I find these articles so frustrating to read. Yes, a lot of reform is needed with regard to student loans. But how about some personal responsibility? This woman went to a private college undergrad, dropped out of law school, decided she needed to go to grad school to become a teacher (?!), and started (and didn’t finish) a PhD program. And after amassing several hundred thousand in debt, took out a $12k Parent Plus loan so her child didn’t fall into the same trap. Ugh!
Crazy saga. At least she acknowledges her responsibility.
Unlimited borrowing is a problem, as is beng able to defer pymts endlessly.
I take issue with “unremarkable decisions”. She actually made one poor decision after another.
This is where people needed to be saved from their own stupidity. Loans for child care? Maybe that’s an indication that you are in over your head financially.
Of course, Ms. Kelley could have stopped borrowing and deferring, and borrowing and deferring at any time. The DOE did not force her to take out loans at gunpoint!
These situations just stump me. What did she think was going to happen?
Maybe high schools should be required to teach a class to every student that explains how compound interest works.
I"m not really serious, but then again…
There are a lot of Ms. Kelley’s out there. If she got a bachelor’s degree from Missouri-St. Louis in business she would have low debt and a decent chance of paying it back. But she wanted to “follow her passion”.
Some of DS’s student loans are from the private sectors (we know because we had to co-sign it.)
Not sure about its payback schedule. Hopefully, it could be at least 10 years.
What we worry about is that the total loan amount increases significantly due to accrued interests when he is still incapable of paying back in the next half a decade at least. We may have no choice to help cover his interest payment portion while he can not.
Are any parents in such a situation: having to pay the interests while their S/D still does not have financial means to pay even the interests only?
I am very ignorant here because DS did not have any loans for UG but now he has the loans for his grad/prof school.
What reforms would you propose?
Caps on borrowing, as exist for undergraduate Federal student loans.
@bluebayou, I don’t have a solution. Brighter minds than mine are thinking about it, I’m sure.
I am intrigued by the idea of making 4-yr public school tuition (or equivalent job training) free. I think education beyond high school (either college or job training) is necessary for a middle class existence.
I’m also intrigued by the idea of government getting out of the student loan business. If free colleges were an option, students wouldn’t need to take loans for public schools. If private schools wanted a financially diverse class (which I think they should) then they can offer need-based grants to attract low income students.
I have no idea what these ideas and others cost, and how they would be implemented given what would likely be strong pushback from impacted parties. But something needs to be done, and the sad thing is that the NY Times chose to highlight a 1-in-1000 woman who owes $400k+ and brought her problems on herself, rather than focusing more on the problems and solutions.
It is hard to not blame a system, at least a little, that would give someone $410K with no collateral.
Of course she made the choices too. No doubt there either, and it sounds like she realizes it (good for her).
If loans were hard to get people would complain then too.
ETA: Just read part of the article - apparently a decent chunk of the $410K is interest (?).
I think free four year college will make it as valued as some value high school. College will need to be simplified so the unmotivated masses can pass and attain the degree.
We already have almost free community college. The poorest can attend free with Pell and state grants. Why don’t more students do that? Are they OWED free dorms and private colleges?
Why did the subject woman have four kids before she settled in a career? She made bad personal choices and needs to live with them. She should not be allowed to file bankruptcy.
I don’t understand people. Eighteen years ago I had a child and began taking financial steps to pay for his college. It meant driving older cars a bit longer than I would prefer. Why should I pay for someone else’s kids?
I’d be okay with the free tuition at the local community college or, if the state prefers, a state university. It would be like public school, you could go to the school you are zoned for. No pell grants, no extra money for room and board, the tuition is free just like grades k to 12. If you want more, you pay for it, just like people who choose private school or boarding schools do. Private schools could continue to offer funding to those who need financial aid if they want to, but the government would not subsidize it because the government is already providing a free option.
This system would really hurt those who qualify academically for a ‘better’ school but can’t afford it. Because some people could not handle borrowing responsibly, no one will be able to borrow anymore butthe government will provide. A nanny state.
