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not exactly. what they do not understand is the concept of boundaries as they apply to the term "non dischargable loan".
Maybe the student loan paperwork should be required to have a diagram featuring a figure wearing a mortarboard yoked to a plow, with a figure in a suit cracking a whip over them, to demonstrate exactly what that term means :-)
I think part of the problem is that the numbers are simply outside the conception of most students. If the most experience they've had with money is some summer job paying $320/week, numbers in the tens of thousands are just outside their conception. $30,000 or $80,000, it all just registers as "huge".
Why is this going on? Because, in many cases, students depend on the unis financial aide departments to get them those loans, and in many cases, those financial aide departments are corrupt and getting kick backs from the loan originators. Don't believe that, then look up the Andrew Cuomo's investigation of university financial aide departments when he was NYAG. And he admitted that his work wasn't near exhaustive, the situation is far worse. If a uni has only one preferred lender, then run like hell, the school is doing everything not to get you the best terms for your loans. Think of it this way, why would corrupt lenders need to engage in the criminal acts that Cuomo discovered? Because if they had to compete with other originators on terms and loan quality, they would lose, so they engage in all of the nefarious stuff in order to dupe idiot students into taking out way too much money.
Best solution is to remove FED loan guarantees, or scale them WAY back. Force a student to go directly to a bank, and treat those student loans in the same manner as business loans. In other words, create a business plan of what you want the money for, how much you'll need, why you think that what you're going to study is going to allow you to pay back the money, and show how you'll pay back the money. It would be an outstanding educational experience for anyone, it would force them to do quite a lot of work and research, to become familiar with career prospects several years after they borrow money, and require a lot more savvy and understanding than just signing any paper that's plopped in front of them.
This will also force banks and lenders to do their damn jobs, if they don't have the public to clean up the mess of making ridiculous loans to 18 year olds, who have no idea what the hell they're getting into or now where near prepared or ready to attend college, then they would stop making loans. It's not my job to backstop the banking industry's nonsense of lending to people who aren't capable of having that kind of debt. It's simply time for everyone to grow up, know what you're getting into and understand that much of what you're being told regarding college is a scam and fantasy, designed to make a very few rich while saddling you with ever increasing debt.
Why is this going on? Because, in many cases, students depend on the unis financial aide departments to get them those loans, and in many cases, those financial aide departments are corrupt and getting kick backs from the loan originators. Don't believe that, then look up the Andrew Cuomo's investigation of university financial aide departments when he was NYAG. And he admitted that his work wasn't near exhaustive, the situation is far worse. If a uni has only one preferred lender, then run like hell, the school is doing everything not to get you the best terms for your loans. Think of it this way, why would corrupt lenders need to engage in the criminal acts that Cuomo discovered? Because if they had to compete with other originators on terms and loan quality, they would lose, so they engage in all of the nefarious stuff in order to dupe idiot students into taking out way too much money.
Best solution is to remove FED loan guarantees, or scale them WAY back. Force a student to go directly to a bank, and treat those student loans in the same manner as business loans. In other words, create a business plan of what you want the money for, how much you'll need, why you think that what you're going to study is going to allow you to pay back the money, and show how you'll pay back the money. It would be an outstanding educational experience for anyone, it would force them to do quite a lot of work and research, to become familiar with career prospects several years after they borrow money, and require a lot more savvy and understanding than just signing any paper that's plopped in front of them.
This will also force banks and lenders to do their damn jobs, if they don't have the public to clean up the mess of making ridiculous loans to 18 year olds, who have no idea what the hell they're getting into or now where near prepared or ready to attend college, then they would stop making loans. It's not my job to backstop the banking industry's nonsense of lending to people who aren't capable of having that kind of debt. It's simply time for everyone to grow up, know what you're getting into and understand that much of what you're being told regarding college is a scam and fantasy, designed to make a very few rich while saddling you with ever increasing debt.
I think this is a bad idea. The issue I see is that it is tougher to do the plan than starting a business. rather than a business plan where you can say I expect to have X number of customer by year 1, Y by year 2, Z in year 3... I do not see a way where students would say by sophmore year I will get an internship and have a job four years out BEFORE they even have the degree, let alone start the actual program I don't see many people actually willing to do this, I know I wouldn't.
I never undersand these posts that assume that all schools teach the same information. Our HS, and I assume other schools, do teach how loans work in a general computer class. Two of my kids colleges have a mandatory class on financial issues including loans, mortgages and interest rates. Here's a program about financial literacy at my son's college: Center for Financial Literacy | Centers of Excellence | Champlain College
As did our kids. After the financial award packages came out for the schools my kids were accepted to we made an excel spread sheet and showed the actual total cost for each school. We did not qualify for need-based aid, but each child was offered substantial merit aid in the form of grants and scholarships. It was surprising how different those amounts were. Anyway, after calculating the cost, we then put that figure into this: Amortization Schedule Calculator -- Bankrate.com , or another similar site. We then took it further and looked up the expected salary in each child's future profession, estimated monthly and yearly expenses and had a fairly realistic picture of future debt.
My youngest son, in college now, has been so motivated by that final semi-high number in loans that he chose to pay off the interest on his unsubsidized Stafford loan each year and really work to get a well paying internship this summer. My husband also pointed out that his savings was calculated as counting more when we filled out the FAFSA, so it would be better to spend his hard earned money.
The above exercise was also done in their HS class, but it was done sophomore year so it may have seemed more like home-work then something real. The financial literacy classes that are done in college are geared more for up-coming life expenses and loan re-payment, but by that time most of the kids have probably already committed to a large debt of student loans.
