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College Loans and the US Debt


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I want to preface this by admitting that I don't know much about how the college loan system works, and I don't know a ton about where the money is coming from. It took me 6 years to get through college because I did it by mostly going to class at night, and working a fulltime job the entire time to pay my bills.

 

Anyway, the younger brother of a friend of mine graduated from college about 15 months ago - he has a bachelor degree in literature from a VERY expensive private college, and the college loan to go with it. Loan is to the tune of $105,000 - which is virtually med school expensive. So it's been 15 months, little bro hasn't been able to find a job using his degree (surprise surprise), and he's been working as a night manager at a hotel in the meantime. Apparently work isn't exactly fulfilling, so now he's decided to go back to college and pursue a different degree. Well I found out last night that he's going to be starting back to school at UC to work on a degree in art history...with loans, once again, paying the way.

 

So our country is in a huge financial crisis. We're in enough trouble that we're trying to figure out how to cut costs by looking at cutting veterans' benefits...yet here's a 23 year old who's just getting ready to start back to school for his second virtually useless degree, and Uncle Sam has been paying the way the whole time.

 

 

Should something be done about federal college loans? Can people be refused loans based on the financial solvency of the degree in light of the student's employability once they have that degree? ...should they be? How many more degrees in literature, photography, psychology, philosophy, womens studies, and art history does the government need to fund, if the folks getting those degrees are just going to walk out the door of their college graduation and apply for unemployment?

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Should something be done about federal college loans? Can people be refused loans based on the financial solvency of the degree in light of the student's employability once they have that degree? ...should they be?

 

Yes.

No.

No.

 

I have a lot of thoughts on this subject. Where should we start?

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A useful question to consider right off the bat is this: do you think the federal government should continue backing student loans at all? If you don't, then the rest of the discussion begins to clarify. If you do think that the federal government's loan programs can be successful and should continue, then we're talking about reforms within an existing federal program, which is just as difficult as you might imagine.

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I have to plead some ignorance to the college loan system. These federal loans are subsidized loans correct? This means a lower interest rate? Also, are these loans denied to people based on credit? What happens if you default on such a loan?

 

My initial thought is that loans like this distort the market for certain degrees, like literature, but $105,000 still seems like quite a gamble, i.e. the risk of pursuing such a degree isn't removed.

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I have to plead some ignorance to the college loan system. These federal loans are subsidized loans correct? This means a lower interest rate? Also, are these loans denied to people based on credit? What happens if you default on such a loan?

 

My initial thought is that loans like this distort the market for certain degrees, like literature, but $105,000 still seems like quite a gamble, i.e. the risk of pursuing such a degree isn't removed.

 

$105,000 is definitely a massive gamble, and going to an expensive private school is a part of the equation. The average college graduate last year has to pay back somewhere around $25,000 if I remember correctly.

 

Subsidy: some federal loans are subsidized and others are not. But the federal government does guarantee them. If you default, then the government can seize tax returns, garnish up to 15 percent of wages or sue for a judgment.

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I want to preface this by admitting that I don't know much about how the college loan system works, and I don't know a ton about where the money is coming from. It took me 6 years to get through college because I did it by mostly going to class at night, and working a fulltime job the entire time to pay my bills.

 

Anyway, the younger brother of a friend of mine graduated from college about 15 months ago - he has a bachelor degree in literature from a VERY expensive private college, and the college loan to go with it. Loan is to the tune of $105,000 - which is virtually med school expensive. So it's been 15 months, little bro hasn't been able to find a job using his degree (surprise surprise), and he's been working as a night manager at a hotel in the meantime. Apparently work isn't exactly fulfilling, so now he's decided to go back to college and pursue a different degree. Well I found out last night that he's going to be starting back to school at UC to work on a degree in art history...with loans, once again, paying the way.

 

So our country is in a huge financial crisis. We're in enough trouble that we're trying to figure out how to cut costs by looking at cutting veterans' benefits...yet here's a 23 year old who's just getting ready to start back to school for his second virtually useless degree, and Uncle Sam has been paying the way the whole time.

