Why College Loans Are EVIL

[SovereignessofVamps]

I had researched college loans a lot and found out some shocking things. Shocking to me anyway. I found out...well, a common statistic is that the average amount of college debt for grads is roughly 30K. I had believed that when I was younger, but I found out that totally is not true.

The real truth is that those figures only account for the loans in the 'student's' name, not the loans in the parent's name. Because the loans that are in the student's name are called Stafford loans. The cap for the amount a dependent student is ever allowed to borrow in their name for these, is only 31K!!

The loans in the parent's name are called Parent Plus loans. They pay for most of the COA. So, the parents are the ones who are legally bound to paying the huge amount of college debt! I never knew this was going on. No one ever talked about Parent Plus loans. My parents had never heard of those types of loans either, and they had heard college debt horror stories IRL. They also both read plenty of horror stories online, and I had to. But, I had no idea that was truly how the loans worked.

I had always wondered though, how the student loan debt amounts in statistics could be so low...I think we had all assumed people got scholarships or something...but no, the parents have massive, massive amounts of college debt from their kids. Now that I know what to search for, I've found a whole new crop of horror stories from people.

I know people start applying for Univ soon, like early decision. So, before you do just do your research! For Parent Plus loans, I've read over and over that it's very difficult to transfer them from the parent's name to the student's name, even after graduation and if the kid got a job. So, lots of parents aren't able to keep making payments, and their kid could also even have trouble finding a job in the first place and lives with them to cut costs for their own selves. They may not be able to even pay their own Stafford loans in their name, let alone help their parents with the way higher Parent Plus loans debt. So there's just so many sad stories...

And now I know what students really mean, when they say that they worked part time through college and paid off like half their debt. Or they worked long hours before graduation and paid off most of their debt...no one was talking about the real debt!!!

[meowcow]

I still don't see why college loans are evil. You never really got to that point.

A loan is a loan. What you do with it is your own business. When people buy a new car or a house, they go to a bank and get a LOAN. Entrepreneurs who start up a business also go to the bank to get... a LOAN. When you want higher education, you either get a job to pay for it, or you get... A LOAN.

These are all various forms of investment in the hopes of some form of return on that investment. People buy a home hoping it will appreciate in value. People buy cars and the return is the expedited travel. People get loans for their education hoping it will qualify them for higher paying jobs (compared to high school grads). What part of that is evil? Why do you sound like an entitled brat who expects everything to be handed to you on a silver platter?

You want a car? Earn it.
You want a house? Earn it.
You want higher education? Earn it!

[SovereignessofVamps]

The loans you can usually get vs student loans aren't even remotely the same! You can't declare bankruptcy on student loans, so if you can't afford payments you can end up homeless, have your credit ruined for years on end, and have very severe consequences you can't escape from. Parent Plus loans are even worse than Stafford loans... I wrote this so people would do their own research about it. I think you need to look into things, if you want.

Student loans can be a living hell and make people commit suicide or end up homeless. I don't think any other loans can do that.

[meowcow]

Why would a student loan be the same as a loan for a car/house? It doesn't even make sense. If you take out a loan for a car, house or a business, that asset is collateral. Meaning if you don't pay it back, the bank will take your car, house or business. That's the consequence of not paying what YOU OWE.

With a student loan, there is no collateral for the bank to reclaim their losses if you go bankrupt. That is why you are not allowed to declare bankruptcy. That sounds PERFECTLY FAIR to me. That is also why parents co-sign on the loan, because nobody is stupid enough to give you thousands of dollars with ZERO guarantee of being able to reclaim some of it back if you default.

Also, I question your sense of honesty and integrity. You sound like you are taking out a loan with the intention of declaring bankruptcy so that you don't need to pay it off.

It's not the student loans that cause people to commit suicide. It's a person's lack of management of their finances.

[SovereignessofVamps]

No... people commit suicide because of the interest and being unable to pay the loan, because of the terrible job market. You should google some horror stories...

[meowcow]

That's a laugh... interest payments causing suicide. What you've done is identify the symptoms of a person with financial management problems. You've completely missed the underlying cause of their problems.