I blame the parents as much as the Feds for allowing the loans. For the most part, it is hard for kids to wrap their head around a college debt of $60,000 + especially when the financial packages make the loans sound like some sort of gift. BUT, these kids can't sign for big loans without parental input. Certainly, someone that has been a parent for 18 years, paying mortgage/rent, utilities, and probably their own college loans has to have a better idea of how a crushing debt can impact their kids lives. I realize most parents aren't as detail minded as my husband and I (Librarian + Engineer = anal parents) but they have to know even in general terms how crazy-stupid it would be to take on a loan higher then a years expected salary.
I come from a family of poverty with the only person in my family who would be able to negotiate details in finance being my Great Grandfather and I'm convinced that man sincerely felt that all of his descendants would fail based on how he treated us. I'll be the first male in 4 generations (possibly more) to graduate with a Bachelor's degree and in a semi-technical degree (I.T degree). I'm having some regrets based on some research I've done but I plan to make the best of it and just hope I can somehow get my foot in the door when its all said and done.
So with that, I went into college with no knowledge going into it and thus could not plan my way through it like most of you are suggesting. My mom got an associates in nursing back when going to school was extremely cheap (atleast compared to now) and my dad wasn't around so neither of my parents would have been useful. My mother also "made too much money" so I couldn't receive grants or financial aid, thus I took out loans. Ill probably have about 30k debt but I'm not really upset because I eventually wised up and accepted this is what ill have to live with and I'm taking steps to prepare for it when I finish college. This year I decided to start saving what little money I make so that I can put myself closer to an advantageous position of sorting this out.
Sometimes its not really all about people's intelligence or whatever pre-conceived notions based on fantasy people have. Sometimes people are born into situations where they're heavily likely or expected to fail and unfortunately it is a lucrative business to prey on those people.
Too bad for them, I inherited my stubbornness from my family and won't accept failure in my life. However, I also understand that there is lots of temptation in this world that can destroy a person and I don't begrudge others who weren't strong enough to do what I do to succeed. I'd rather just educate those who want to walk the same path as me.
Accounting is not mandatory in our district. But any parent who feels that it is important can have their students enroll in it. However, I don't believe that understanding student loans falls under accounting as much as it does under basic finance. Basic finance is a skillset that is passed down from parents to children. Similar to cooking and cleaning.
The parents were not required to take accounting and the grandparents were not.
But how many had to take English literature. What did Shakespeare do for anyone's skill set.
I don't even know if my high school had accounting. My mother just trustingly sent me off to school. The people running the school decided what constituted "college prep". Accounting would have been more useful than history, chemistry, English literature or religion.
But if I had just been told some good books on the subject a course at school would not have been any better. The trouble is the majority of books are crap.
I'm currently a college student and I'm not surprised at this, at all. When I read "student loan horror stories", people say that they have no idea how they accumulated so much debt. Then I see episodes of Judge Judy and see that people are buying cars and clothes with their loan money. I was the only one in my circle of friends that knew about the controversy (last summer) surrounding the interest rate increase for subsidized loans (3.4% to 6.8%).
I know that I'll borrow $15,500 for my bachelor's degree and $30,000 for my master's. I plan on moving to Houston after graduation, and the job offers for new grads are paying an average of $40/hr or $83,200.
What I don't understand about all of these "horror stories" is that students who take out Federal loans are required to go through entrance [loan] counseling where all of this "horror" being thoroughly covered. And, at the end of each module, there is a quiz, with questions about rates, interests, repayment (options), etc., etc. All of this needs to be completed before the student can sign the MPN. Perhaps it is different for private loans, but any student with a Fed loan who claims they didn't know is full of complete BS.
The parents were not required to take accounting and the grandparents were not.
But how many had to take English literature. What did Shakespeare do for anyone's skill set.
I don't even know if my high school had accounting. My mother just trustingly sent me off to school. The people running the school decided what constituted "college prep". Accounting would have been more useful than history, chemistry, English literature or religion.
But if I had just been told some good books on the subject a course at school would not have been any better. The trouble is the majority of books are crap.
psik
This right here is the issue. America wants educated students but debt issues isn't high on the list nor is figuring out your major early on (which adds a year or two into school.) America rather have states give standardized tests to students to see if the teachers are teaching the right information rather than information students need. Do we need double dip when it comes to say US history where you learn about it say in 4th and 5th grade, again in 7th and 8th grade and once again in 11th grade. What I learned in 7th/8th grade and 11th grade is was mostly the same with the only new stuff from 11th grade was Johnson's Great Society but other than that, it was re-hash where at least Math was fresh to an extent with alegbra, geometry, statistics and calculus.
Disclaimer: I went into a good field, graduated with a Master's Degree almost ten years ago and paid off my loans a few years back.
I don't think the problem is students not understanding loans. When I was in high school, we were all told "go to college because that's how you get a good job." This was fine with me, it was my plan anyway, and I chose a college that was going to pay for my degree. However, not everybody got the same deal. It was still understood that you had to get your degree. Loans wouldn't matter once you graduated, you'd get a 60k+ / year job and loans would disappear.
We all know the reality. Getting a college degree does little to guarantee you a job. Where is the responsibility in the matter? Those high school students were in school to learn, and they learned that they needed a college degree. Therefore, shouldn't some of the responsibility be placed on those doing the teaching? (And teaching is broad here, meaning parents, guidance counselors, administrators and teachers, etc)
Here's the kicker though: I'd bet we're STILL doing this. We're essentially lying to our children. Yes, the numbers indicate that a person, on average, obtains a higher salary with a degree, but that is an average, not a guarantee.
Last edited by lovethehighcountry; 05-06-2013 at 11:43 AM..
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I don't see many people actually willing to do this, I know I wouldn't.
