American Dream Eludes with Student Debt Burden.

[Deleted]

Good morning to all.
www.bloomberg.com/news/2013-04-12/american-dream-eludes-with-student-debt-burden-mortgages.html

Luke Nichter of Harker Heights, Texas, said he’s not a renter by choice. The Texas A&M University history professor’s $125,000 of student debt means he has no hope of getting a mortgage.

Nichter, 35, who’s paying $1,500 a month on loans for degrees from Bowling Green State University in Ohio, is part of the most debt-laden generation to emerge from college. Two- thirds of student loans are held by people under the age of 40, according to the Federal Reserve Bank of New York, blocking millions of them from taking advantage of the most affordable housing market on record. The number of people in that age group who own homes fell by 4.6 percent in the fourth quarter from the third, the biggest drop in records dating to 1982.

[happyhoix]

I think the best thing I've heard lately was an NPR story about how kids just entering college now have learned from the kids that are currently graduating into a bad job market to be more savy about school debt.

One of the kids they interviewed spent the first two years at a community college at a much cheaper tuition, another one planned to work her way through, so she wouldn't have to take SL debt to pay living expenses (and therefore graduate with less debt) and another waited to get a job with a company that would pay for his masters, rather than jump right into a masters' program. Another one also talked about how she set herself a limit of how much SL debt she would accrue, since her proposed major (Sociology) wasn't going to ever be a highly paid field.

So I hate that we have a crop of graduates who didn't seem to get much direction (or didn't understand the consequences) when they took on all this SL debt, but at least they seem to be serving as an example of what not to do to this next generation of students.

[Deleted]

Preaching to the choir here.

Between my wife and I we have 150k worth of student loan debt, 115 being my wife (undergrad and grad school).

We pay $1,600/month towards student loans vs $1,375/'month in rent. Next month we are hopping to increase that to $1,800/month.

It sucks, not going to lie. But we manage to make it work; live and learn they say. We do counsel and talks to the generation after us going to college now and tell them to look at all their options.

We both have good credit, been able to purchase cars, go on vacation, save for retirement etc. We just got approved for a mortgage and are now house hunting.

[Deleted]

Good luck!! cawiau

[Deleted]

Apr 12, 2013 7:48:46 GMT -5 @snowbird said:

Good luck!! cawiau

Thanks, we will need it.

If we stick to our guns we will be done by 35 (so 7 more years) while the school payment plans had it at 25 and 30 years for the loans.

Let's just say the idea of paying our student loans while sending our kid to college did not seat too well with us which is the big motivator to pay them off ASAP!

[Deleted]

I'm certainly one of them - although I was able to get a mortgage.

I don't usually talk to people about money in real life, but I'm pretty up front about my SLs and the bad choices I made.  This is what happens if you don't consider cost of living when you choose a school... this is what happens when you don't lock in your interest rate and the feds raise it... this is what happens when your loans are in deferment but interest is still accruing...

Every decision I have made in my adult life has been influenced by my student loans.  That doesn't mean I would change all of the educational choices I made to get me into this position, but I wish I had thought them through more in advance.

[Deleted]

One of the kids they interviewed spent the first two years at a community college at a much cheaper tuition, another one planned to work her way through, so she wouldn't have to take SL debt to pay living expenses (and therefore graduate with less debt) and another waited to get a job with a company that would pay for his masters, rather than jump right into a masters' program. Another one also talked about how she set herself a limit of how much SL debt she would accrue, since her proposed major (Sociology) wasn't going to ever be a highly paid field.

These options are nothing new.  What I don't understand is, what changed?  What caused so many people to ignore these tried and true methods at the expense of their financial well-being?

[formerroomate99]

I guess it has something to do with being only two generations away from white trash, but it honestly never occurred to me to think of college as anything more than a means to earn a good salary.  A major in something that didn't immedately lead to a good job was considered a waste of time. 

