Much attention has been given to home mortgage defaults and the huge credit cards that most Americans still have to deal with.
As high school seniors and their parents focus on college and college costs, it is crucial to consider the ramifications of taking out private student loans without first maximizing federal loans.
The total college loan debt is now estimated at one trillion dollars – the same amount that Americans owe on their credit cards. But while Americans generally understand the ramifications of credit card debt, too many are ignorant of the lifetime anchors they face by signing or co-signing private bank student loans.
Unlike federal student loans, most private school loans are variable and cannot be discharged by bankruptcy. And banks can garnish Social Security money to repay student loans – untouchable to most other lenders.
As the recession continues, recent college graduates face gigantic monthly loan payments and few jobs high enough salaries to live a middle class lifestyle.
A recent Wall Street Journal story tells the story of Jodi Romine, who took out $74,000 in students loans so she could earn her business-management degree at Kent State University in Ohio but now has $900 monthly loan payments. That represents 60 percent of her paycheck as a bank teller in Beaufort, S.C., the best job available to her after graduating four years ago.
Her finance Dean Hawkins is in a similar boat with 40 percent of his payment going for student loan repayment. They both have part time jobs in addition to their full-time ones.
As the result – like many young Americans – Romine and Hawkins are delaying marriage, children and the purchase of a home.
“Most students get little help from colleges in choosing loans or calculating payments. Most pre-loan counseling for government loans is done online, and many students pay only fleeting attention to documents from private lenders. Many borrowers “are very confused, and don’t have a good sense of what they’ve taken on,” Deanne Loonin, an attorney for the National Consumer Law Center in Boston and head of its Student Loan Borrower Assistance Project,” told the Wall Street Journal.
For a list of free online college courses check here.
Students and parents refuse to understand that college tuition needs to be the primary selection criterion if they are not millionaires. Don’t come crying to the taxpayers because you picked an expensive school far from home and then racked up debt (and probably a median GPA).
Go to a state school close to home … commute … work a part-time job … study hard … get a fellowship or assistantship to pay for grad school.
But tell that to starry eyed seniors and ego-driven parents and expect them to listen? Hardly.
Very good article on helping students and parents better understand the risks and dangers of private student loans. The only part that could send the wrong signal is the quote about “maxing out government loans before taking out riskier private loans”. Government loans can ruin someone financially even though they are not as bad as private loans. 6 out of 10 people who take out student loans are harmed financially as a result. All student loans are super risky and can create huge harm in your life. . I hope I can help parents and students avoid the financial harm that student loans can bring. Thanks for a good article.
SIGN UP FOR A MILITARY HITCH AFTER GRADUATION AND HAVE ALL YOUR LOANS PAID OFF FOR YOU. TOUGH COUPLE OF YEARS BUT BUT IT COULD BE WORTH IT TO YOU.