Let me prove to you that you're wrong. What's the average student loan these days for a college student? For the standard degree, it could run up to about 30-50k over 4 years. Those in medical or law degrees could rack up over 100k, but the average is 30-50k. The LOC interest rate today is about 3%... yes, we are experiencing the LOWEST interest rates ever seen for the last 10 years.

So if you have a $100,000 student loan, paying 3% interest a year, the ANNUAL interest amounts to $3,000. So what you're saying is that students are killing themselves because they cannot pay $250/month in interest payments? Yep... that's what you said. Sounds stupid doesn't it?

[meowcow]

Meanwhile, every millenial out there has no problem spending $100/month on their cell phone bill, and $700 on whatever new iPhone or exploding Samsung phone that comes out. Or eating out at trendy restaurants so that they can instagram their food. You also see a lot of millenials rent out apartments in trendy downtown areas which they can't afford, forcing them to live paycheck-to-paycheck. Those are CHOICES that they made themselves because they want others to think they live a great life. Seriously, these people stretch their finances so thin that a few dollars of unexpected cost will throw their lives into turmoil.

[SovereignessofVamps]

Yes, but like I wrote, 30K debt is the largest amount of debt... that the student can get! The debt statistics won't mention the Parent Plus loans, which pay for 2-3x and more of that debt amount. Like going to college in state on average is about 25K a year (total cost, not only just tuition and fees). So the student may only have their personal debt capped at 31K, but the parent will have the other 70K of debt!

So, if the parent can't afford the payments or the interest on their Parent Plus loan, and then on top of that their kid can't even find a job due to the terrible job market...

I wish you had read my mytake.

[SovereignessofVamps]

But college can be extremely expensive these days, so even if the student does get a job with a 30K-40K salary, after bills/expenses they still may not be able to pay for their 300 a month loan payment. And... I think Parent Plus loans have like double the interest rates of Stafford, but 100K total loans... that's actually pretty cheap for just a regular 4 year degree, let alone if the kid goes to an out of state college.

[meowcow]

If a person thinks 30k + a low interest rate is a life-sinking loan, they have no hope of achieving much in life. One wonders how these people could ever hope to buy a home through a mortgage, if a 30k loan scares the shit out of them.

Fresh grads can't expect to make top dollar right out of school. It's a common theme that most millenials think they are the best thing since sliced bread. In reality, they lack experience, and their salary reflects that. Guess what? Our parents also started at the bottom of the ladder. My parents immigrated here with zero English and worked 30 years to pay off their mortgage. You sound like you expect a student loan to be paid off within a year of graduation. Sorry but you will have to pay your dues, just like everyone else.

I paid 90k for one year in an MBA program and paid it off the next year. So I'm not unfamiliar with student debt. I wouldn't be able to pay if off if I was 21, but I'm quite a bit older and experienced, and hence make more.

[SovereignessofVamps]

@meowcow How'd you pay off 90K in 1 year? Savings yeah?

[meowcow]

As I said, I was about 10 years older than a someone who graduated with a bachelors. So yes savings.

It's called financial management, investing your money instead of spending it on "wants", and not spending beyond your means. I had a shitty job just like everyone else when I was 21-22 that paid around $15/hr. I had the patience and understanding that I was not entitled to a high paying job just because I had a degree, and worked 2 jobs to gather experience until I got a decent paying job by 25.

Never complained about my debt, because taking on the debt was my choice.
You don't CHOOSE to take on a loan and sign on the dotted line, then whine about the interest payments after. You have every bit of information available to you - the terms of the loan... etc, from the start.

[SovereignessofVamps]

@meowcow How did you get 90K without needing a Parent Plus loan? You were so young...

[meowcow]

Because I worked 2 jobs and ran 2 online retail businesses by myself by the time I was 25. By 27, I bought my first home with a bank loan. I didn't go for the shiny expensive new home that I couldn't afford. I got the 40 year old house that was in good condition. I learned to trade stocks and commodities during the 2007 recession after I lost my job (I was 28 by then), and through informed investment decisions and analysis, made more trading than I did working. Saved 300k by living modestly and driving a shitty used car when I was 32.

