institutions either need to stand or fall on their own merits.
47. Michael | 04.08.09
“I signed for [the loans] and I believe in paying them, and I will do so until I can’t do it anymore,” says Mr. Kraus.
Yes you did, but did they explain to you that the money lent was created out of thin air, using the fractional reserve banking system, based on hyper-usury.
Personally I think anyone tricked into this debt scam, is quite within their rights to NOT pay it back. This Usury is killing the Worlds Economy.
The idea of wiping out student debt is great, much better than bailing out more useless banks.
48. Anonymous 2 | 04.08.09
Instead of looking at different options for helping (or not helping) people pay back loans once they’ve gotten themselves in over their heads, we need to be looking at how we can prevent students from going into debt in the first place.
1. Is a college degree really necessary? Why not go to trade school? Become a plumber, car mechanic, or medical technician. You don’t have to have a college degree to earn enough money to live off of - especially if you didn’t go into debt to get through school.
2. Why don’t we teach our young students to research the job market and average starting salary for any degree they are considering BEFORE taking the loan out (brilliant right?) You don’t have to have advanced degrees in every field to make a decent living and be able to afford to pay off loans. Engineering, nursing, accounting, and graphic design all come to mind. I am sure there are other programs. I am almost positive that most of the people profiled in this article completely ignored the job market when selecting their degree programs (yes, even the lawyer. If you research law, you will realize that a high salary is not inevitable.)
3. College rankings based upon value per tuition dollar should be giving priority for the most part over college rankings based on academics. Any major state school can provide a solid education and decent job prospects. It’s time we as a people evaluate our return on investment before calling any degree an investment. Education is a good goal, but normal people need to eat and be sheltered, so that should automatically be priority number one when it comes to evaluating a degree program (unless you are affluent enough to not have to worry about money while spending $10Ks.)
4. The lawyer talked about taking a job based upon public interest while he had $75K of loans. That’s not being charitable - that’s being irresponsible with the taxpayer’s money, money that could be collected and spent on other uses that could also help society. Pay back your loans, then take a public interest job. If you are that far in debt, you are not in a position to be charitable YET.
49. jimbo bubba | 04.08.09
Come on people, it is education that is at issue here not the banks. College should be free for qualified people and charged to all others. Since the banks have had their part in the declining economy they must sacrifice also. Nothing is guaranteed absolutely so why must they get their money and the rest of us not?
50. Rick | 04.08.09
It seem to me we are all a little dense. The real issue is there are to few jobs which will pay our way out of debt. I’m saying this only because when people get serious about meeting their needs they pay attention to detail, like how in the hell am I going to pay this back. Most of us don’t ask when we are young and unable to see into the future. The first thing they need to teach us is Rome was not built overnight. It’s like the military you get beat down and you learn respect and then you move through the ranks. So this freebie society is naturally plagued with problems. I don’t think all things are fair I just feel you need to have a real clear understanding of the situation before you sign. Parents who make things very clear to their kids before they borrow come out ahead in the long run
51. David | 04.09.09
If you can get government grants to go to college for pre-graduation expenses, why can’t an education grant system be set up for post-graduation expenses? Could it be effective to have some of the grant funds shifted to post-graduation? Theses post-graduation grants could be issued based on economic need such as job loss, but qualifications might be that you have been in good standing for N number of months/yrs before the specific economic event happened. The grants would not need to pay balances in full, but at least cover deferral fees and interest until your economic situation improves with some maximum cap (ex. up to $10000). This might actually help those that have the means to pay to stay current as not to lose the possible emergency grant privilege.
Nothing pissed me off more than when I saw a organization youcandealwithit.com, I believe, was having a monthly contest to give away $10,000 to pay towards student loans. Because they wanted you to know that that it was possible to deal with student loans by gambling (You had a better change of paying off your student loans playing the local lottery.) They should have used those $10,000 gambling payoffs as grant funds and distributed the money to those that truly could not deal with it. It was my understanding based on their own marketing that they believed people could pay, but that they just did not want to.
What a world we live in where we believe minors can not sign contracts to buy cars, but we allow 18 and 19 yr-olds to start making $50,0000 debt decisions about education cost that they can never get discharged for any reason. Student loans are the closest things the US we have left to debt-slavery and indentured servitude; you must work to payoff the masters in return for the education they financed for you. Maybe we should coin a new term for it, Student Debt Slavery.
I do realize why they have made it so hard to discharge student loans; they understand that the majority of the loans are too risky and if the banks felt the risk was not being backed by someone else they would not loan; there would be no student loans. It still angers people in this day and age to see bankers being bailed out, but students being told you can deal with it. Banks are more import than people; even during an economic disaster greed still wins.
