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Student Loans . . . Hard To Shake? Or just hard to take?

Student Loans.  Those two words have the bane of many, including myself.  I hate those words so much that I opted for automatic withdrawal from my checking account, so I don’t have to be reminded with a hard copy bill every month or be forced to write a check.  Fortunately, I am in a position to make my payments on time.  Nonetheless, I hate making the payments, because at my current rate of about $850 a month, it will take at least thirty plus years before I tackle the approximate 100K in law school debt I acquired.  Awesome.

Not everyone is so lucky.  For many, student loans are not only the bane of their existence, but also the ‘evil’ that has garnered their paychecks and the ‘evil’ that has remained despite declaring bankruptcy.  It’s an interesting thing in the bankruptcy law, but the bottom line is that student loans are excluded, unlike other types of debts.  There’s a website called Student Loan Justice that discusses the ‘problem’ of student loan debt and shares numerous stories of student loan payments gone horribly wrong. According to the author of the website, Alan Collinge, the “problem” with student loans boils down to this:

Due to Congressional action over the past decade, student loans are the ONLY type of loan in our nation’s history to be specifically exempted from standard bankruptcy protections, have statutes of limitations removed, be exempt from truth in lending requirements, and also exempt state agencies from the Fair Debt Collection Practices Act. . .As a result, student loans have become the most profitable, uncompetitive, oppressive, and predatory type of debt of any in the nation.

While Mr. Collinge’s website sheds light on some of the strong arm tactics displayed by collection agencies working on behalf of student loan companies, it stops short on several issues on tackling and addressing the real ‘problem.’  For one, it is very easy to attack the student loan companies.  They are the ones we have to fork over our hard earned money to — whether we like it or not.  At the same time, they were the ones, whether we like it or not, that allowed us to pay the exorbitant tuitions and to focus on school without having to work seventeen jobs.  I think you may see the point here already.

Attacking just the student loan companies, and blaming them for all that is bad in the world, surely misses the point.  What we should be focussing on is a) why the cost of education for a student has skyrocketed and b) why the job market has not kept up with the higher cost of education.  Here’s just a simple anecdotal example.  In the early 1990’s, law school tuition was about $8,000.  A few years later, in the mid 1990’s, law school tuition shot up to about $35,000 a year.  Meanwhile, incomes for first year attorneys — barring those that went to the handful of jobs at large law firms in NYC — remained relatively flat for that same time period.

Yes, this is America, and we should take responsibility for the choices we make.  In my case, yes, I could have gone to a state law school and my debt would be 1/10 of what it is now.  I did not, because I wanted to go to the better school.  I take responsibility for that.  I could have gone to a private firm after law school and received a potential earnining capacity higher than what I have now, but I decided not to, because I wanted to serve the public.  Again, I take responsibility for that choice.  I did spend very frugally in law school.  I thought my law school loans wouldn’t be such a portion of my monthly debt.  But they are, and it’s a portion I’m not so comfortable with.  Perhaps I should I have done real research for that, but I didn’t.  I take responsibility for that idealism and ‘ignorance is bliss’ attitude.  Now I’m paying the price, literally.  It doesn’t seem fair, but again, it was the Faustian choice I made to go to law school and the Faustian choice I made to take a job in public service.  If I had to do it over again, I would — except I would have thought a lot harder about choosing a cheaper law school.

But why does it have to be this way?  Why does education have to be so damned expensive?  It’s great that these student loan companies give people like me an opportunity to go to law school when I would certainly not have been able to pay the $35,000 in tuition each year plus the about $8,000 in room and board out of my shallow pockets.  But it’s disappointing that even if you made this sacrifice to go to school and acquire a solid and honest job . . . you still aren’t in the position to pay off the debt in any normal amount of time (I think the normal life of a loan for people that go to law school loans is a ‘lifetime’).  The conspiracy theorists may say that this is exactly what the student loan companies want, as more time equals more interest equals more money, more money, more money.  Perhaps.  Then again, student loan companies are companies, and they make profit from their borrowers as opposed to finding money on trees or handouts from the government.  I’m sure if student loan companies were frugal with their loan guidelines, i.e., giving loans to people only with a solid credit history and assets that will guarantee repayment within five to seven years, then surely these conspiracy theorists would complain equally hard as to why these student loan companies aren’t giving loans out.  Somethings got to give.

Regardless, there’s currently a serious disconnnect between expectations, the economy, education, and the government’s role.  We have education institutions charging up the wazoo for tuition.  We have student loan companies handing out loans to anyone and everyone so that they can go to school.  We have a job market that doesn’t empower people to pay off these student loans in any reasonable amount of time.  We have a government and education system that teaches, at a very early age, that everyone can go to college, regardless of money.  Even on paper, something here doesn’t make sense.

Is this really the ‘American Way’?  Perhaps I’ll just move my family to France.  At least I’ll know my taxes are going to something tangible. . .like health care and education.

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About Mr. Cheeseburger 9000

I am Mr. Cheeseburger 9000. I like my burgers medium-rare with a side order of french fries.

7 responses to “Student Loans . . . Hard To Shake? Or just hard to take?

  1. Really great perspective on the problem with student loans, and more importantly student loan debt. Thank you for presenting both sides of the issue.