The MBA was 90k, and I could afford it right away. But, since student loans are interest free, I applied for it and saved having to pay $6000 in interest for the year. Once the program was done, I sold some stocks and paid it off.

It's all about having a pattern of making good decisions. Just cuz you have the cash to pay the latest toy or a shiny apartment, doesn't mean you should. Save it and the delayed payoff is greater.

[SovereignessofVamps]

@meowcow If your situation was real, then it was really exceptional. These days many grads can't even find that first job. Where I live, you have to srsly compete for a simple part time job. I heard in cities it's better though but still...

Honestly, have you mentioned any of that, anywhere else on this site b4?

[meowcow]

I live in Canada where the current unemployment (and historical levels of unemployment) are always higher than the US. Canada is sitting at 7% while the US - nationally is at 4%. Having operated businesses against US competitors, you would not believe how difficult Canadians (and other countries) are disadvantaged vs the US.

My story is not particularly "exceptional" except that a Canadian small business was able to survive decently against US competitors. American jobs pay more, the dollar is worth more than Canada's loonie, Americans pay about 30% less for their food and expenses vs Canadians. I actually drive 2 hours across the border to shop at Trader Joe's because it's cheaper overall... yeah, after driving 2 hours there and back, taking into account gas and expenses, it's cheaper to buy US stuff.

And somehow, Americans, given everything to them, can barely make ends meet. You should see some places like Vietnam or China and see the real challenges people face to survive.

[LivingLife94]

I have no experiences dealing with college loans, because I have a great job. I heard that college loans are awful.

[Gothics_]

Hey, can you pm me?

[bcromartie]

Actually the loan system is really gracious. It's a great idea if you think about it; the loans themselves gain interest and previous users of the system pay back into the same pot of money that goes out to others plus some money. While the concept of debt seems terrifying it's actually not; primarily what is really happening if you were to put it together is you are paying for someone else's education who in turn someone else is paying for yours through the same cashflow system.

It eases the burden on the State which keeps everyone's taxes lower. Most people miss that part. If you wanted to be upset it isn't the loan system, it's the college system, and the fact that education is a major for profit business that should be upsetting to you because your parents of yesteryear paid the same elements really, actually with greater interest to compensate for the lower numbers of students.

As students increase and stability is economically available because it's not a generated system with the intent to make money (like a bank would be) all that happens is the interest rates continue to drop. So really it's the price of college not the cost of taking out loans since loans like this, despite deferment and all sorts of sweet options being present, are actually investment type loans and when compared to other investment type loans tend to pan out better in the long run.

You are better off taking $60,000 in loans today through the education system than $10,000 for a start-up specifically because banks are out to make money and government grants for small businesses tend to be more rigorous. You also have other things to consider such as the failure rate of small businesses versus the opportunity cost of actually getting an education.

But don't mind me. I've no idea what I'm talking about; I just do this all day.

[SovereignessofVamps]

... so if a parent has 80K in loans and can't afford the payments, and the student can't even pay their own much smaller Stafford loans... you don't think that's just awful and has severe consequences?

[bcromartie]

It doesn't. School loans are treated very differently than regular loans. For instance in a mortgage you can lose the asset, right? In school loans if you defer and prove that you have a low income the loan repayment is significantly reduced. You say "Well, you're in debt! That's terrible and stressful!" but in reality you're always in debt, you have to pay bills that are ongoing, so your electricity bill is a lifelong debt until either you get off the grid or own the company itself. The same is true with internet and all other common amenities. As far as I am concerned an ongoing liability is a sunk cost so it's a debt and you don't have an option but to pay it.

That said I do understand why it SOUNDS horrifying. Most people want a house that's maybe in the 50k range and are happy so the idea of paying more than a house for education sounds unsettling but in reality if you consider how it is spread out and various options not afforded to regular loans it's better.