52. Joshua Cranmer | 04.09.09
Mass forgive student debts? Egads!
As a current college student, one of the things that sickens me in college is people who don’t take it seriously. Typical 4-year colleges will cost between $40K for an in-state college to $250K for a top-notch private college at this point–it’s the most significant purchase most people will make, after their households (if they buy one).
The key thing there is that college is a purchase–one that most people make, in theory, to help them achieve higher incomes in the future. But it’s not a purchase that everyone should be making. If people can’t countenance the debt burden, perhaps they shouldn’t go into college. Forgiveness would distort the costs and could result in massive unbalancing of markets: think of how distortive the mortgage deductions are.
Should changes be made to the student loan industry? Undoubtedly. But outright forgiveness of all debts would be untenable, in my humble opinion.
53. Stephen | 04.09.09
We provide “free” education to the bulk of society till age 18 because it is beneficial for society. Apparently, after the age of 18 education becomes a luxury. If we eliminated for-profit education we could advance our society and create more high-income tax payers. As it stands now, we are creating a few generations of debt slaves, good for pensioners but suicide for the progress of society as a whole.
Can we change America from a high wage world leader? “YES WE CAN !”
54. shen wu | 04.09.09
They need to clean up the student loan industry. It is crooked. Sallie Mae and other loan holding companies, work to force students into default, so they can collect from the gov’t insurance and then the student, too, doubling their money. There is no way to reach them by phone, their address constantly changes, letters are never returned, but their collection agencies, which add on $5000 in fees at a time, will have no problem finding YOU. By law, they are supposed to make special payment arrangements, but refuse to do so and hide, too. Every time I tried to make a payment arrangement, I received demands for $5000, or $7000 etc. Never one honest attempt to make an affordable arrangement. I am sick and can’t work full-time. They refused my disability forms, made my doctor fill them out three times and kept pretending they didn’t get them or the form wasn’t right. They are as crooked as the banks. All the same. Don’t take student loans. Why are you going to college for jobs that don’t exist?
55. inez ammann | 04.09.09
I took a loan for my daughter, in 1982, $5,000 a year. It is now 37,000. Sallie Mae, now has loan. To talk to anyone, is in India. There has to be a change. How can I possibly pay loan, at my age. Taking a forebearance, is not the answer.
56. jake | 04.09.09
TIME FOR A JUBILEE YEAR
DEBT FORGIVENESS FOR THE WHOLE WORLD:
chinese fortune cookies for everyone
57. John | 04.09.09
I have large student loans and low pay. If someone would let me do something servicewise to discharge them, even going to jail for a few years, I’d consider it.
There is risk in loans. Payments or loan amounts cannot even be reduced in BK. Unlike every other type of loan and unlike what Obama is advocating for every other type of loan.
58. Lynn G | 04.09.09
College is neither a right nor a privilege; an educated population is a matter of national survival.
The problem with student loans is the interest rate for those kids whose parents are (or were once) in the middle class. My daughter’s interest is a 8.5% which compounded while she was in school.
About 30 years ago we privatized student loans. If we publicize them again at a fixed rate of 1 or 2 %, which is the rate of government bonds, most students would be able to pay back their loans. That way, instead of going into debt to China, students would be subsidizing government debt while reducing their own debt burden.
59. Dave E. | 04.09.09
Three point plan:
1) Make all student loan payments deductible from taxable income (both interest and principle) - NOT a tax credit, simply a deduction from income.
2) Tie eligibility and interest rates for future student loans to academic success after the first year of college For example, 4.0 GPA might guarantee approval at 3%, but a GPA below 3.0 may demonstrate not taking college seriously enough, so they have to be approved based on tighter lending standards and may have to pay higher interest rates for their second/third/etc. year’s loans.)
3) Once a student has paid in 150% of the principal amount, they are DONE. A return of investment of 50% over “x” number of years should be more than enough profit for the greedy, usurious bankster criminals. Someone with student loan debt of $25,000 who pays in $37,500 over time should be off the hook for any remaining interest and fees - and then they can start being taxed on the income that was previously deductible!
Some folks will be debt free in a few years, other it will take longer but it’s an end to the “permanently indentured servant” debt servitude our young people face with today’s ridiculous and abusive student loan system.
Some folks called for the bankers to start sacrificing, too, given the tough times we all face. I almost fell down laughing! What on Earth makes someone think that the organized criminals of the banking industry would ever sacrifice ANYTHING just because it was moral or right to do? Of course they _SHOULD_, but they never in a million years WOULD.