[zdaddy]

I've always thought that what we need is an expanded GI Bill for federal work programs. Something similar to Depression-era programs where students agree to work for the government 2-3 years and either get college benefits or have their federal loans forgiven. The government gets cheap trained labor and the students get their college paid for  plus experience.

I know there are some programs like this already, but I was imagining bigger efforts like the Tennessee Valley Authority or Works Progress Administration.

[EVT1]

There needs to be a mandatory class in personal finance in high school around sophmore year when many are entering the workforce. 

[fairlycrazy23]

To much easy money is what has caused the tremendous rise in tuition. Too many government loans, and the fact that student loans are not dischargeble caused money to flood in. Lenders don't care who they lend to if they know they will eventually get there money.
If the government stopped making loans and also made all student loans dischargeble  you would see fewer loans, fewer loans means fewer dollars and tuition would have to fall.

[EVT1]

I am sure you meant to include all of the banks that got in the feeding frenzy, didn't you?  I get the government wanting its money back- the problem is that the private loan companies were allowed to operate as well with no risk- yet they priced their products and built fee schemes that abused the shit out of students.  Add in all of the new low quality private colleges out there pushing those loans, the public universities pushing those loans and here we are.  Glad Obama got their asses out of the business of risk free financial rape.

[The Captain]

I came from a blue collar background.  First in my family to go to college on both sides.

We had no idea what the heck we were doing. 


What we did know was to never borrow more than you thought you could afford to pay back (what a novel concept).  How did we figure this out?  No guidance, personal finance course, etc.  We just looked at what the profession I was majoring in pays, subtracted reasonable living expenses, and figured the rest would go to student loans.

It meant me working 2+ jobs both during and after getting my degree and taking about 50% of the loan amounts for which I was eligible.  

But go ahead and blame it on everyone else except those that were all to happy to take the money when they wanted it.  Those poor poor victims who were raped (a very ugly word used far too lightly such as in this situation IMHO) by the big mean banks.  They need protection because they are too weak/vulnerable/stupid to figure things out for themselves. 

[formerroomate99]

I agree with you to a certain extent Captain.  Where I went to school, nearly everyone was from out of town and getting almost no help from their parents, and nearly everyone chose a much lower standard of living than the folks on welfare had in order to keep the student loan debts lower.  But with the cost of college rising at twice the rate of minimum wage, these young kids are going to have a tougher time of it than those who went to school in previous decades.  And that's assuming they can even get a job. 

[EVT1]

Really- a finance class is too much to ask for?  Sorry, but 18yo kids are still young and naive and are taken advantage of all of the time- and technically it is their fault- but in reality they are targeted for what would be usury except the banks found a way around those laws.  Financial rape is dead on- guess you are not familiar with how penalties/fees/etc. hit some of these people where they ending up owing over double what they borrowed- some of them having not graduated or were to dumb for college in the first place but got talked into some bullshit institution with low standards that confer useless degrees.  This is why we need the consumer finance protection bureau-everyone deserves to know what they are getting into with plain and unambiguous language.

Don't think they are targeted?  During my first spring break trip CC companies were set up in the entrance to bars handing out free tshirts and drink coupons to those that filled out applications.  How disgusting is that?

[The Captain]

You were able to afford to go on multiple spring breaks?  Interesting.  Too rich for my blood.  I had to work to pay for school.  Interesting concept, more apparently should try it based on the article.

 

As far as the rest - if you don't understand the implications of what you are signing then don't sign it. 

It's not that hard.  Of course it is much easier to cry victim and blame your poor choices on someone else.

What's more disgusting - the marketers or the people who took the money and then cried "oh poor me" when they realized they didn't think through their actions?

[The Captain]

Apr 12, 2013 14:52:12 GMT -5 formerroomate99 said:

I agree with you to a certain extent Captain.  Where I went to school, nearly everyone was from out of town and getting almost no help from their parents, and nearly everyone chose a much lower standard of living than the folks on welfare had in order to keep the student loan debts lower.  But with the cost of college rising at twice the rate of minimum wage, these young kids are going to have a tougher time of it than those who went to school in previous decades.  And that's assuming they can even get a job. 

