Wednesday, July 29, 2009

A poorly chosen poster child, and a poorly chosen major

Student loans puts college graduate into deep financial hole:

There are a lot of things I could ask, a lot of things I could say, but I'll leave them for y'all. I'll just ponder who will want to hire her after that profile hit the newsstands. And what she was thinking when she consented to it. "Might as well totally torpedo all my hopes of ever getting a better job?"

12 comments:

army_wife said...

Wow. That could have been me, right out of high school. I had no financial discipline then either. But I'm the same age she is now, and I'm glad I have a better handle on my finances. I had to learn a few lessons the hard way along the way, that's for sure. I hope she gets a clue because she's really gotten herself into a bind. All I can say is... excessive spending! I guarantee that's her problem. She just didn't keep any kind of control of her extra purchases, and didn't do up a written budget so she could keep track of all her expenses. And there are some irresponsibility issues there too -- not completing her FAFSA on time, not keeping her grades up, not using some common sense about how much debt she's getting into. I feel sorry for her and her daughter, but she really did do it to herself. She can work her way out of this but it's really going to take a lot of hard work and sacrifice (including some major cutting back on luxuries!) on her part.

Kathy said...

Ok, this girl was smart enough to get into college, but remained so uneducated as to finances?? And we wonder what is wrong with this country! Yikes!

The things that made the deepest impression (aside from $120,000 for a so-far unusable Bachelor's, and her grandma about to lose her house for cosigning), is that instead of working through school so that she could have the least amount of excess expense, and perhaps having to take out less in student loans to start with, she chose to take out extra student loans to live off of. Double mistake. Perhaps triple, because working while going to school builds character and requires discipline, in addition to keeping your debts low or nonexistent. Secondly, she doesn't have money for groceries, and is drowning in debt and particularly interest on the student loan... but she spends $120 on cable & internet and $150 on her cell phone every month?? That's insane! Her parents failed this child, and now she's going to have to suffer for years because of their inability to instill financial common sense into her.

Lilliput said...

Her daughter is 9 months old which means that she fell pregnant while she was studying. Was it really the best decision to have or keep her baby?

What would have been the smarter choice in terms of her and her daughters quality of life?

I bet its what everyone reading that will think.

Kathy said...

Well, had she killed her daughter in utero, the baby's quality of life would have been zero. You can't get much lower than that. But you're right -- her daughter's quality of life would have been much higher had she let her be adopted by a loving family.

Purple Envelope Project said...

Ok. This is just absurd. She most certainly qualifies for income adjusted repayments. If she's making 7.50 an hour, her monthly payments would be either nothing or close to nothing. This isn't a deferal program either.

http://money.cnn.com/2009/04/15/news/economy/loan_forgiveness/index.htm

You would think one of her financial advisors would have mentioned this to her at some point!

Kathy said...

PEP,

I think the article mentioned that -- there are two paragraphs that say, "But the reduced income repayment program is only available for federal student loans under Stafford, Grad Plus and federal consolidated loan programs. Ten of Ms. Dillon's loans totalling $108,639 were private signature student loans through the SLM Corporation -- commonly known as Sallie Mae -- which cannot be consolidated, forgiven, deferred or erased in bankruptcy. Two of her loans, totaling $9,000, are federal government loans."

Honestly, I thought Sallie Mae was federal student loans. It's surprising to me that Sallie Mae loans would not be available to be part of this program. Also, from the article you linked to, I was starting to think that maybe my husband (being a school teacher in a high-needs area) could get some sort of reduction in his student loans, but since they're SLM loans, I wonder if they could be, according to this article.

Purple Envelope Project said...

I admit I didn't read the entire article til after I posted.

I'm really perplexed by the Sallie Mae thing. I'm nearly positive that they are fedearl loans. I have Sallie Mae loans that I got through my FAFSA. I've never taken out any private loans for school. I think the author of the article might have been mistaken on that point.

However, it is unbelievable that the girl would take out that many private loans. How did she even get them? Something just feels very off about this story.

Subvet said...

PEP, this really isn't all that rare. My wife took out a butt ton of student loan money during her six years of college, she had zippo counseling from the college (Baylor) on the long term consequences.

Fortunately she lived with her mother for most of that time, so those expenses were minimized. She also is able to basically "work off" one of the three loans by staying actively employed in her field (RN). Every month she works the total due is diminished and during that same time she doesn't have to make any payments.

But she STILL took out a whale of a lot of money. After ten years of marriage we're finally getting to where we can see the light at the end of the tunnel.