 

 

Should something be done about federal college loans? Can people be refused loans based on the financial solvency of the degree in light of the student's employability once they have that degree? ...should they be? How many more degrees in literature, photography, psychology, philosophy, womens studies, and art history does the government need to fund, if the folks getting those degrees are just going to walk out the door of their college graduation and apply for unemployment?

 

FWIW, Federal Student Loans are capped at around $30,000. I found that out the hard way this year and had to get a private loan for my senior year. You can possibly go beyond that with Parent Plus Loans, and this cap only applies to undergrad work I believe. I wish I knew how he got over $100,000 from the government. I could use a couple thousand more myself.

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Should something be done about federal college loans?

Can people be refused loans based on the financial solvency of the degree in light of the student's employability once they have that degree?

...should they be?

How many more degrees in literature, photography, psychology, philosophy, womens studies, and art history does the government need to fund, if the folks getting those degrees are just going to walk out the door of their college graduation and apply for unemployment?

Yes

No

Yes

Zero

 

Government should not be in the college loan game.

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FWIW, Federal Student Loans are capped at around $30,000. I found that out the hard way this year and had to get a private loan for my senior year. You can possibly go beyond that with Parent Plus Loans, and this cap only applies to undergrad work I believe. I wish I knew how he got over $100,000 from the government. I could use a couple thousand more myself.

 

I suppose it could have been a private loan if that's the case...I was kind of in a daze when I was being told how much money the guy actually owed in loans, so I could have missed some details. I know his brother was telling me he was going to be paying for his second run at college "with more loans", because that was the purpose for the phonecall - a kind of "do you believe this??" conversation. I don't understand how anyone ever - government or otherwise - would ever give out loans like that to an early twenties student without a serious job.

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Way back in the dark ages when I was in school, student loans were called National Defense Student Loans. I think the name says it all. It is in the long term best interest of our country for people to be able to further their education. That said, you would hope that someone would counsel the young man that a six figure debt for a degree in literature borders on stupid from an economic viewpoint.

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I couldn't imagine owing $105,000 in students loans, I think that would be enough to honestly make depressed. I avoided student loans for 3/4 of my college career before finally giving in, it was that or take twice as long to finish up. It certainly made those last couple of semesters a lot less stressful, paying a few hundred dollars every month isn't fun but I dug the whole and ultimately feel it will be worth it in the long run. I really feel like it's too easy for students to access such large amounts of money just by clicking a few buttons on a computer and verifying some personal information. Student loans are a growing problem IMO, it would seem as though the target buyers for homes are educated working class young adults however now a large majority of that targeted group are graduating with a large amount of debt which certainly isn't helping the housing market to get back on track.

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Way back in the dark ages when I was in school, student loans were called National Defense Student Loans. I think the name says it all. It is in the long term best interest of our country for people to be able to further their education. That said, you would hope that someone would counsel the young man that a six figure debt for a degree in literature borders on stupid from an economic viewpoint.

Six figure debt for 75% of degrees (probably more) borders on stupid.

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Going to a private school to obtain anything but a competitive edge in getting into a Grad school program that guarantees 6 figures out of school is nuts. I've said it before, but taking out loand to go to a Liberal Arts school to become a teacher should automatically show that you are not smart enough to become a teacher.

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Going to a private school to obtain anything but a competitive edge in getting into a Grad school program that guarantees 6 figures out of school is nuts. I've said it before, but taking out loan to go to a Liberal Arts school to become a teacher should automatically show that you are not smart enough to become a teacher.

 

Absolutely agree.

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Going to a private school to obtain anything but a competitive edge in getting into a Grad school program that guarantees 6 figures out of school is nuts. I've said it before, but taking out loand to go to a Liberal Arts school to become a teacher should automatically show that you are not smart enough to become a teacher.

 

Speaking from personal experience, private schools can actually be less expensive than a state college, due to the fact they are a lot more generous in their scholarship money than the state schools.

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