I will agree that it is getting tougher, which is why you have to be even more careful about the decisions you make.

College simply is not for everyone.  To figure out it's not a good investment for a particular individual AFTER they spend tens of thousands of dollars is trying to get a "do over" at someone else's expense.

[formerroomate99]

Don't think they are targeted?  During my first spring break trip CC companies were set up in the entrance to bars handing out free tshirts and drink coupons to those that filled out applications.  How disgusting is that?

Yes, I got  a free T-Shirt when I signed up for a credit card on one of those booths, and never put anything on my credit card that I couldn't write a check for.  Bear in mind, doing that meant keeping body and soul together on a $30/wk grocery budget, living in a with multiple code violations that made my mother cry when she visited, walking to and from school in extreme weather instead of driving, and wearing jeans with holes in inappropriate places.  Despite having a middle class upbringing, it never occurred to me to think I deserved a higher standard of living then my bank account would allow. 

Like it or not, with the internet, it is incredibly easy to find out whether or not a degree is marketable and whether or not a school has a good reputation.  But some people will just listen to whoever tells them what they want to hear, while others don't seem to think that bills need to be paid on time, and that's the kind of stupid that won't be fixed by a personal finance class. 

[EVT1]

Apr 12, 2013 15:12:20 GMT -5 The Captain said:

You were able to afford to go on multiple spring breaks?  Interesting.  Too rich for my blood.  I had to work to pay for school.  Interesting concept, more apparently should try it based on the article.

 

As far as the rest - if you don't understand the implications of what you are signing then don't sign it. 

It's not that hard.  Of course it is much easier to cry victim and blame your poor choices on someone else.

What's more disgusting - the marketers or the people who took the money and then cried "oh poor me" when they realized they didn't think through their actions?

I worked full time through undergrad and paid as I went.  I only took one loan my last semester because I took 21 hours and went part time so I could graduate in December- still regret that.  I saved up cash for those trips- and I earned them.  I went to school all year when other people were having the summer off.

I have no problem with people having to pay back what they borrow- I have a problem with the way private loans were sold and the onerous provisions that went with them.  I doubt anyone though for a second that these things were debt traps- at least on a Stafford loan you can get a forebearance if there is a hardship- not these folks- it is penalty interests rates, late fees, etc. etc. piling on top of each other- and because of stupid laws they were exempt fron BK- well, not anymore and that's a good thing.  I have no problems with low rate government loans that are BK proof.  These jerks took advantage of that status based on pure greed- there was no reason to charge what they did- pure greed and highly usurious.  I would add unethical as well.

[zibazinski]

The govt has no business being in the student loan business. Everything they touch turns rotten. 

[mmhmm]

I worked my way through college, as well ... for two different Bachelor's degrees; however, the cost of those degrees was nothing compared to what they would cost today.  My employer paid for my Master's.  The way I did it isn't near as easy to do in this economy.  While I agree folks should be aware of what they're doing, the debt they're accruing, and the possibilities available to avoid getting too far in the hole, I also think things are way too tough on our young folks.  It's not easy being green in the first place.  You've got more to learn than you know.

[The Captain]

EVT1

You raise some good points with how SOME of the loans may have been marketed.  However when you use terms like "financial rape" you appear to imply that only one party bears all the blame.  Sorry, can't agree with that.  If you don't understand what you are signing you should not sign it.  BOTH parties are at fault and to imply only one should be at fault is wrong.

 

As far as reform I think private loans need to EITHER have the same low rates as Federal loans, OR give up the ability to be discharged in bankruptcy.  The fact that they want to have it both ways is one thing I think we can agree is troubling.

mmhmm

Yes it is harder than it used to be.  However for a MAJORITY of the students the debt load is very managable:

www.asa.org/policy/resources/stats/



The average is around $26K.  The median is $8K for a four year public undergrad degree.  Half of students with debt graduat with only $8K.  Very manageable IMHO.