[bcromartie]

Also, there are ways to achieve loan forgiveness and many times with proper notification (note: not "negotiation", just notification) if you do default on the loan it doesn't necessarily go on your credit. The loans will naturally be placed on your credit, yes, but you can request that you don't have them reported. A lot of things people don't know about the system exist that are really important to consider but ultimately the entire reason why the PLUS system exists is to actually keep dependents from drowning in debts they normally would never be able to pay because if you think about it a mortgage can be 30 years but student debt can be 50+ if you please. It's just significantly lower and with a lower interest rate, no taxes attached like property taxes, no for-profit system trying to squeeze you to death... Oh, I am passionate about money. I need to calm down

[SovereignessofVamps]

There are so many horror stories. Unlike a mortgage or other debt, you can't declare bankruptcy. Once the student loans ruin your credit from you not paying them, you can't get a mortgage or credit card or other loans...

I actually like your bill analogy though. But if you look online there are hundreds, and hundreds, of student loan horror stories.

[SovereignessofVamps]

And I've heard plenty of deferment horror stories too... and Parent Plus loans, they have stricter rules so they don't have the same variety of deferment or other options as Stafford loans. Parent Plus loans... they can be brutal from what I've heard and read.

[bcromartie]

No, that's a good thing. You do not want to declare bankruptcy. That is the worst of the worst decisions you can make financially. Going income based is far smarter (and not an option anywhere else) than declaring bankruptcy. Also, if you let (and I mean LET) your loans enter default that's not the system's fault at all. I've yet to hear of someone who actually spoke to their NON-PRIVATE lender and have this issue. Keep in mind that some student loans are privately owned by banks and they are totally different! They don't negotiate at all. Even if it is backed by the US college fund in truth it's still a private transaction. Also, if you declare bankruptcy you can forget about getting other loans anyway.

I've read many fear-based or ignorance-based behaviors with money, period. Questions like "did you actually talk to them?" with the answer "no, but I tried once" come up. It's pretty bad. But it's a consumer knowledge issue not The System for the most part.

[bcromartie]

But this also makes me question if this is before or after the large reformation of the NDLFS system. I think that's the acronym. Loans used to be issued by and co-owned by real banks so that system definitely did carry it's own horror stories which is why so many of those loans were transferred over to the new system because the banks had interest in actually acquiring the funds in the private sense hence greater pressure to heckle individuals to get the money. Now all loans usually go through a single carrier instead of multiple carriers and banks.

[SovereignessofVamps]

Did you read my comments? You can't declare on student loans...

[bcromartie]

You don't ever want to declare bankruptcy to begin with. If you declare bankruptcy right the assets that you own (education isn't tangible hence why it doesn't work and it is not the only intangible asset that you can't declare on) right then and there can be seized. You don't "win" through bankruptcy. Chapter 7 ( bankruptcy.findlaw.com/.../...-rules-overview.html ) basically screws you over. While it protects your assets at first when you actually get through the system you basically have a meeting where the banks try to take their stuff back or make you pay for it. Now there are real horror stories involving loss of assets especially over unreasonable Ch. 7 declarations where people thought they were getting over on the system.

It's a good thing you cannot declare Ch. 7 on intangibles. You don't want to. Ever. Or Ch. 13 for that matter. Or any modification to bankruptcy. You're better off working with the lender directly in all matters regarding assets.

[SovereignessofVamps]

I nvr said anyone should; that's a totally different topic. You can literally be stuck with student loans, and especially Parent Plus loans until the day you die, was my point.

[capturemyheartnow]

All loans are evil if you don't benefit from them. And student loans are evil when the students don't complete their studies or they don't get well paying jobs after graduating. Financial institutions encourage credit. Credit card crisis has ruined American families financials. On an average each American earns S 51,017 a year and is $ 2,25,238 in debt. Warren Buffet says , "You only learn from mistakes." I hope Americans can look back with introspection about their ideas of taking reckless loans , and learn from their past mistakes.

