Like many middle-class families, Cortney Munna and her mother began the college selection process with a grim determination. They would do whatever they could to get Cortney into the best possible college, and they maintained a blind faith that the investment would be worth it.
Today, however, Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt from her four years in college, and affording the full monthly payments would be a struggle. For much of the time since her 2005 graduation, she’s been enrolled in night school, which allows her to defer loan payments.
This is not a long-term solution, because the interest on the loans continues to pile up. So in an eerie echo of the mortgage crisis, tens of thousands of people like Ms. Munna are facing a reckoning. They and their families made borrowing decisions based more on emotion than reason, much as subprime borrowers assumed the value of their houses would always go up.
Meanwhile, universities like N.Y.U. enrolled students without asking many questions about whether they could afford a $50,000 annual tuition bill….
For at least the Federal Student Loans, there are programs where if you work for a 501c3 non-profit, and earn under $40,000, you can pay an income adjusted amount for ten years and then have the rest of your loans forgiven.
This article http://news.medill.northwestern.edu/washington/news.aspx?id=136913
questions whether this is a good idea, but gives a lot of the details of the program. One of my children is taking advantage of this program. When I read this article I was tempted to get on the phone this instant and ask her if she realizes she will be kicked off the program if she misses or is late with ONE payment!
Since she is going to have about $80,000 of loans forgiven, that would be a pretty hefty late fee! She has a bachelors in social work and a masters in public administration, but none of her jobs has paid as much as $25,000. She has worked for an agency which ran group homes and sheltered workshops, and for an agency which placed difficult to place foster kids and did adoptions. She now works for an agency which investigates complaints of abuse of the developmentally disabled. These agencies can’t afford to pay more than this pittance for these very responsible jobs. Yet people do need education to do them. So this program does make some sense.
I hate to sound mean here but anyone who has a degree from NYU and works for a Photographer is WOEFULLY underemployed. And why is that? Because the young lady spent (i.e. WASTED) 4 years of tuition money graduating with an interdisciplinary degree in religious and women’s studies.
Taking out loans for education can be a worthwhile investment IF and ONLY IF!! one’s degree is in something which will pay a decent wage. (Think engineering, the sciences, economics), Heck, even a public school teacher in most states makes a fair amount more than $22,000. Actually, when I was selling cars, I pulled in around $40K in a bad year. (And that is a job which DOES NOT require a college degree!!).
So one of the problems is that there is the philosophy that “all majors are equal.” If I were a bank (or Sallie mae, or the Scholarship office) I would think long and hard about financial aid for students who will never make enough money to pay back the loans. (And do we really need more people with degrees in medieval dancing-GRIN).
#2, Exactly what I was thinking and likewise was not feeling empathetic in this situation. My daughter will graduate next spring with a similar degree next spring, but no debt, as we are fortunate to have saved and being able to pay as we go along, she also works in the summers. She also attended a local CC for awhile which helped her accumulate some credits at a fraction of the cost of a four year school. I have another one in college who will be a soph.
She had an offer to go out-of-state to a private school that was twice as expensive, but opted for her current choice. We think as parents that its important them to begin their adult life unencumbered by debt. At some point value has to become a criteria. While I’m sure NYU is a good school the degree from there for that profession just isn’t providing a return on investment.
I am wondering if banks are still making these kinds of loans? Do parents have to co-sign? Do banks go after the parents?
My initial reaction was one of disbelief that the writer would equate student loan debt with the teaser rate mortgage fiasco. Some people honestly got sucked into the exotic loans, not understanding the long term consequences. That doesn’t necessarily excuse them from their debt, but one can at least empathize with those were were taken in by shady mortgage deals.
Student loans on the other hand are completely self inflicted economic wounds, particularly in the undergraduate level. You know how much you are borrowing when you sign the promissory note. You know the terms. You do it of your own free will. You have other options for quality education at institutions with greatly lesser tuition rates.
I am not, however, one of those people that says you have to get a degree in something that will make money. I think there is value in doing scholarship in a discipline you enjoy studying that is not necessarily a money maker, but, likewise, you need to have some plan on what you intend to do with such a degree afterward. If you want to continue on and become an academic in that field, fine and good. But, I don’t have a whole lot of sympathy for someone who drops $100k on an undergraduate degree in a field that is a proven non-money maker.
I think the operative principle of the Laffer curve is applicable to student loan debt as well. The Laffer curve involves government taxation, and basically argues that at some point taxes get so high that no revenue is generated. For instance, if 100% of every dollar I earn goes to the government, then I am better off not working at all if I end up with nothing. If no one is working, then government has nothing to tax, and therefore no revenue. In terms of student loan debt, at some point the loan is so high that a graduate can never hope to repay the loan in his or her working lifetime, thereby negating the purpose of getting a higher education in the first place.
Why doesn’t she just get a better paying job?
From Instapundit, a reader writes:
And the military–either as ROTC or the “GI Bill” (It has a different name these days but you know what I mean)–is another source of help for college. I actually joined the Army Reserves at an older age (I was an old captain) to pay for a great deal of my doctoral program. I was expected to do reserve duty (drill one weekend a month, two weeks of active duty training, ready to be deployed) but actually had my graduate expenses paid off before I finished the program!
All I’m saying is that there IS a way to get relief from college expenses if one is willing to serve one’s country. And on this Memorial Day weekend, that is something to seriously consider!