Be careful of taking out too many loans to pay for education

Discussion in 'General Distance Learning Discussions' started by bazonkers, Feb 13, 2010.

  1. bazonkers

    bazonkers New Member

  2. Rich Douglas

    Rich Douglas Well-Known Member

    In a flexible human capital market, the onus is on the employee (largely) to develop him/herself. This is usually done by borrowing against future earnings. While much of this borrowing is subsidized by the public, the main risk still sits with the employee/student/borrower. Better get it right.
  3. major56

    major56 Active Member


    Columbia University Professor Mark C. Taylor (chairman of the religion department) addresses the “buyer” beware and debt crisis in a New York Times opinion article (What Is a Master’s Degree Worth?), e.g., “Far too many students come out of college with substantial debts that plague them for years.”
  4. Rich Douglas

    Rich Douglas Well-Known Member

    Cool article. But I would be wary of the financial projections--either way. It is very hard to predict your future income, as well as the impact of earning a degree (at whatever level) will have.

    I'm not so sure I agree on the "bust" to come in higher education. We might certainly see some realignment as students adjust their preferences. We might also see some retrenchment in the traditional market as students make alternative choices. But as long as we have a human capital market that puts the onus on the individual, not the employer nor the state, we'll continue to see credential inflation (what Hapgood termed "diplomaism") and rising tuition fees.

    All of that assumes a marketplace that (a) isn't in failure (failing to adjust to market forces and provide the participants what they seek--good old supply and demand) and (b) where the participants act rationally. Are parents--or even students--really going to make buying decisions based on potential future earnings vs. the cost of money (tuition spent today instead of invested for tomorrow)? I doubt it. This is still America where we preach the value of an education--the more the better.

    Let's also not ignore the power of the internet. Not only does it make getting an education accessible to almost anyone--no more decisions about quitting work or not having kids in order to pursue a degree--it makes jobs accessible to candidates around the world. As employers widen their nets in search of talent, they'll be faced with greater and greater challenges in sorting through all of those candidates in order to find the right ones to interview. Credentials--especially higher degrees--are an easy (if not entirely accurate) way of doing so. This puts further pressure on the market to behave irrationally, and on employees to go back and get more degrees.

    One thing in nontraditional academia's favor: students foregoing full-time study in order to earn an income. This puts them square in the sites of nontraditional schools (and traditional schools running nontraditional programs). We might see more for-profits doing business at the expense of traditional universities--unless those traditional universities can step up and compete for the working learner.

    Finally, what we may certainly see is a market saturation of providers competing for the same group of potential students. This will serve to commoditize degrees, blurring distinctions between the barely passable and the pretty okay. We may also see some school failures on the margins as competition rises.
  5. major56

    major56 Active Member

    As Professor Taylor acknowledges in the article, education is also an industry; and he believes “oversold”. Unfortunately, I too believe the marketplace is saturated with degree holders; thus the degree value decline (e.g., supply & demand). For example, this summer I was in charge (10-Texas counties) of a federal jobs program for underserved youth and young adults (ages 14-24). Rich I had young college graduates with very high GPA’s who couldn't and still can’t find full-time employment. And of course the "payback" student loan obligation comes into play a mere 180-days after graduation – a real dilemma!:(
  6. Rich Douglas

    Rich Douglas Well-Known Member

    One can continue to defer Stafford loans beyond the grace period after graduation if one is suffering from financial hardship. Subsidized Stafford loans will not accrue interest during their deferment. Unsubsidized Stafford loans will accrue interest, which will be tacked onto the balance (or can be paid during deferment).
  7. major56

    major56 Active Member

    Thanks Rich, I wasn't aware of this loan repayment deferment option. My project management period for this program ended after Oct. 2009, but I'll try and get word to the graduates affected – a truly great bunch of kids!
  8. cookderosa

    cookderosa Resident Chef

    This is an interesting article. It also brings out a few lifestyle-character issues of the lady featured in the story. Really, a NP with even $250K student loan debt has over-borrowed. (MAYBE $150k is the high end and that's if you used some of the loan for living expenses while in school)

    There are certainly MANY grad programs that require your full attention, where working simply isn't possible. But this brings up a key issue- people borrowing too much for undergraduate degrees.

    In my opinion, and knowing what I know now, I see absolutely no reason under the sun to borrow a single penny for an undergraduate degree. Zero.
    Save, pay cash, work through school, save, apply for scholarships, don't fail any classes, save, test out if you can, don't declare a major your first year, be smart about buying books, live at home, save, choose a school you can afford, join the military, save attend a work-free college, stay instate, never pay $$$ for gen eds, work another job- save more, quit spending, etc... I could go on for days.

    Since my husband and I go to great lengths to lead a cash-lifestyle, I'm a little more sensitive to people's inability to even TRY to support themselves without borrowing. But, in all honesty, if any of my children borrowed money for their undergrad I'd drop dead from shock.