[NexAngelus]

the federal loans are based on the school and the NEED. it has a ton of base variables. ur cap though is not true, neither is the burden of putting it on to the parents. regardless student loans are stupid and u shouldn't use them. use scholarships and savings or other programs hell even working.

[SovereignessofVamps]

Why is the cap or the parents' burden not true? I read it on an official site about FAFSA. I could link if you want.

[NexAngelus]

i use FAFSA every year been so for a few years now.
i just re read the stuff u are talking about, i was off, but u are still wrong. 31k was yearly limit not cap. and as i said its based on the school and need. u will probably get much less. where i go i checked and its like 3k a semester. that would be 6k a year. far from 31k. the parent plus as u say, no one talks about it because its not needed. its just one more of a hundred methods for parents to get their little brats into college. its a low interest set for life loan. its not a bad deal overall. not great but not bad either. why the parents would want to take responsiblity for their brats is beyond me though. time for jobs and scholarships as i said. if u suck that much u could even go the military route if u have to have the college life so badly. there are litterally hundreds of options for non retarded people. loans are for the most stupid and dumbest people. its the EASY way out.

[SovereignessofVamps]

@SovereignessofVamps Nope it's not yearly, it's Stafford and only in the student's name: www.usnews.com/.../stafford-loan-frequently-asked-questions\

'Dependent students are not allowed to borrow more than $31,000 in total through the Stafford program during undergraduate studies' Not yearly, but in total, the yearly cap is much lower.

Parent Plus loans pay the rest of COA, or other loans like private or whatever but the parent cosigns...

[SovereignessofVamps]

lol @NexAngelus

[NexAngelus]

um thats not a fafsa loan

[SovereignessofVamps]

It totally is, parent plus loan.

[NexAngelus]

u just said stafford or what ever. those are not listed anywhere on the fafsa site.
plus loans are yes. which req a parent to sign for

[SovereignessofVamps]

Stafford are the most common... you need fafsa to get them...

[Saoirse_Nua]

As someone who comes from a country that has relatively free third level education ( most colleges have a registration fee of a couple of k) - I always thought the US college cost was dreadful - When I was in university there was a program for about 100 US students who came to university in Ireland because it was so much cheaper, like literally move to a foreign country away from your family for months.

[SovereignessofVamps]

I've heard of that! Is the program for USA students really competitive?

[Saoirse_Nua]

It has been 25 years since I was in university but at the time I think it was just a if you were willing to pay for it. I think the fee was about 4 or 5 times the cost that an Irish student would pay but probably about one third of cost of the US and since our universities had different formats there was different credit arrangements. They try to arrange it so that you could switch back to a US college for later years, only a handful did full degree in Ireland, really only the ones that loved Ireland or honestly just couldn't afford the college fees in States. Air transport and direct flights not as good as it is now which meant that getting home was expensive around 1k for flights so often only times they went home was for summer and Christmas that can be lonely for 3 or 4 years. (1k in those days would be about 4k now)

[FatherJack]

...& a lot of degrees are not worth toilet paper !! A degree does NOT = a truly successful life , formal education can actually hold a lot of people back. Drive & self learning business acumen is worth far more !!

[Anonymous]

The biggest problem is that university educations costs too much money for the value it has.

We end up fighting over who should foot the bill, but the problem is the spending is too high.

I don't have any easy solution, certainly not one that applies to individuals.

[Fathoms77]

Lots of people with gigantic loans never even pay them back entirely. They just pay the monthly until they're dead.

[SovereignessofVamps]

I've heard of that also, it's just awful.

[Unit1]

Education is worthless and costs you money.
Unlike smoking it doesn't *directly* impact on your health and you also do not get better chances at getting a job... at least in my experience.

[SovereignessofVamps]

I think more people should go to community college.

[Unit1]

I think such a thing as "educational degree" should vanish altogether and people with proven talents should just get their jobs without wasting years of time and money for a degree.

[SovereignessofVamps]

Totally agree.

[Luci92]

Ahh man, uni here isn't cheap, but college in the US... damn it's pricey.

[Adigelunar]

nice post-

[SovereignessofVamps]

Thanks!