60. perspective | 04.09.09
National total student debt is way less than the trillions of taxpayer dollars given to banks, or for that matter financing the military adventures. Just a thought
61. PaidMyDebt | 04.09.09
We can agree on several things: Tuition prices are increasing. Book prices are increasing. Dorm fees are increasing. Processor salaries are increasing.
Everything college related is increasing. BUT… it is your choice to attend college. It is also your choice of which college to attend and how to live while attending college.
When I went to college, I did not have a cell phone or cable. I did not drink $4.00 coffees on a daily basis or eat at fancy restaurants. I lived like a college student. I ate lots of mac and cheese, ramen noodles, PB&J and hot dogs. I lived with 5 roommates to keep my rent down to $150/month. Students now live in luxury apartments by themselves at $600+/month. They go out…. a lot! They have the newest phones with the highest plans. They have nice new furniture and flat screen TV’s. They go on fabulous spring breaks!
Of course their debt will be high! They are living off their loans as if they are their salary. They are not worried when borrowing or how they will pay them back. It all comes down to their choices. .. live like a student while in college OR live like a student when in loan repayment. It’s their call.
62. deven | 04.09.09
If you take a loan you pay it back! This should not even be a question or a debate. The whole idea of walking away from any debt, be it a mortgage or a student loan, is abhorrent. I can sympathize with people who do not want to pay huge student loans, I didn’t want to pay them either. And I could have avoided those loans in the same simple and fair way that is available to everyone, I could have chosen not to take the loans in the first place. If you don’t want to pay for something that is fine, just don’t buy it. If you don’t want to pay for college, don’t go. And just so we are clear, there is no such thing as debt forgiveness, and bankruptcy is not a restructuring. When you don’t pay back your debts you are a thief. You may not use a knife or a gun but you are no better than the street thug that mugs a elderly woman. By the same token you are no better than Bernie Madoff. In the end you are taking what is not your, and you are taking it from someone else…
63. Dave | 04.09.09
@Bob (post #2)
You’re right… but at the same time, if degrees are devalued by the number of people that have them… does the number of people living on this planet devalue workers in general?
Techrepublic also had an interesting article from a few years ago, entitled “The Education Scam”:
http://techrepublic.com.com/5208-6230-0.html?forumID=6&threadID=179848&start=0
64. 1776 | 04.09.09
I recruit college grads for the military to become officers and I have a ringside seat regarding this issue. The debt levels of new grads is obscene because:
#1-universities (and the lenders that loan tuition money to attend same) ARE NOT CHARITABLE INSTITUTIONS. Let that sink in for a moment. They exist to make a profit. Period. Like any other business. And don’t be silly and fall for their “non-profit” mantra.
#2-Kids will sign anything w/o regard to future liabilites. It’s truly amazing to see a collegiate’s response to questions such as “how much will you owe when you’re done with school” or “what will your payments be in x years”, “how will compound interest affect your bill” etc. Of course, they usually don’t have a clue, nor do they care (yet).
It’s amazing that such bright kids cannot do simple math. I deal with kids borrowing for undergrad plus grad school, and they are silly enough to think they will live a life of relative opulence with say, a low six-figure salary. They are in for a rude awakening.
65. Bob | 04.09.09
I disagree..fields change…they get outsourced, companies close. No one can tell teh future with certainty. When I graduated from High school in 1982 EVERYONE said Computer Science was the way to go…years later, much of that work is outsourced.
You paid it in 15 years…congrats…things worked out for you. Just allow those that have financial hardship to include student loans in bankruptcy again. In addition, the fact remains that the system is out of whack.
ASK YOUR SELF THIS! Why does a school charge the same amount of money for a major than has low prospects as they charge for a major that supposedly will be hot in the next 5 - 10 years. If someone wants to major in, lets say sociology, because they love it, why does that cost the same a majoring in finance? Does a Chevy Cobalt cost as much as a Corvette? WHy don’t the schools take some responsibility when copunseling students to say “you know, chances are you won’t get a job with this degree”?
I TELL YOU WHY, because they want students and they don’t give a dam. They know student loans are freely available and teh student will take them. They convince the student that opportunities exists. When the student graduates and can’t get a job, the school doesn’t think it is their problem.
Rather than say, why does a student take out 100k for a major that pays 36k, you should be asking why a school gets to charge so much for a major that pays 36k
66. Bob | 04.09.09
Joshua,
I think it is sad that we have produced a society where people like yourself can think that college is a purchase. I have cousins in Italy, they got advanced degrees for free. Yes, taxes paid for it. But, they got their degrees they graduated with no debt and took jobs they love. They did not have to take a job because of pay.
We pay for school up til High school. That standard was set years ago when a high school degree meant something. In today’s society, the standard is a college degree. Some things society needs to pay. At one time, not so long ago people went to college and got all kinds of grant money. Maybe they took out a little bit of loans, and if life threw them a curve ball they filed bankruptcy and started over. It seems to be that our society did not go bankrupt, but rather survived.
