Student loans surpass auto, credit card debt

[XaviFM]

@sax: Amen. BTW, you were a heck of a ball player.

[MiamiDAP]

"Bernanke makes about $200,000 from his job and apparently additional money from textbook royalties. So he certainly isn't poor - even for DC - but $400,000 is a 2nd home!"

-This family could EASILY pay for UG and Med. School. It is NOT a funciton of income to some degree, having or not having student loans based on this example is a funciton of family desire to pay or not for kids' college education.
Student Loans are expansive, much more than (for example), equity loans.
Family with lowerincome than Bernanke can pay for both UG and Med. School if they plan right and have desire to do so.

[Hunt]

I would like to echo the comment above that people with debt will wisely pay off the highest-interest debt first, which probably explains a lot of the persistent educational debt (as well as why Bernanke's son probably borrowed so much). Indeed, if you think you might want to buy a house in the next few years, it might make more sense not to pay off your student loan, but to save that money for a larger down payment on your house.

[bluebayou]

The federal govt should loan students money at the same 1% rate they have been charging the banks.

Perhaps the federal government should just stop loaning students money, period. Perhaps Congress should allow education loans to be eligible for bankruptcy proceedings. THAT will avoid any potential loan bubble.


btw: not sure why everyone is speaking about Bernanke's son's med school loans. In the first place, it's none of our business. (Yes, he did bring it up publicly.) And yes, Ben is probably wealthy enough to pay the med tuition. But perhaps he doesn't want to. Perhaps the deal with his kids is that he pays for undergrad only. Perhaps he wants his kids to have some skin in the game. Who knows, and why should we care?

Just because other parents are subsidizing their student's medical schools/grad schools doesn't mean that every other parent should (even if they have the income to do so).

[MiamiDAP]

^But it is worthwhile mentionning, since it might not occur to some that they might negotiate with parents financing Med. School while choosing free UG. I believe it is much better option than going to expansive UG and have Med. School loans later. But again, it is everybody's choice.
We are discussing all aspects here because OP started the thread for mostly entertaining puposes, there is no learning except if we try to share our experiences and I quess that what we are doing.
Again, if something is disturbing, then do not read it, ignore, put person on ignore list.....

[bluebayou]

I grew up on the other sides of the tracks, so I find few things 'disturbing.'

My point is more of relevance. Unless one is wealthy like Bernanke, his personal situation is not relevant to the masses.

since it might not occur to some that they might negotiate with parents financing...

Hahahahaha. Sure, it might not occur to "some" but I would submit that would be extremely rare. Kids start learning how to negotiate with their parents when they spring from the womb.

But still to make it relevant, do you know that Ben's son did not attend a college on a merit scholarship?

[MiamiDAP]

^Not very rare anymore. I heard here on CC, that about 25% of Med. Students are financed by their parents. In many of these cases, these students choose to go to FREE UG to have this option. I have no idea what Ben's son did or did not, I do not care, I am sharing information relevent to OP. If he did not choose free UG, he had valid reasons for that. We need to ask him personally to share. However, I suggested that if he did, then it could have resulted in no loans.

[SteveMA]

The fact that Ben made 2.2 MILLION dollars last year alone and still drives a Ford Focus leads me to believe he is looking at this from a fiscally responsible standpoint, a fiscally responsible standpoint MOST of us have little understanding about because we don't have several million in spare cash lying around. Again, these loans are at VERY low rates. By taking these loans vs paying cash they are MAKING money. It's pretty simple.

If you had 40,000 in an account earning 5% that you didn't need and got a great deal on a car and were offered 0% financing would you pull that 40,000 out of the bank to buy the car for cash or would you take the 0% financing? I know which one I would take.

[quicksilver]

What if student loan debt does not give a return and proves to not be a good investment after all, especially in this recession? I know a whole bunch of college graduates struggling to find jobs and still depending on their parents despite holding such a stellar college degree. When they do get hired, they work positions that don't even require a college education. Where's the pay off on that student debt they accumulated? If they had known better, might as well don't go to college and start getting their work experience right out of high school.
The alternative is this: just work right out of high school, get some years of experience, and move up the ranks in your company! No need to attend college and accumulate debt that possibly would never earn you a return!

[Hunt]

What if student loan debt does not give a return and proves to not be a good investment after all, especially in this recession? I know a whole bunch of college graduates struggling to find jobs and still depending on their parents despite holding such a stellar college degree. When they do get hired, they work positions that don't even require a college education. Where's the pay off on that student debt they accumulated? If they had known better, might as well don't go to college and start getting their work experience right out of high school.
The alternative is this: just work right out of high school, get some years of experience, and move up the ranks in your company! No need to attend college and accumulate debt that possibly would never earn you a return!

Don't confuse long-term and short-term return.

[MiamiDAP]

Ben has to drive Ford and many others will have to drive Volt. This has nothing to do with his income.

[SlitheyTove]

The fact that Ben made 2.2 MILLION dollars last year alone

Not necessarily. The website you cited states that he had book royalties last year of between $200k and $2m. Nothing more specific than that.

I've never heard here on CC of families taking out student loans so that they could invest their funds in higher-earning investments. Is this really done? Interest rates on student loans look to be higher than what we could manage to get out of investments unless we went for something high-risk. There are probably options for the super-wealthy, but Bernanke's money right now must be in a blind trust.

He's a former academic who refi'd a house from an adjustable rate to a fixed rate. That doesn't sound to me like someone who has a few million around to invest, outside of a retirement account.

[Hunt]

Somebody might not want to sell stocks to pay for a college education, especially if they were appreciated and were showing a decent yield.

[SteveMA]

SlitheyTove--heck yes, people do that all the time. The question is why WOULDN'T you?? Same with the home mortgage, when he took that out he probably had an inkling that the market was going to work in his favor, again, he refinanced at a very, very low interest rate. Any financial adviser worth anything would suggest you do the same. It makes zero financial sense to pay off a 3% mortgage or loan when your investments are earning 5, 10, 20% or better. WAY too much short term thinking going on in the current economy that concepts like this have gotten lost.

[MiamiDAP]

Steve,
Some people would not have a cash flow to cover all accumulated debt. At least, we had just that simple idea in mind when we decided to pay off mortgage (with very low rate) before D. started HS and never have car loans for longer than few months and were very pleased that D. decided to go to free UG. All these and many other considerations gave us ability to finance D's furhter education. There is no way under sky we would be able to do so having mortgage, car loans and having paid for UG (not only hers but also ours - both of ours plus MBA's were paid by multiple employers). Yes, we do not have savings, but nobody needs them as money are going to be just paper very soon. The faster you spend it, the better.