As the nation watches the student loan debt steadily rising above 1.3 trillion, new data was released on Friday indicating at least half of students have defaulted or failed to pay down at least $1 on their debt within seven years. There is no shortage of memes or Facebook commenters calling out who is to blame.
Is it the student’s fault? The university’s? The lender’s?
Lady Woolthief’s Take:
If 50% of a middle school English class failed, would it immediately be assumed all of those students were stupid? Or would it be worth a shot to look into the teacher’s effectiveness?
A combination of factors have created this toxic environment for students. Yes, students should pay back the money they borrowed. But… Interest rates are much too high. College is too expensive. Degrees are valued too much in the job market. And the lending practices of universities absolutely need reform.
“You don’t have a credit history, which is why the best interest rate you can get is 7%. It’ll be even less if you have a co-signer. Mom? Dad? Can you help them out? Oh, don’t worry. With the skills our program teaches, he’ll easily get a job and have it paid off in ten years. And even if that doesn’t quite work out, there’s plenty of repayment options. You can always consolidate.”
That’s what the student loan industry is built on, which is sad (and probably in a business-savvy way, smart). It’s also short-sighted. They’ll make trillions on millennials, but the rest of the economy is already suffering — check out the mortgage industry. Many millennials are too overwhelmed paying off student loans to put money away for retirement or even start families. Others have unfortunately given up ever paying off their student loans and have abandoned them.
Who takes out a loan without the intention of paying it back? Pretty much no one, despite the perception. No college-bound 18-year-old wants to ruin their credit or declare bankruptcy before their adult life has really began. Most students take out loans with good intentions. But being smacked with a tremendous monthly bill that only seems to grow as interest accumulates gets to be too burdensome. Others are scraping by paying the minimum (for some, close to/over $1,000), while barely making an impression on the principal balance — they will be paying for their student loans into their forties and possibly fifties. At current interest rates, the lender could double their initial investment.
No matter who is responsible, something has to change for the next generation. Lenders and schools need to stop looking at students as cash cows before the entire system collapses.
Dear General Public,
There is plenty of blame to go around, so please, please stop pointing your finger solely at the (literally) poor 18 year-old kids who wanted a better life for themselves. They have their share of the responsibility and they are held accountable for that (even in bankruptcy, student loan debt is rarely discharged), but it is also the corporations handing out the money that are breaking the system. In the last few years, students have won several lawsuits against schools and lending companies over their predatory lending practices. Everyone knows schools over-inflate their success rates, job opportunities, and salary statistics to bait students into loans they could never afford. But that is nothing compared to the nefarious practices of outright lying to students about what their loan payment terms will be and covertly charging private student loans with higher interest rates to students who have not used up their federal loan resources yet. Schools are not looking out for the best interest of their students and that is a scary prospect for everyone.
Student loans are the only option for millions of students in an economy where janitor positions ask for at minimum a 2-year degree. Please take pity on these borrowers. Many of them are in over their heads. Imagine five years out of college, making a minimum payment of $900/month, on top of rent and other living expenses, and barely seeing a dent in your principal balance due to sky-high interest rates. That is not the dream their college financial counselor sold them on and it is beyond discouraging.
There’s no classy way to say it: this situation sucks the big one. However, predatory or not, you did take on the responsibility of the loan when you signed for it. Don’t hide from your debt — it’s not going to go away. There is a wealth of articles online both bemoaning loan companies (which will make you feel not so alone) and offering helpful tips about how to make your loan situation manageable. Educate yourself on options concerning federal versus private loans. Take advantage of the programs available to consolidate your federal loans into one, small monthly payment. It’s time consuming, but will save you thousands of dollars and a lot of stress. If you remain in good standing, most private lenders are now willing to work with you due to pressure from the public and the government. Sign up for income-based programs. Even if you aren’t in good standing, there are generally still options available. After all, paying something is better than nothing. Make sacrifices to pay off your loans. Live with roommates, don’t eat out every day, work extra hours. Cut your living expenses as much as possible until those loans are paid off.
Please don’t give up on your dream. It’s unbearable to think of those struggling under the weight of this debt who don’t even have the pay-off of working in the field for which they went to school. Keep fighting to make it worth it.
Dear United States Government,
Offer some relief — not a bail-out, just some relief.
Here’s an idea: raise the cap on what can be deducted off of taxes. $2,500 of student loan interest getting deducted sounds nice until you discover that you’ve paid well over $7,000 in student loan interest over the course of the year. The student loan deduction cap was instituted before this became a household crisis, and has not been raised since. With some student loans being as large as some mortgages, it’s beyond time the cap was raised. Further, get creative with incentivizing people to invest their tax refund back into the repayment of student loans. For instance, a program where the government matches any tax refund money paid toward student loans would encourage people to get their loans paid off faster.
It is so appreciated that you offer gainful employment, but please really consider if a degree is necessary before including it in a job description. If more good jobs didn’t require degrees, fewer students would feel obligated to take out loans to pay for college. It is a hard job market to navigate for someone without at least some college on their resume.
Cut your costs and make education affordable again. Leave general education to high schools, and consider opening up more 2-year trade schools so students are focused on the careers they are pursuing instead of spending money on mandatory classes they will never use. Stop with the predatory recruitment and lending practices. Seriously, stop.
Dear Private Lenders,
You are important. You help bankroll kids’ college educations when they would never be able to afford it otherwise.
But please reflect on your business model. It is unsustainable and bad for the health of this nation. Make a buck on someone’s dream, but don’t multiply that by seven.