40% of all students don't take any loans.  Of the remaining 60% who do, 75% owe less than $28K.

So of all students only 15% owe more than $28K.  Only 6% owe more than $54K and less than 2% owe more thank $100K.

$54K is tough, but still manageable as long as you get a job (I acknowledge this is key) and don't overextend yourself for a few years.  I think the interest and forbearance rules should be the same for private and public loans.

So we have a "crisis" because around 2% of the total student population took on more than they could handle and we want to cut off funding for the other 50-55% who may need it?

For the most part I think it's more of a jobs crisis than a SL crisis.  And sorry, but I think anyone who takes out over $140K in loans for a moderate paying job dug their own hole.

 

 

[mmhmm]

There definitely is a jobs crisis, I agree, captain.  That makes it difficult even for those who have smaller amounts of debt.  If they can't find a job, they can't pay those debts.

While it may be only a small percentage who are buried in debt, and it may be that some of those should have looked first and jumped later, it's still sad to see them struggling so hard.  They reached for their dream ... a good education in a field they enjoyed.  While others may have done things differently, I can't fault young people for having dreams.  In today's world, dreams are so very costly.

[EVT1]

Which was a point about the forebearance- the government loan will give you a break where the private loan will go for the jugular.

18 is not mature regardless that the government will give you a gun and send you overseas- and a lot of people buy into what they are told.  They are operating under the assumption that it is going to pay off and nothing bad will happen.  Obama set it straight- you can get a private loan if you want- but they are no longer immune from BK.  Only the federal loans are now.  I think that is fair- in fact I think it is worth the cost for the government to subsidize the interest on these loans- invest in the citizens.  Tuition on the other hand is way too high- how do we fix that?

I guess I got out cheap- I took out $4300 for one semester and paid it off in a couple years.  I paid all cash for law school- however I chose to go to a school I could afford and attend part time.  I had to apply to several and in the process was offered financial aid packages- the largest one I was accepted to was going to set me back about $180,000.  That was a sobering number.  And extra shitty is ABA rules that you are not allowed to work full time so if you want out in 3 years you are going to have to take a loan for living expenses as well- which were of course included in that number.  No thanks.  I can't imagine starting out that far in the hole- hey, before you buy your first house you need to pay for this equivilent one you already bought. 

[billisonboard]

Apr 12, 2013 20:17:58 GMT -5 EVT1 said:

... in fact I think it is worth the cost for the government to subsidize the interest on these loans- invest in the citizens.  Tuition on the other hand is way too high- how do we fix that?
...

Businesses need to pay for the training of their workforce.

[BeenThere...DoneThat...]

...what's inherently wrong with being a long-time renter?

[billisonboard]

Apr 13, 2013 12:55:50 GMT -5 BeenThere...DoneThat... said:

...what's inherently wrong with being a long-time renter?

[Deleted]

[formerroomate99]

The older generations of my family achieved the American dream by doing things that most people of my generation aren't willing to do.  They married late, stayed in apartments, living on one salary and banking the other for 5-10 years, and only then bought a house (usually for cash) and started a family.  Honestly, with all the uncertainty in the job market, I'll never understand why so many people set up their fixed expenses as if layoffs don't happen. 

[Deleted]

I looked though the article but missed the important part. Where was the part where someone FORCED them to borrow money? Was a gun or a knife used? Because if that didn't happen, then it comes down to you can't protect people from themselves. As a side comment I noticed the first guy was teaching in TX but didn't go to college there. Did he go out of state to school? As a non resident schools are generally higher.

I did cut & past this:

Megan Lilburn, who in 2004 graduated from Texas Christian University in Fort Worth, Texas, with a degree in social work and religion, said she wishes she lived more frugally in school. She racked up $40,000 of debt by the time she got her graduate degree

OMG someone actually excepts some sort of responsibility for their debt, I can't believe it!!!!!!!!!!!!!