Somewhere along the way, we as a society, made the decision that college needs to be purchased. I find that sad.
67. Ryan | 04.10.09
I owe 65k @ 7.5% - federal stafford through citigroup. And yet right now I can qualify for a 5% mortgage. The fed can drop rates to make housing more affordable but anyone pursuing a higher education is locked into a ridiculous rate. I’ll make my payments regardless, but for God’s sake, lower the interest rates on student loans!
68. dom youngross | 04.10.09
If you got a degree from college — and a load of student-loan debt — you are an educated fool.
69. The Prudent | 04.14.09
I had plenty of college debt when I graduated college uin the 1980’s and paid it all off by sacrifice.
I do not want to pay for some more freeloaders looking for bailouts like these irrwesponsible homeowners.
Stop bing a bunch of crybabies. You ttok on the debt be repsosnible for it.
70. Kimmi | 04.15.09
I agree that student loan debt needs to be repaid. I took out the loans and got my education and would not have my job if I did not have a degree, however, the same way that the government steps in and bailed out the banks in the financial industry, and remember, bailout money was given to all banks, even those that did not need the additional funds, something can be done to help either lower rates on private loans and federal loans, and/or research loan forgiveness through more public service. There should be no reason why, if I put my private loan into forbearance or deferment for 6 months, I come back to a loan interest rate almost doubled what it was originally. Thats taking advantage of the situation because they can and they are not regulated. Something can be done about that.
71. Paula | 04.21.09
Students need to be made aware of their responsibility when they sign on for a program. They need to know their approximate payments and also what their expected income is and then decide do they want to go through with it.
Of course this is until there is no free or almost free higher education in the U.S. I think there are some free programs in New York City for residents. There could still be the expensive ones, but free ones need to be made available as well - maybe not at government expense, but maybe corporate, or maybe some combination.
72. Matt | 04.28.09
Oprah needs to stop telling young people that student loan debt is “good” debt. It isn’t. In many cases a college education will prevent you from getting a job, because if you have a loan default on your record, many companies won’t hire you. Oprah has done colossal damage by pushing education and not warning students about student loan debt. Is she getting kickbacks from Sallie Mae?
73. ForeignStudent | 05.04.09
It is amazing that a lot of people here making comments without really thinking it through. There are a couple of facts needs to be made clear:
1, bail out money given to banks are not free, banks have to pay an interest, very high rate. I know the one given to AIG is 10%. So the bail out you want is not the same as bail out for banks.
2. It is lucky for US students to be able to get a loan. For students from developing country, they have to resort to eating less to go to school.
3. If there is no free trade, jobs will not be our sourced, on the other hand, you won’t get cloths, electronics, cars … so cheap, see the horrifying pollution in China, American consumers are destroying themselves and the world at the same time by over consuming.
74. Keith | 08.07.09
After going to school for 11 years, I can honestly say that college/education is so overrated. I can’t advise my child to go to school past a 2 yr degree. It doesn’t make sense anymore.
75. Miss. Credit Cards | 09.11.09
Another threat that students are facing is the danger of getting into credit card debt. First year students have often never managed their economy by themselves which means that they are not actually aware of that they will need to pay back everything with rent. Considering that the average American household already have about $9000 credit card debt which sums up to $960 billions you realize that the future is pretty worrying and dark.
76. Organic Fertilizer | 09.17.09
Seriously, student loans are a huge issue. I am now in my early 30s and I have $40k still left to pay off my students loans. By the time I am 50 they might be paid off. What is going to happen to my kids? It’s scary to me. Now I’m going to check out that other article about the kid who ditched debt.
77. Private Student Loans | 09.20.09
The question is who is to blame? Students for taking out more than they could ever pay back? The schools for increasing tuition over and over again? Or the lenders for making money to available and tacking on a high interest rate?
In my opinion a lot of the blame comes on the schools, if they charge a reasonable amount the students wouldn’t need private student loans and the situation would be far more manageable.
78. tonya brady | 10.18.09
what has to personal responsibility in this country
people take out loans they cant afford,to buy houses they cant afford and use the house as an atm machine then
go whining to obama for a loan mod
people max out credit cards and offer to settle for pennies on the dollar
now its student debt foregiveness
people often say that america has been through tougher times than this before
maybe america has but not this group of deadbeats
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1. Rose Belanger | 04.07.09
I think that this issue is going to continue to plague the next generation of leaders unless something is done from the top down. Good job at pointing out the core issues at the center of student indebtedness and the lack of freedom many students have post-graduation due to massive student debt.