The $550,000 Student Loan

• Con_Alma

  "..."Maybe half of it was my fault because I didn't look at the fine print," Dr. Bisutti says. ..."
  
  Only half is your fault??
  
  "...Dr. Bisutti says she loves her work, but regrets taking out so many student loans. She admits that she made mistakes in missing payments, deferring her loans and not being completely thorough with some of the paperwork, but was surprised at how quickly the debt spiraled. ..."
  
  "...There is an estimated $730 billion in outstanding federal and private student-loan debt, says Mark Kantrowitz of FinAid.org, a Web site that tracks financial-aid issues -- and only 40% of that debt is actively being repaid. ..."
  
  I understand that some of this figure is from deferment but wow that's a big number.
  
  http://finance.yahoo.com/college-education/article/108846/the-555000-student-loan-burden?mod=edu-continuing_education
• derek bomar

  

  maybe she should have taken a couple finance classes with the $
• Manhattan Buckeye

  I read that article earlier, strange situation. On the one hand without being overly judgmental it sounds like this "doctor" is a piece of work, she's smart enough to go to Med school but is so aloof with understanding and administering student loan repayments....perhaps this is such an extreme case it isn't a good example, but at any rate I really believe student loan debt is going to be a HUGH problem for this country. Somehow "Big Academia" keeps increasing costs and loans for students despite all economic indicators to the contrary. We've created a society where young people are being forced into debt.
  
  "and only 40% of that debt is actively being repaid. ..." That is a shocking number, I'm guessing it is due to the number of people in school now that are in automatic deferral, but it is still a surprising number.
• cbus4life

  I wonder how many of those are Humanities PhDs and the like, though i would imagine some are also of the Med School/Law School variety.
  
  Except for a rare few, it is nearly impossible to get full funding for PhD and even Masters programs in the Humanities, and with so many graduating, jobs in academia are just not there. Becomes nearly impossible to find a job outside of academia with those degress that will enable one to pay of the amount of debt that they've accumulated.
  
  Discouraging that one has to incur that much debt in pursuing a profession that a functioning, healthy, enlightened society should be supporting tremendously.
  
  But, i also understand that people need to be realistic and think about they debt that they are taking on.
  
  Thankfully, in my field, i was able to receive full funding for my Masters work, as well as my PhD work starting this fall, by being written on to research grants that a faculty member had won, thereby allowing me to receive full tuition as well as a healthy stipend to live off of.
• fan_from_texas

  cbus4life wrote: I wonder how many of those are Humanities PhDs and the like, though i would imagine some are also of the Med School/Law School variety.

  Typically, MDs are going to be in pretty good shape, despite the student loans. Law students typically have $100-150k in loans, and when you figure the median starting salary for lawyers is about $45k (for those who can get jobs right now), it starts looking ugly.
  
  I imagine the PhD route probably depends a lot on the field. An econ PhD with some debt isn't going to be in nearly as bad of shape as a Religious Studies PhD in similar debt.
  
  The federally-subsidized loans (to make college "affordable") are a killer, as they enable schools to inflate tuition and have it guaranteed.
• cbus4life

  Agreed, FFT.
  
  I'm talking more about friends i have who have PhDs in the likes of History, Lit, Comparative Religion, etc., etc.
  
  All incredibly smart people, well-intentioned, perfectly capable of teaching and contributing to the university environment and teaching students.
  
  However, because of the lack of jobs currently in academia, they're mostly working jobs that simply do not allow them to pay their debt as well as live, essentially.
  
  Partly their fault, i understand, but it is still a tough situation to be in.
• krambman

  

  Student loans are tricky. You have kids 18-21, most of whom have never even had a credit card, taking out loans for thousands of dollars to pay for school. Most colleges now have a "Welcome to college" class all freshmen are required to take and a capstone "Bye bye college, welcome to the real world class" that all seniors have to take. Maybe they should spend more time in these classes talking about debt and student loans. I know most schools make you go through exit counseling with financial aid when you finish, but they basically just give you a list of places you can go to try and get a consolidation loan.
  
  We had a guy who came and spoke in one of our chapel services when I was in college and he talked about debt. He said that if you max out your first credit card at $500 your first semester of college, never use it again and only make the minimum payment each month, that by the time you graduate you would have some ridiculous amount of debt, like $27,000 (I don't remember the exact number, but it was big) when you graduate, because of the interest on the card. It was kind of shocking. This is exactly why I pay off my entire credit card balance each month and overpay on my car loan by $50 (or 15%) each month.
• Manhattan Buckeye

  "Law students typically have $100-150k in loans, and when you figure the median starting salary for lawyers is about $45k (for those who can get jobs right now), it starts looking ugly."
  
  We had dinner Friday night with one of my wife's co-workers. Her husband is a 3L at U of Richmond law, very nice guy. I'm trying to get business from his father*.
  
  He's working for the federal district court for no compensation, and is also working for the Chesterfield County (that's the county south of Richmond) court system for also no compenation....apparently he only has 6 hours of classroom credits this semester.
  
