Another cautionary tale for prospective students who think that borrowing huge amounts is worth it if they can attend their “dream school.”
Usually I think that the onus is on the borrower (and family) to figure out how much it is reasonable to pay off in the future, but one family was allowed to borrow $832,395 with an income of $181,000 and a house worth $163,000. How is this even possible?
https://www.■■■■■■■■■■■■■■■■■/documents/2704376-2015-10-22-15-Minutes.html#document/p22/a279736
I was just about to post this one. We’ve read these stories before, but it is worth a read. Clearly students and their families do not understand all of the potential pitfalls and risks. This NJ program seems particularly predatory. I believe people should be responsible for the debts they incur, but there has to be a reasonable plan for those who experience extreme documented hardship.
Not wanting to deny your student their dream is not a hardship.
I was referring to the former student who survived cancer and was laid off from Goldman Sachs. Establishing an affordable payment plan for him, after a period of deferment, would have been a reasonable response. I would conclude that his circumstances rise to the level of hardship.
The article ruined my Sunday. Greed in America is so disgusting.
the state should not be in the loan business. Period.
@newjerseygirl98: Did you see that?
I am shocked at the predatory practices by this state loan system. I assumed that, as a state loan, it was parrallel to Perkins and other federal loans, ie., a public service not a money-making scheme.
And of course, no one’s taking responsibility for anything.
Disgusting.
I agree that the state could have shown more compassion for the young man with cancer. It is a hardship that was not foreseen and hopefully recoverable.
What gets lost in these articles is how many students are helped by these programs. There must be some. Those that borrow responsible and have reasonable debt loads and pay on time never seem to mentioned. All we hear about are the students with 100K+ of debt often used to go to a private school or out of state public. Makes for better reading I guess.
I agree the rates are high. Then again this is unsecured debt. No one holds a gun to their head. The loan agreements clearly state the terms. The state also seem to recommend life insurance for co-sign loans. Maybe that should be built in like other states.
Should death be a reprieve in the case of co-signers? Isn’t life insurance a realistic option? For a young person, it shouldn’t be that expensive. Maybe all co-sign loans or any loan for that matter should have a life insurance policy built in. It will raise the rates but will solve the issue of the co-signer being saddled with the loan.
Okay, I reread the article.
“Mr. Gonzalez’s loans had a relatively high interest rate — on average about 7.5 percent. At the time it seemed like a good investment. He graduated with an engineering degree from Embry-Riddle Aeronautical University in Florida and landed a job on Wall Street working as a programmer for Goldman Sachs.”
Anybody agree that the 180K at 7.5% and an additional 30K in federal loans is a good investment? The article seems to imply that since he was hired by Goldman Sachs.
Somehow the mindset that the college degree is worth any amount of borrowing has to stop! Yes, many if not most need to borrow but there has to be a limit. Today there is no limit and we wonder why people get in trouble.
Some people borrow in excess.
However, the practices of the “state” plans are predatory.
Th first idea doesn’t negate the other.
Perhaps. Perhaps not.
Maybe all these programs do is encourage students to attend out of state (pricey) colleges vs. the instate flagship. Not sure I’m convinced that attending Rutgers at instate rates and lower debt is not an better benefit than attending an OOS with higher debt.
Maybe the only people being “helped by these programs” are the bond moguls in NYC.
The predatory aspects of the New Jersey program aside, I don’t understand why a co-signer’s having to make good on a loan when the primary borrower has defaulted, for whatever reason (even death), is so objectionable. The whole purpose of requiring a co-signer is to give the lender extra comfort that the loan will be repaid even if the borrower won’t or can’t, and without that comfort the loan wouldn’t be made at all. Requiring a co-signer for a student loan at least means that an adult has the chance to review the loan terms, even if many don’t bother to look or don’t seek help when they don’t understand the process. At some point there’s no way to protect people from their own negligence or obliviousness.
Alternatively, if the loans included a death benefit – balance waived upon death – they would have higher interest rates. Maybe that would not be a bad thing since fewer folks might borrow.
If I was that Brazilian mother whose son was murdered I would move out of NJ. Let them try to garnish wages from a different state. Or at least, never pay a penny in taxes to the state of NJ again.
Student loans should be wiped out in death. Period.
If credit insurance is required, it is considered part of the APR and then you’ll see APRs of 50% or so. Really. Credit insurance is pretty expensive especially for 10 year terms (often the longest allowed by the insurer).
Why should a loan be forgiven upon death? You’re mortgage isn’t forgiven if one owner dies unless separate mortgage insurance is purchased. Don’t forget that most student loan programs do not require qualifications for the credit - income levels, age of co-signer, health of borrowers.
It’s very sad that the mom is paying for the co-signed loan of her deceased son, but it’s likely she was already making payments on the loan prior to his death. He had quit school the year before and was only sporadically employed.
Borrowing that much for her child to choose to go OOS to UVM was a poor risk to begin with.
I wonder if the fact that the son had dropped out of school the year before played any part in NJ’s decision not to cancel the loan?
While “credit insurance” can be costly, simple life insurance on a healthy young person may not be that expensive.
These are all very sad stories.
These students who take on ridiculously sized loans that they are unqualified for remind me of a movie I just watched on my flight yesterday: “Everest”, an account of the 1996 Mt. Everest Disaster.
Eight climbers died in the disaster, including clients who were obsessed with pursing their “dream” but were not technically qualified to climb 8000meter peaks (student borrowers) and experienced mountain guides who were the enablers who agreed to take the clients up there (parent cosigners).
The experienced mountain guides knew once they reached the summit of Everest, it was critical to begin the decent no later than 2:00p to be able to return to the basecamp before nightfall. But because of pleading from their dream-obsessed clients, the guides were still leading clients up to the summit after 3pm, against the guides’ better judgement. A return to base camp before nightfall would require a best case scenario with absolutely no hiccups.
We’ll, as you already guessed, they didn’t not get the base case scenario coming back… In addition to the 8 who died, some of the survivors were scarred for life by losing to amputation parts of their body that were destroyed by frostbite.
I will not comment on whether the loans should have been given or taken, or criticize or demean folks on either side…
But couldn’t this have been solved by the lender adding a small life insurance premium on the borrowers with the lender as beneficiary? Since the pool is all young people highly likely to outlive the term, it would be a very small amount for each borrower.
I must be missing something, right? Because this solution is too simple.
65 percent of any increases in student loan debt goes to increased tuition. The groups who most benefit from increasing student loans are the college and universities who get to raise tuition to exorbitant rates. People shouldn’t be blaming the State of New Jersey or the borrowers for this problem, the fault directly lies with the college administration who are predatory in increasing tuition to unaffordable amounts.