In her defense I can say that for health reasons she couldn't work during that time (it's a LONG story there!). Since her parents were divorced and my mother-in-law is an idiot, there was no adult present to counsel her about attending a cheaper institute of learning or setting her sights a bit lower. Bottom line, I can relate to this chick somewhat. Not TOO much, but somewhat.

Lilliput said...

I think you guys forget that the Credit Crunch was caused by banks lending money to anyone with a pulse whether they could pay it off or not - this is why she is so much in debt.

How much do undergrad degrees cost in the US? In the UK locals don't pay more then £2000/year! And there are loads of interest free student loans available if one can't get a bursary.

Kathy said...

Lilliput,

I agree with that about the Credit Crunch. That doesn't totally absolve the stupid people who took out loans they couldn't repay any more than it absolves the stupid people who lent money to people who couldn't repay it. There's *plenty* of blame to go around, from downright predatory lending to mere ignorance.

The amount of money it costs for an undergrad degree depends on a lot of different factors. Private schools cost more; public schools cost less; in-state public schools cost the least (the government picks up a portion of the tab, viewing it as an investment into future money-makers and tax-payers). Do you stay in a dormitory or in an apartment? Do you work while you're in school, or take out extra loans to cover your living expenses (which this girl did) instead? Did you have any scholarships (either for academic achievements or things like playing in sports)?

I went to a local two-year college (never went on to complete a degree, and I don't regret it), lived at home, had a full tuition scholarship due to the score I received on the ACT (a standardized test), so only had to pay for books, plus whatever petrol expenses to get to and from school, and lunches at school. Most of the students also had full or partial ACT scholarships; but at the time I went (15 years ago) the tuition for a year would have been about $1000, plus books, room and board, and whatever other expenses you might have. The students that stayed in the dorms (which was required of those playing sport, cheerleaders, band members, etc.) also had a meal ticket that allowed them so much from the college cafeteria (or else it charged their account for the meal), so very little out-of-pocket money was required.

I listen to financial counselor Dave Ramsey, and people regularly call in about their student loans. He's a big believer in working your way through school, and "if you don't have the money to pay cash, you can't afford it." Usually, when people call in with $100,000 or more in student loan debt, they are doctors or lawyers or some other profession that requires expensive schooling and/or 6 years or so in school for the degree. Most people have in the neighborhood of $20-50,000 (sometimes due to post-grad studies, as well). Some people are like this girl, with a monstrous student loan debt and only a graduate degree to show for it, because of the choices they made during college.

I just checked my local state university, and in-state tuition is about $5,000, with out-of-state tuition being a little more than doubled. It estimates that if you life off-campus with your family, your "total cost of attendance" is about $9,000 if you're in-state, which would include books, I suppose, but not sure what else might be considered expenses.

So it can be quite reasonable -- but not everyone chooses to go the cheapest route.

Christina said...

I'm not as bad off as this girl, but I'm struggling with student loans.

I had a total of $35,000 when I ended college in 2006. Now, I'm down to $28K.

Problem is when I was in High School (the same time as this girl), Student loans were touted about as if they were scholarships. No one counseled you on the consequences of taking out a student loan. But then, 7 years ago, student loans were considered "good" debt. As long as you made your minimum payment, the debt was in your favor on credit scores. I guess that's why they were treated so flippantly by guidance counselors and the college financial office.

I was the first person in my immediate family to complete a 4 year degree. My parents didn't really realize what they were asking of me, and I had absolutely no clue. Unfortunately, the paying back of them is a hard, but thorough, education on the subject. I've been advising my three younger brothers to stay as far away from loans as possible.

As to the Sallie Mae thing, you can get them through Federal loans and you can get them privately. The ones gotten privately are not eligible for the federal repayment plans.

Kathy said...

Christina,

Thanks for the clarification on the whole Sallie Mae issue. I didn't realize there were two different types of loans with two different sets of rules for the one organization.

I think that a lot of people are totally clueless when it comes to money and debt, and unfortunately for a lot of people, this includes student advisors who really ought to know better. When they don't, people who take advice from them can't know either.

My husband took out student loans to pay for his Master's degree (his undergrad tuition was free because his dad taught at the university). Now he's looking at more student loans to get his Doctorate. I've told him I don't agree, but he's going ahead anyway, with the assumptions that most people make -- that it's "good" debt; or that since it's at such a low interest rate, it's affordable; or that the only way he can earn more money is to get a bigger degree. He shuts down his listening capabilities when my express disapproval or reservations about it, so I just try not to say anything. He's ultimately responsible, even though it affects all of us. I'm his wife not his mother, so I can't make him do what I want. :-) Oh, well.