  At any rate, at dinner he told me that perhaps 10% of his class found employment....in all sectors. He was counting himself in that 10%. That includes people working for nothing, like he is. I didn't find it polite to ask about debt but I'm guessing he has a significant amount.
  
  * I'm thinking about hiring him. His Dad is the owner of a fairly large business in the area and I've been wooing this business for 6 months. Hiring him will get me the account, but I have NO CLUE what to offer to pay him. I don't want to overpay for a completely untrained person but don't want to offend him for obvious reasons.
• muffy

  Wiping out all, 3/4 or half of student debt (and if not wiping out all then reduce the amount owed and the monthly payment by the same percentage - 75%, 50%, 25%) would really stimulate the economy. If you owe $100,000 and pay $2,000 a month right now (just throwing figures out there) and your debt were cut to $25,000 and you only had to pay $500 a month it would free up $1500 a month. Hopefully some of that would go in to savings but the rest could/would be used for other purchases, etc.
  
  If people weren't tied in to so much college debt they would use that money to buy houses, cars, furnishings for those houses, etc.. which have a ripple affect.
  
  I'm not commenting on whether people should or should not assume large debt for college, I'm simply stating that freeing up that much money would stimulate the economy and I think it would stimulate it more than the steps tried so far.
• Manhattan Buckeye

  "If people weren't tied in to so much college debt they would use that money to buy houses, cars, furnishings for those houses, etc.. which have a ripple affect. "
  
  I agree with this, most of the folks I know that in their 20's are in arrested development. They aren't buying houses. They aren't getting married. They aren't having kids (for the most part)...this is an issue.
• Con_Alma

  Who are you suggesting takes the hit? The underwriters??
• fan_from_texas

  Manhattan, I'm not surprised. I've talked to a number of people from NU who haven't found employment, either. It's gotta be brutal at a lot of places. In my class ('08), I'd say that close to 20% of the people I know have already been laid off. There's no realistic way for those people to pay off loans--we're doing it as fast as we can, and it's overwhelming.
  

  Hiring him will get me the account, but I have NO CLUE what to offer to pay him. I don't want to overpay for a completely untrained person but don't want to offend him for obvious reasons.

  NALP would probably give you a ballpark idea of what the area BIG/MIDLAW shops are paying, and the Career Services there might give you an admittedly upwardly skewed ballpark number. I think that most people heading into private practice are probably in the $40-60k range starting out, depending on COL and billable requirements. A few friends at smaller plaintiffs' shops get paid based on realizations, almost like a straight commission. Maybe some sort of hybrid comp could be good, so you give him a floor, but any business/billables he generates above that allows him to share in the upside. No idea how that would work in practice, but I think most people would be open to the idea of tying their compto their performance.
• Manhattan Buckeye

  "Who are you suggesting takes the hit? The underwriters?? "
  
  The professors/administrators that have ran this bubble into the ground. I went to a "public" law school so the salaries of all employees can be found. There is one professor I know in particular that makes $300,000 a year (plus benefits, plus pension, plus what other state workers get) that couldn't lawyer his way out a cardboard box. He was incompetent, a terrible professor and a most likely "not a good" person (from reports, I didn't know the guy that well so I'm not going to judge too much). But the good citizens of the Commonwealth are on the hook for for his compensation. We're in a recession/depression. Every public worker should be up for yearly public review. Tenure shouldn't be an option.
• fan_from_texas

  Re wiping out student loan debt: it's a major moral hazard, IMO. Seriously, I talked to a gal who is heading to Marquette Law and will probably take out $150k or more in student loans, despite being aware of the employment prospects post-graduation. Everyone is certain that they're the exception to the rule and will find great employment making a ton of money. It's just not realistic, and rewarding people for refusing to balance the costs is a bad idea. Maybe we should require schools to provide legit employment statistics and average indebtedness, or make people take a debt counseling seminar before taking out student loans. I don't know. It's a tough situation, and so many people in their 20s are mired in debt with no realistic hope of getting out. I just don't like the idea of wiping the slate clean for people who made bad decisions.
• Con_Alma

  MB I understand your frustration but the defaulted loan value isn't going to be absorbed by profs and administrators. They already got theirs from the transaction. You might seek to have that changed going forward but that wasn't what I was asking.
  

  fan_from_texas wrote: ... and rewarding people for refusing to balance the costs is a bad idea. ... I just don't like the idea of wiping the slate clean for people who made bad decisions.