    I started my website as a response to the bullying tactics used by Alan Collinge and his PAC, Student Loan Justice. In my opinion, Mr. Collinge is the worst possible spokesman for people with special circumstances that make it impossible to find employment and pay back their student loan debt. In his case, he had no such circumstances, just a desire to travel and find another job instead of fulfilling his obligations to pay back the loans he was more than happy to take out to get his THREE Engineering degrees. He admits to backing himself into a corner by asking for a raise and then quitting his perfectly good job as a research assistant at a California State University.

    I have about 30k in loans myself for a teaching degree and I reluctantly pay them each month. I personally hate Sallie Mae, but i respect their right to run a profitable business. I do strongly believe that there should be some protection in place for medical catastrophe or other extreme situations. But I absolutely do NOT think that students should have the option to borrow money, get a degree, file bankruptcy, and screw over the very people who gave them that opportunity. My stance has always been very simple, and Alan Collinge is a prime example of what disgusts me about this situation. He has put a thousand times more energy into trying to weasel his way out of his obligation of debt than he has into trying to just pay it back.

    Just my thoughts and thanks again for the well written article.

  2. While I agree that those of us who took out student loans have to take responsibility for our own actions, I do have to question a system which allows someone (me, in this case) to take out the maximum student loan available to a person going through graduate school when I was taking education in a field known for it’s minimum salaries.

    As a PhD in the Humanities, I could only reasonably expect to make a mid-thirties to mid-forties starting salary. Yet the system allowed me to take out over $100000 in student loans. Now, after 5 years that $100,000 has exploded into over $250,000 in debt. The only redeeming quality of the student loan system is that when I die, my heirs won’t have to pay the money back. Until then I am wallowing in a debt that I will never be able to repay.

    Please understand that I am not saying that anyone forced me to take out the maximum loans, I did that to myself. I am saying there has to be a better way to pay for education. I am saying (as you did) that education is overpriced. I am also saying that the value of a higher education is vastly overstated.

  3. Jennifer

    I’m trying to petition congress to return consumer protection to Private Student Loans.

    All other forms of debt (credit cards, mortgage, vehicle etc..) have standard consumer protection and can be discharged in bankruptcy. I think Private Student Loans which are not federally insured (and therefore pose no risk to tax payers) should be included in bankruptcy proceedings.

    I am not asking for money – just want signatures of people who support this cause. If you don’t – don’t sign.

  4. I posted a link to your blog over at the Get Rich Slowly Forums

    JD also runs a great bog as well

  5. dawn ⋅

    economic major you were not. . .

    I also am not an economic major, just observant at the school of hard knocks.

    The reason tuition is so expensive. . .wait for it. . .is because people can get loans to cover it. Same reason the housing market has such a bubble. For the colleges it is ‘play money’ to build new fun toys. For the students footing the extra windfall for the colleges it is a life of servitude. If there was no student loan money. ..colleges would either be cheaper or close down. Because they are in the business (ideally) of educating what? Yes that’s right students. No students, no college.

    And if bankruptcy protection were re-instated , it does not mean everybody and his brother would declare bankruptcy. What it could mean is that would give the rest of us negotiating room. Right now the favorite reply to any plee to reduce interest rates, fees is met with the same “NO.” No help at all AND these are government agencies not private corps.

    Oh and BTW. . .I did work three jobs at a time at college cause I was scared of debt. The loan we have problems with is my husbands.

  6. Muneeerah Crawford ⋅

    I paid back three loans prior to being defrauded by Citibank. Yes I agree that Alan is the wrong person to represent the problem. He has completely ignored
    people who are far more educated in law. He does not like to be told the truth, he covers it up with excuse which make no sense. If he cannot even communicate with educated people, how can he represent these students? My case is not typical and should not be ignored. When I asked Alan for help, he referred me to a reporter who went behind my back to the lender before verifying my story.
    This is the same thing that the Ombudsman for the Dept of Education did. I did not trust that reporter and told him that he acted unethically. When you have a proven case of fraud against anyone and it has not been heard in a court of law, you dont need anyone contacting the perpretator and warning them. What do you think? That Citibank is going to admit this?
    The NY Attorney General went after Citibank and Sallie Mae and other lenders in the loan scandal in 2007. Just to show you that people are doing everything that they can to hush the truth, just take a look at how they dealt with Citibank and Sallie Mae. There was vas evidence that Sallie Mae and Citibank were doing this at every university in California. Again when you warn people, they cover up. The Attorney General without even investigating Citibank or Sallie Mae alowed them to pay a mere 2 million each into a slush fund supposedly to educate students. Immediately as a result UCLA destroyed all evidence of wrong doing and were never confronted. The financial aid director for USC resigned when she was caught with stock. Kickbacks are not unusal in america and this has been going on in every industry and business for years. The attitude in this country is use and abuse and get rich!!! Dont take my word for it.
    Everyday on CNN there is a crook exposed ie Mr. Madoff. I recently discovered damaging evidence against the largest loan guarantee company in the world, California Student Aid Commission. I am in the process of arranging a class action lawsuit against them and the real perpretator EDFund.

    For all of you who want people to own up to their responsibilty I dont have a problem with your view but when lendors and guarantee agencies commit fruad by delibertly defaulting student loans then we need oversight to make sure they operate legally and to protect your rights.

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