Student loans leave crushing debt burden

[Liberal_in_LA]

Student loans leave crushing debt burden

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Kyle McCarthy, 28, lives in San Francisco. He has a master’s degree, $72,000 in debt and, he says, no way to pay it back.

"I can't get out," he said. "I'm about to lose my apartment. And my phone's about to be turned off in a couple days. And I have negative money in my account."

McCarthy had hoped to turn his passion for soccer into a career in physical education. But four months after graduation, in a pickup soccer game, he blew out his knee that required major surgery.

Unable to work for months, with medical bills piling up, his loans went into default. Now, the collection agents call day and night.

"I've tried to work out anything for them," he said "Like, 'I can pay this amount of money. I can pay $50 a month.' And it was, 'No.' It was, 'You need to pay the full amount now or, we're just going to take it out of your paycheck.'"

Student debt can even outlive the student.

On Nov. 3, 2009, Ralph Grande and his wife, Joan, lost their only child in an automobile accident. Vincent was weeks away from taking his exam to become a stockbroker when he was killed.

"Does any parent ever bring a child into this world thinking that they would outlive them?" Ralph said. "God, no. God, no."

Ralph and Joan soon learned that not only had they lost their only son, they were on the hook for more than $81,000 in student loans that Vincent had borrowed through New Jersey’s state student loan program.

"What they told us was, 'Well, you co-signed. Too bad,'" said Ralph. "And the longer it takes you to make a payment, the more the interest is going to accrue and the higher the payments are going to become."

Ralph is a car salesman and Joan a schoolteacher. Their personal tragedy has been compounded by the prospect of financial ruin.

"Where am I going to go from here?" said Ralph. "Where do we possibly come up with that kind of money?"

That question is being asked by millions of American students and families.

http://www.msnbc.msn.com/id/40772705/ns/business-cnbc_tv/

[handmade34]

1. the stories are endless and devastating

http://www.youtube.com/watch?v=xtIM_TEQxwA&feature=related

http://www.studentloanjustice.org/

[OhioChick]

2. Rec. n/t

[corpseratemedia]

3. REAGAN'S LEGACY

one of his "finest" among many horrible ones

[badtoworse]

5. How so? What did he do?

[handmade34]

7. in part... but it is not all Reagan

many things have gone wrong for us...

"...Federal appropriations during 1981-1985 for student financial aid are reviewed, along with the effect of the Omnibus Budget Reconciliation Act of 1981. The effective cut in need-based federal student aid for funding year (FY) 1981 totalled $600 million ($500 million Pell Grants, $100 million National Direct Student Loans). The Omnibus Budget Reconciliation Act of 1981 phased out Social Security educational benefits, which had provided $2 billion, one fifth of federal student aid in FY 1981. The Act also restricted eligibility for Guaranteed Student Loans and reduced spending ceilings for other student aid programs. For FY 1982 President Reagan requested additional cuts totalling $332 million, but Congress set FY 1982 funding at slightly over the FY 1981 level. Congress also set appropriations for FY 1983 at about the same level as FY 1982. The President sought to eliminate the in-school interest subsidy for Guaranteed Student Loans..."

http://www.eric.ed.gov/ERICWebPortal/search/detailmini.jsp?_nfpb=true&_&ERICExtSearch_SearchValue_0=ED253123&ERICExtSearch_SearchType_0=no&accno=ED253123

[badtoworse]

10. Thanks for the link

I was under the impression that the problem today is private loans. Student and their parents don't fully understand the consequences of borrowing more than they can afford and the schools aren't explaining it to them. Students are assuming the schools are looking out for them when they really aren't

[notesdev]

11. The problem

is that these loans are non-dischargable in bankruptcy. The only way to ever get rid of it is to pay it off.

Thus, with the threat of default lessened as a result of this unique policy (no other type of loan has such a provision), the sky's the limit as to what lenders will lend, and thus what schools will charge.

This is the root cause of skyrocketing tuition.