  
  I agree whole heartedly.
• derek bomar

  

  to play devil's advocate for a second...we have a long history of rewarding people for making bad decisions in this country, why shouldn't college grads be included? At least they put forth some effort in good faith and without bad intentions...
• fan_from_texas

  I will throw in the caveat, of course, that whether a decision is good or bad shouldn't be judged by hindsight, but by whether it was a good or bad idea at the time. I'm not sure how to differentiate that out in a practical, workable manner, but in my mind, if the health care bill suddenly radically changed physician compensation, it'd be necessary to deal with the "stranded costs" of student loans for all the med students who reasonably relied on one thing. Sweeping legislative changes need to differentiate between good chocies and bad choices, and I don't think that's politically palpable in many situations.
• Con_Alma

  derek bomar wrote: to play devil's advocate for a second...we have a long history of rewarding people for making bad decisions in this country, why shouldn't college grads be included? At least they put forth some effort in good faith and without bad intentions...

  To use a wrestling term....you never chase a bad position.
  
  Someone will have to pay. I again ask, who should it be?
• Manhattan Buckeye

  "I agree whole heartedly."
  
  I agree as well. I don't think we should reward poor decisions.
  
  But this is going to be an issue, and perhaps more soon than we'd like to see. There simply aren't many options that don't present risks for young people. My sister-in-law is a 3rd year undergrad at UVA. She dates a 4th year that is pretty "with it" (I'm biased, I'm a tough brother in law!)....it isn't easy for them. She's glad to have her waitressing job at the local country club, I still don't know what he's doing or planning. It is just so different from my experience.
• LJ

  

  fan_from_texas wrote:

  cbus4life wrote: I wonder how many of those are Humanities PhDs and the like, though i would imagine some are also of the Med School/Law School variety.

  Typically, MDs are going to be in pretty good shape, despite the student loans. Law students typically have $100-150k in loans, and when you figure the median starting salary for lawyers is about $45k (for those who can get jobs right now), it starts looking ugly.
  
  I imagine the PhD route probably depends a lot on the field. An econ PhD with some debt isn't going to be in nearly as bad of shape as a Religious Studies PhD in similar debt.
  
  The federally-subsidized loans (to make college "affordable") are a killer, as they enable schools to inflate tuition and have it guaranteed.

  Vets are in even worse shape. They keep claiming there is a shortage of vets, but that is when you try to spread vets out over an area. Sure they may be only 3 vets for a 5 county area in Vermont, but there are only 6 dairy farms. With the economy being like ti is, people are skimping on their pet care. Luckily at the time when my gf entered vet school, her subsidized loans are backed by the USDA because she had an interest in Large Animal and are forgiven in 25 years no matter what. If she took a USDA Placement (which sends you to like, middle of nowhere Wyoming, Vermont, Maine, etc) they would forgive another 10% upfront, but the pay is like $25k per year subsidized by the gov't (they give you all your equipment and tell you to go at it).
• Con_Alma

  Manhattan Buckeye wrote: ...
  
  But this is going to be an issue, and perhaps more soon than we'd like to see. ...

  
  I'd actually rather see this be an issue earlier rather than later so that we might as a community at large be forced to address it.
• fan_from_texas

  Con_Alma wrote:

  Manhattan Buckeye wrote: ...
  
  But this is going to be an issue, and perhaps more soon than we'd like to see. ...

  
  I'd actually rather see this be an issue earlier rather than later so that we might as a community at large be forced to address it.

  Any thoughts on how to deal with it?
• Con_Alma

  No. It's why I have inquired in this thread several times regarding who it is that would take the hit on potentially forgiven debts.
  
  I do know that intentional discussions by people that are more intelligent than I and carry the authority to act can only help. The earlier the better. Delaying further won't improve the situation.
• just_a_swimmer

  

  This is a scary thing. My son has been taking out loans to pay for his college. I wasn't much help to him in 06 when he started school because he started in September and I lost my job in October. Since then he has taken all the responsibility. I have a general idea of what his debt is but I sure hope he has been paying attention after reading all of this.
• fan_from_texas

  Con_Alma wrote: No. It's why I have inquired in this thread several times regarding who it is that would take the hit on potentially forgiven debts.
  
  I do know that intentional discussions by people that are more intelligent than I and carry the authority to act can only help. The earlier the better. Delaying further won't improve the situation.

  My guess on the most likely outcome is that there will be a lot of grandstanding and puffery, followed by a plan that the feds foot the bill on loans for "low income" or "public interest" people. Essentially, if you take out $100k in loans to be a teacher, or if you take out $100k in loans and then can't find a job, the feds will foot the bill. I see this as the worst of all worlds, where we reward the people who failed most significantly on the cost-benefit side. But it's not politically palpable to pay the loans of the doctors who make $200k, even if doing so frees up more money for the economy. The doctors, lawyers, economists, whatever who landed good jobs will be stuck with their loans, while people who didn't will get a free pass. This is probably the easiest political move, but it would be infuriating to people who made good decisions, landed good jobs, aggressively paid down their debt . . . and now have to pay for the guy who took out $250k in loans over 12 years in his quest for a sociology degree.
  
  I guess we'll see. In the state of the union, Obama mentioned that he'd like to see all loans canceled after 20 years (I think). I can only imagine what that will do the cost of college if they realize that they can charge whatever they want, with the balance canceled after 20 years. We'll see.