    Grad school is another animal- but the gal in this story didn't rack up this debt from grad school.
  9. CalDog

    CalDog New Member

    Key point, which most people don't realize:
    There are people out there who will literally spend the rest of their lives in servitude to creditors and collection agencies because of their student loans. I know it sounds too melodramatic to be true, but when it comes to student loans, the only alternative to repayment is death.
    Last edited by a moderator: Feb 14, 2010
  10. CalDog

    CalDog New Member

    Apparently she did; the story says she took out the loans for medical school. It states:
  11. cookderosa

    cookderosa Resident Chef

    "She maxed out on federal loans, borrowing $152,000 over four years, and sought private loans from Sallie Mae to help make up the difference. She also took out two loans from Wells Fargo & Co. for $20,000 each. Each had a $2,000 origination fee. The total amount she borrowed at the time: $250,000"

    She borrowed $152,000 to go to medical school. The rest she borrowed for lifestyle or was fined for default and non-payment. If her balance really is a half million dollars, that's 350k of whoopsie.
    But yes, you are correct, it does appear as if all of this happened in med school as opposed to any of it happening during her undergrad.
  12. joanie

    joanie New Member

    The thing is that not all of those are options for everyone, and college is so drilled into our heads that we're encouraged to do what it takes to get there. I completed my undergrad with about $65k in mostly private student loan debt. My parents, even though they didn't pay a penny toward my college, made too much money for me to get subsidized loans. I worked three jobs at once, but still did not make enough enough to pay for my room and board and books and classes. Testing out of classes is something that no one bothers to tell freshmen undergrads, and had I known about it 8 years ago, but I had no idea, and of course, my guidance counselor or my adviser at school would never mention such a thing. Morally, the military was not an option, and I couldn't live at home past my freshman year for various reasons. So what then?

    Every month when, between the two of us, my husband and I make a nearly $900 loan payment, I cringe. When I first graduated, I was making $11/hr, barely enough to cover my loan costs per month, and had I not had the second income of my husband to help pay my exorbitant NYC area rent, I would have been even worse off. Lucky me, I graduated in the summer of 2007 and had trouble finding a job then in a market oversaturated with college grads. It's only gone downhill since. But you do what you have to do. I'm using subsidized Stafford loans to pay for my master's program now, and when I have to pay them back, my loans will top $1k per month. But I'm doing it in the hopes to better my quality of life and to get some ROI on the most useless investment I ever made: my bachelor's degree.
  13. CS1

    CS1 New Member

    I think that's why vocational schools are so popular, since their diplomas, certificates and two-year degrees are geared towards real life careers.
  14. GeneralSnus

    GeneralSnus Member

    Were you attending a state school as an in-state resident?

    Why not relocate to an area with a lower cost of living?
  15. joanie

    joanie New Member

    At times I was, and then I had to move for reasons beyond my control. You are not considered an "in-state" resident until you have lived somewhere for about one year with a permanent address.

    Relocation? My husband and I both have jobs here, in NYC, and mine is relatively secure. My family is here. I don't live in Manhattan; I live in a one-bedroom in an unglamorous area of Brooklyn. I also don't make $11/hr anymore. Regardless of where I live, I'm still going to be repaying my loan debt, and even though it costs more to live here, we get paid more than other areas of the country.

    The point of my post was more to explain the circumstances in which some of us end up with bad student loan debt as well as provide somewhat of a cautionary tale.
  16. joanie

    joanie New Member

    Absolutely. For whatever reason, there was a stigma associated with this where I grew up. I'm sure the kids who went that route are now laughing all the way to the bank and with their minimal debt as "white collar" graduates are losing jobs left and right.
  17. major56

    major56 Active Member


    I’m truly sorry to hear of your student loan debt plight and the struggle it brings! On a positive, the not so good decisions we make can and do make leads to building our character and help to strengthen us as life goes forward.

    Hopefully on a somewhat better subject … how is your experience with Webster University? I have a cousin with J.B. Hunt Transportation who completed his MBA through Webster. He was fortunate that his firm took care of all tuition costs.
  18. ideafx

    ideafx New Member

    It's the private loans that get people in trouble. As far as Stafford loans go (subsidized or unsubsidized), you're still better off taking the maximum unless you're majoring in something useless. Grad school is a different story though.
  19. joanie

    joanie New Member


    Thanks for the encouragement. I hear you. If nothing else, I'm pretty student loan savvy these days, and by the time I have kids who get to college, I'm sure I'll be an expert. ;)

    I'm in my first class at Webster, the intro to HRM course. So far, so good. My only concern is that my instructor seems to grade very easily, but it is only an intro, so I'm not getting too worked up right now. I'm actually getting pretty nervous about the finance class that I'm beginning in early March. How did your cousin like Webster?
  20. major56

    major56 Active Member


    That’s the problem with reaching maturity; it’s a continuous journey. The hope is that our own children will listen and learn from our own experiences (some good and some not so good). And of course they don’t always and are likely predestined to make some of the same mistakes we’ve previously encountered and warned them regarding. I suppose that’s just part of life’s learning cycle.

    The feedback from my cousin was that the Webster MBA program benefitted him greatly in that he learned much and was able to incorporate a good deal of the curriculum at the workplace. He attended one of the Webster satellite campuses (Ft. Smith AR Metro Campus), so he couldn’t comment on their web-based delivered program. (I believe J.B. Hunt has a corporate agreement with Webster University in that the firm encourages its employees toward both the Webster undergraduate and graduate programs).

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