[badtoworse]

13. That is a problem, but how can you solve it?

How many lenders would loan money to students if the risk of bankruptcy were a factor? If they loaned money at all, the rates would be prohibitive and loan amounts would be minimal. That would not be a desirable outcome.

[notesdev]

14. That would be the desirable outcome

We'd get back to the days of being able to work through college on your own again.

The loans would (mostly) stop but prices would collapse as a result.

Surely you can't be satisfied with a situation where a student has to promise away to a bank the entire economic benefit (and in many cases, more than that) that he gains from higher education!

The alternative is the death of degree programs that aren't focused on increasing future earnings power. Non-dischargable or not, they pretty soon going to figure out that those Art majors are never going to be able to pay back that $200k loan.

[EstimatedProphet]

21. That's the thing - there's no risk of bankruptcy anyway

The loan program is called the Guaranteed Student Loan Program, because the loans are guaranteed by the government if the borrower defaults. What is making them predatory these days is that banks have learned how to double dip - they sue a defaulted borrower and can garnish wages, PLUS they can go to the government for a defaulted loan and collect the principal back. They get free money that way, and because of that, they have been trying to encourage over-borrowing for a long time, since that makes defaulting much more likely. In practice what they are doing with student loans is very close to what they did with the housing market that caused the bubble.

[SharonAnn]

4. I guess the lesson is if you cosign, you get life insurance on the son

It seems mercenary, but when you take on a debt like that, then "hedge" the situation.

[badtoworse]

6. That is very good advice

It should be suggested when the loan is taken out.

[SoCalDem]

16. I can imagine a bank actually requiring that

These college loans are more than houses used to cost (not all that long ago).

[sakabatou]

8. Student loans leave crushing debt burden

This just in, water is wet.

[Smashcut]

9. The terms on student loans are absolutely draconian compared to how easy they are to obtain.

There needs to be serious reform on this issue, and fast.

[Orrex]

20. You're absolutely correct about that. My fear, though...

Is that our esteemed representatives would word the legislation in such a way that it would only apply to loans made after 1/1/2015 or something like that.

[Orrex]

12. If I had a nickel for every post I've seen on DU that attacks the borrowers

I'd be able to pay off my loans several times over.


Student loans are an unparalleled evil in this economy. Far more predatory than credit cards or dubious mortgages.

[SoCalDem]

15. This is a bitter lesson..Parents should NOT cosign for kids' loans

Especially education loans, since parents of college-aged kids are likely to be nearing their own "Golden Years", and if the kid defaults of in this case, dies, they are responsible.

It's hard for kids to grasp, but they are better off taking a LONG time to graduate while paying as they go, than to borrow a shitload of money that will be an albatross for them for DECADES.

[prolesunited]

17. My son has remained at home with me

and is working his way through school. He supports himself, buys his own food and even kicks in a bit toward household expenses. He has been taking two or three classes per semester and going every summer. He pays off each semester's fees and books before the start of the next one. It's been a long haul, but he will finally finish after an internship this summer. He'll turn 26 in the fall when he's done, but he'll be starting "real" life out with a B.A. and NO DEBT. Hard as hell, but it can be done with persistence.

And there's no way to get out of repayment. It doesn't discharge in bankruptcy and it is one of the few debts they can garnish your SS check for.

We say we value education, but then we put up tons of obstacles to get it.

[sarcasmo]

18. Sent my kid enough scary articles on this subject that he has his two years done now and no debt.

It took him four but having no debt is the key.

[xchrom]

19. recommend

[EnviroBat]

22. Who should we be writing to?

It seems like this issue is going largely un-noticed by our legislators.

[bvar22]

23. In the 60s and 70s,

Anyone could attend the State University and graduate DEBT FREE (even graduate levels)
if they were willing to work a part-time job.

We could have that again
if we had a Political party that represented the Working Class.

[FiveGoodMen]

24. The whole point is to ensure that even the most educated are just more slave labor

The entire objective of the right-wing is to have slaves.

Everything else is window-dressing.

[Matariki]

25. This needs to change. How in the world does anyone expect the US to keep up

if our education system is gutted and only for the increasingly small wealthy class?