I also disagree with the “unremarkable decisions” comment in the article. My daughter is planning to go back for her master’s next year (coincidently in education - she had been thinking of doing an alternate teaching certificate but decided the master’s is a better long term choice). At 26, she is very aware of the debt she could incur and is planning to work or hopefully get a TA position to minimise any borrowing. She worked while her husband did his Master’s and he graduated with no debt by being a TA. It is doable. (Though they don’t have kids).
I don’t see how someone’s debt grows to over $400k without them being aware of it. I’d have a stroke!
Denial and the belief that someone, the taxpayers, will bail them out.
I don’t understand why the public believes everyone needs a college degree. There are plenty of alternatives. How about making high school a priority first so kids graduate with skills? I hire mostly HS grads in my office and their basic skills are for the most part completely appalling. The problem isn’t those who graduate college, it’s the opportunities available for those who don’t go to college or get degrees that don’t have any real potential. Seems to me there are plenty of jobs that really don’t require a college degree.
As one of the people who is already taxed out the wazoo… why am I supposed to be the one to pay for people to go to college? There are plenty of students who really aren’t serious students, plenty of questionably non rigorous colleges out there. Why more for free instead of focusing on alternatives and encouraging personal responsibility?
My wife worked with recent high school grads who could not construct a sentence nor did some know that Hawaii was a state.
And 25 years of not making payments! 25 YEARS of deferrals. One thing she has in her favor is she’s not in default as she still qualified for a Parent Plus loan for her child. She must be keeping up with her deferral paperwork.
She now says what is the point of making payments for another 20-25 years on a PAYE program or other program as she’ll never pay it off and it will just be discharged after those 20 years. Well, she’d at least be paying something.
For the government parts of the loans, she should have applied for the forgiveness programs for teachers years ago and started getting some of the loans forgiven after 10 years. I think she should have to pay a percentage for at least 10 years to get those loans forgiven.
No one paid for my children’s day care. When I was in my 40’s, I wasn’t making much and didn’t save well for retirement because I was paying for day care. I really think it is too bad she now has to pay her student loans instead of saving for retirement, but that’s the decision she made.
Teacher loan forgiveness is only available if you teach at a designated low income/underprivileged school.
^^not anymore Tom. 10-year loan forgiveness is available to all that work in a non-profit, and schools count in that.
Dear @bluebayou and Readers : Regarding reforms, here are some specific thoughts on the subject.
[1] Interest Rates : Educational loans that are government supported yet carrying an 8.25% interest rate should be reevaluated in today’s economic climate where the Federal Reserve is loathe to raise rates. Similar to the housing loan crisis, this would be an important first step. Just as the mortgage standards became too lax, we must finally recognize that student loan lending standards must be tightened.
[2] Undergraduate Cap : While this first step on interest rates is consumer friendly, this must come at a consumer cost. Capping the lifetime undergraduate borrowing for two full years of undergraduate education (junior and senior years) at $30,000 per year per student would be a strong statement. This would force consideration of lower cost educational options (community colleges) for commodity courses during the first two years of undergraduate education. Further, it enforces the concept of on-line education instead of more expensive “thirteenth grade” style courses such as elementary algebra or remedial composition skills at a college level. In theory, the student has been through the exploratory phase and would be ready to commit to a major field of study. Together, this would force some savings during that time to offset the potential increase in costs for junior and senior year private school education.
[3] Program Abandonment Penalty : Any student that begins a course of study yet walks away before completion would be ineligible for further government student loan funding.
[4] Sliding Scale Graduate Loans : Graduate school loans (law schools, medical schools, PhD/MS programs, MBAs) would be capped based on the market estimates of average potential incomes by achieving the degree. Recognizing that the potential earning power of a medical degree would be higher than a master’s degree in education), the borrowing limits would be similarly different. Also, the quality of the school itself should be factoring into this equation, recognizing the difference between a Harvard MBA and a University of Phoenix MBA.
Effectively, a reevaluation of interest rates, a fixed cap for undergraduate loans, penalties for abandonment of a program, and a variable graduate loan scheme based on the forecast income capability are suggested. Yes, very controversial points in some areas, but a serious first attempt at wrangling the spiraling debt problem where too many students see the loans as “free cash” … and realize the problem too late.