WSJ article on student debt - Page 2

speedo · 09-04-2009, 09:27 PM

young people don't really have a lot of choice these days. Around here
there's no good jobs, the future is living at home, working for $10 hour
no benes if you can even find that or going into the service or college.
Outside of commuting to a community college, the state school system
is going to leave you $30,000 in debt even if you graduate in 4 years.
For a lot of kids that seems like the best option, some hope for the future.

ellemenope · 09-04-2009, 09:40 PM

$30K debt is like taking out a car loan for a nice, but not extravagant, car. You'll be able to fit that within the Stafford limits. $60K is a whole 'nuther kettle of fish. Once you get involved with private loans, things can get very crazy, very fast.

sax · 09-05-2009, 07:31 AM

Help for Paying Off Your Student Loans - US News and World Report

The above article talks about new rules for payment of some student loans. On federal student loans young low income adults will only have to pay 15 % of their income for 25 years and the rest will be forgiven. Also if they work in the public sector they can have their loans forgiven after a time.

It is very interesting to read through the comments people have writen on this article. Many, many who say "hey, I have bills to pay! How am I supposed to pay my loans?"

We as a nation have failed to teach fiscal responsibility.

It is my opinion that we are all learning that you do not have to be responsible for your debts as the gov't will come along with a program to save you. So who cares....take as much as you need. We can just add it to the deficit.

yes, I am being sarcastic.

BCEagle91 · 09-05-2009, 08:38 AM

Part of the problem in reinforcing bad habits is that we will not let markets clear. If you live through a true Kondreytieff Winter, you know that you don't want to go through another one and you learn that debt is something to be hated and avoided. That's not politically possible today so we print like mad to avoid markets clearing. And so we have the effects that you talk about. If the government is printing like mad, perhaps they'll get wages higher eventually which should kill the debt. Maybe we should just do it explicitly with a devaluation.

delamer · 09-05-2009, 09:41 AM

member -

“New information from the U.S. Census Bureau reinforces the value of a college education: workers 18 and over with a bachelor’s degree earn an average of $51,206 a year, while those with a high school diploma earn $27,915. Workers with an advanced degree make an average of $74,602, and those without a high school diploma average $18,734.”

There are always exceptions, but ON AVERAGE, people with college degrees make more over the course of their lives than people who have only a high school diploma. That may not be true for the journeyman plumber versus the freelance journalist, but they are not norm.

And, even in this recession, colleges grads are less likely to be unemployed than those without a degree.

Equally important, you don’t have to go into enormous debt to get the college degree. In my state, if you spend two years at a community college and then 2 years at our state flagship public, you pay about $30,000 for tuition, fees, and books for your undergrad education. You may not get the “college experience” you crave, but that doesn’t show up on your diploma.

That doesn’t mean college is for everyone. I think some kids who aren’t academically ready are steered to college, as are some that don’t have the interest in being in a classroom for 4 years. And some kids just don’t have the innate ability.

ellemenope · 09-05-2009, 10:39 AM

^We're very lucky in that we have 4 state universities within driving distance of our house. It is the room and board costs that can really crank up the cost of college, so if you can and will live at home, you can get your university degree without going into crazy amounts of debt. Of course, you will need dependable transportation.

If you don't live in a place with good universities within driving range and you have to pay R&B costs, then college can get VERY expensive.

PrincessPea · 09-05-2009, 11:15 AM

I agree with you ellemenope. Room and board adds enormously to the overall cost. I've seen estimates of anywhere from $7,500 - $12,000 per year for r & b, depending on the school and area of the country. Now, obviously, the kid would have to eat if they were at home too, but not even my 17 year old son can go through $10K a year in groceries!

mamabear1234 · 09-05-2009, 11:32 AM

There was another article in our local paper last week about a young couple struggling with huge student debt. The woman was the first in her family to go to college, attended a local private and has over $88,000 in loans (degree in liberal arts) and a low paying job. She said she always thought if she went to college she would be successful. Her husband (no college degree) was making a good salary in IT, but was laid off. Students taking on that much debt is crazy, they don't grasp the financial consequences. Our state mandates education in health, it seems a financial course should be as important as the health course.

The article also notes that they paid 12,000 for their wedding last spring, and financial planners suggest that they sell one of their cars, and their house to move to something more affordable. It notes the sense of entitlement, that young people expect to have everything they want right now.

delamer · 09-05-2009, 02:54 PM

I just looked this up: As of July 1, 2008, the nation’s 363 metro areas contained 254.2 million people — 83.6 percent of the total population.

So most kids live in an area where there is a community college and public 4-year school within a reasonable commute of their home. For them, even if they borrow the full cost of tuition, fees, and books, there is no reason to take on more than about $30,000 in debt. (Yes, I know that some areas are more expensive, but surely $60,000 isn't necessary.)

I wouldn't recommend The Stones as personal role models, but they were right about this:

"You can't always get what you want
But if you try sometimes well you just might find
You get what you need"

FallGirl · 09-05-2009, 04:21 PM

Quote:

So most kids live in an area where there is a community college and public 4-year school within a reasonable commute of their home. For them, even if they borrow the full cost of tuition, fees, and books, there is no reason to take on more than about $30,000 in debt.

I don't disagree with you, Delamar, but try suggesting this in the suburban DC area where I live and you and you had better know how to duck. Seriously, people are offended if you suggest this. It was not like this in the small midwest town where I grew up.

member · 09-05-2009, 06:56 PM

Quote:

“New information from the U.S. Census Bureau reinforces the value of a college education: workers 18 and over with a bachelor’s degree earn an average of $51,206 a year, while those with a high school diploma earn $27,915. Workers with an advanced degree make an average of $74,602, and those without a high school diploma average $18,734.”

There are always exceptions, but ON AVERAGE, people with college degrees make more over the course of their lives than people who have only a high school diploma. That may not be true for the journeyman plumber versus the freelance journalist, but they are not norm.

And, even in this recession, colleges grads are less likely to be unemployed than those without a degree.

I agree with you in all cases except the trades, which themselves usually take some sort of education on top of HS. Most college graduates will be very unlikely to match what those on the trades make, even 20 years into there careers. The added benefit of the trades is you work for 20-25 years and you are done, you then can retire with a full pension.

As for job supply, tradesmen at least in NYC are highly unlikely to go without work, the worse the economy gets the more jobs they get.

delamer · 09-06-2009, 10:16 AM

Thanks for your comments, member & FallGirl. The general point that I was trying to make is that, despite all the hand wringing in the media & on CC, most kids can get a bachelor’s degree without them or their families going into an enormous amount of debt. And for most kids and families, going $30,000 into debt for a BA/BS is worth it.

Believe me, I’m well aware that some kids (and their parents) feel that going the 2-year community college route and then commuting 2 years to the in-state public to get their degree is a lesser experience. But I think that a kid or family committing to large amounts of debt based on the preferences of an 18-year old would be a pretty scary experience.

For the record, I see a huge amount of difference between living below your means to finance a kid’s dream school and borrowing heavily to pay for that same school. My husband and I have done the former – as you may have guessed by my point-of-view. Living-below your means involves making a calculation based on your known assets and income as to how to spend your money; taking on debt means taking a gamble on what your assets and income will be in the future and committing to spending them before you have them.

ellemenope · 09-06-2009, 10:35 AM

Quote:

I’m well aware that some kids (and their parents) feel that going the 2-year community college route and then commuting 2 years to the in-state public to get their degree is a lesser experience. But I think that a kid or family committing to large amounts of debt based on the preferences of an 18-year old would be a pretty scary experience.

Completely agree with the above. When weighing in the balance a kid's getting a BS but with a suboptimal college experience vs. the same kid getting a BS with the "typical college experience" but with quality of life severely impacted by future crushing debt loads--I would hope suboptimal experience would win a lot more times than not.

I'm not against taking loans out for college--but loan amounts have to be reasonable.

I went the suboptimal route for my undergrad degree--I didn't know it was suboptimal. Who knew back then?!! H and I did live below our means, hit some luck, and haven't had any employment or health disasters, so are able to provide undergrad educations for our kids without their going into debt. They know, from talking with their friends, what a great gift that is.

sax · 09-06-2009, 12:14 PM

Student Loans: Default Rates Are Soaring - WSJ.com

interesting article on defaults with an equally interesting comment section

ellemenope · 09-06-2009, 12:24 PM

Quote:

Sarah Kostecki, a 24-year-old sales associate in New York, graduated last year from DePaul University with a major in international studies and $87,000 in debt, translating to monthly payments of $685, the vast majority of which are private loans.

..."It feels like I'm being punished for having gone to school," Ms. Kostecki says.

This is just the kind of situation that young people need to run away from--over $30K in debt, the vast majority of which are private loans. No, she is not being punished for having gone to school. She is suffering the consequences of having made a really dumb financial mistake.