Advertisement

Archive for Monday, August 15, 2011

Graduates saddled with student loans may pay dearly for decades to come

Ian Hrabe, who graduated with more than $50,000 worth of student loan debt, now works at Half Price Books after graduating from Kansas University in 2009 with degrees in English and film studies.

August 15, 2011

Advertisement

Ian Hrabe, a 2009 Kansas University graduate prices books at his job, Thursday, Aug. 11, 2011, at Half Price Books. Hrabe is one of many recent grads saddled with a large amount of debt from student loans and private loans. He estimates that he owes about $60,000.

Ian Hrabe, a 2009 Kansas University graduate prices books at his job, Thursday, Aug. 11, 2011, at Half Price Books. Hrabe is one of many recent grads saddled with a large amount of debt from student loans and private loans. He estimates that he owes about $60,000.

Cutting costs

Mark Kantrowitz, publisher of the websites finaid.org and fastweb.com, offered some advice on how to avoid massive student loan debts.

• Enroll in an in-state public college. The costs are much less than a private institution, he said.

• Search for free scholarship money.

• Save before college. Putting aside $200 per month for 10 years will shave off $396 from a monthly payment later.

• Buy used textbooks.

• Keep living expenses in check. Just avoiding eating out, Kantrowitz said, can save thousands of dollars. If you’re paying for a meal plan, use it.

Ian Hrabe remembers the phone calls. They started cordially, but got nastier and nastier, until finally the student loan company was calling at 7 a.m., demanding payment on its loan.

National experts agree that people like Hrabe are among a new generation of college graduates having to deal with an increasing mound of debt resulting from decisions they made while in college.

Hrabe graduated from Kansas University in 2009 — “the year of the Great Recession,” he says — with a degree in English, with an emphasis on creative writing, and film studies.

He grew up in Olathe and went to college because he thought that’s what everyone did when they got out of high school, and he wanted to get out of his parents’ house.

“I’m going to go to L.A.; I’m going to make a movie. I’ll write the great American novel,” Hrabe remembered thinking when he entered school as a freshman. But halfway through, he had already soured on those ideas.

“I’m already half done,” he remembered thinking. “I might as well finish it out.”

He wound up working at CD Tradepost for minimum wage in Olathe for a while, as the movie and book career didn’t pan out. Today, he works at Half-Price Books in Lawrence.

It’s a good job, he said. It’s full-time, it has benefits, and he likes the company.

Today, Hrabe’s monthly payment on his loans is $560. His mother pays half of that, he said, to help him get by.

He’s doing well for now, and he has learned to be frugal. He’s engaged to his girlfriend, who’s going to graduate school to pursue a career in social work (she’ll be adding her own debt, Hrabe acknowledges).

A growing trend

Mark Kantrowitz, publisher of the websites finaid.org and fastweb.com, keeps track of data on student debt on the national level.

The average student who leaves college with student loan debts will have about $27,000 to repay, he said.

At KU, those figures are somewhat less, which would be expected at a public university with lower costs, especially for in-state students.

Just over half of KU undergraduates go through the university without loans.

But of the KU undergraduates who are left with student loans, the average principal is $20,517, according to figures from the university’s financial aid office.

And it’s all but impossible to get rid of student loan debts through bankruptcy — either federal loans or private ones, Kantrowitz said.

“You’re more likely to die in a car crash or die of cancer than you are to get your student loans discharged through bankruptcy,” he said.

The loan companies and the government will get their money one way or another, he said. Student loans recover more than 85 cents on the dollar for defaulted loans, a better rate than most private loans several times over, he said.

The level of debt taken on by students has been increasing over the decades, too, Kantrowitz said, as government and other aid for students hasn’t kept up with rising tuition costs.

Students often don’t realize that a dollar taken out in student loans today means a repayment of two dollars later, he said.

That $10 pizza might not look as appetizing, he said, if students thought of it as a $20 pizza.

And the increased debt load means more and more people are extending their student loan repayment plans for 20 years after they graduate.

“Then you’re paying back your own student loans when your children are going to college,” Kantrowitz said.

It’s certainly easy to acquire that kind of debt. Ora McWilliams, a KU doctoral student with more than $100,000 in student loan debt, remembered how he once was able to add $20,000 in more loans through an online process.

“My hand was shaking as I hit check out,” he said. “I kept thinking, ‘What if I hit the button twice?’”

Figuring it out in advance

Leticia Gradington knows that students don’t often understand the ramifications of their debt choices. As KU’s program director for its Student Money Management personal finance program, she deals with students looking for answers every day.

Things like compound interest, monthly payments, expected salaries and other budgeting basics are often confusing.

“You have students who think they know it,” she said. “They say, ‘I took Finance one-oh-whatever, and I know it.’”

Still, many of them don’t, she said. And their parents may not realize the ramifications of the debt their children are accumulating.

Gradington tells students they have to figure out the monthly payment on their loans while they’re in school. Call up their loan companies, she tells them. Figure it out. And, she said, students have to figure out what kind of salary they can expect to make before making choices on how much money to take out in loans.

“‘I don’t know’ is unacceptable,” she said.

Understanding the end at the beginning is critical, she said.

“If you understand, you don’t have to graduate from the school of hard knocks,” she said.

Avoiding the pitfalls

Not everyone has a horror story. Lucas Dunn, a communication studies major with a business minor, graduated last spring and found a job in Chicago as an account manager for CDW, an information technology solutions provider.

Still, he’s living with his parents for a while until he can find out how his budget will handle the monthly payment on his $25,000 college debt.

But for people like Hrabe, the future can look scary, and he admitted to sometimes hoping that a “wealthy widowed heiress” would swoop along and wipe his debt clean. He knows that’s not likely.

Hrabe said sometimes he wishes he would have foregone college. But there were some good things, too. He met his wife-to-be while in Lawrence and learned a lot working for the student radio station.

But still, he wishes he could have better navigated the traps and pitfalls.

“It’s my fault,” he said. “It’s a valuable lesson to learn. You’ve got to figure out something.”

Comments

Flap Doodle 2 years, 8 months ago

merrill the GINO wants people to learn clean energy trades. Har, har, it is to laugh.

0

Richard Heckler 2 years, 8 months ago

Student loans took on another look during Bush/Cheney. Kind of like the housing loan situation. Yes I am suggesting more shady business.

Students are able to access tons of money with little or no collateral and certainly not enough collateral to cover these loans. The interest rates increased substantially.

It was always my understanding college loans were never to be great money makers for financial institutions........... until Bush/Cheney came along.

0

lawslady 2 years, 8 months ago

In 1996 I helped a young man through a maze of red-tape so he could go to KU. He was washing dishes at a local restaurant/bar at the time. He had intellect and talent, but none of his family had ever attended college, and he wanted a college degree so he didn't have to wash dishes forever. He just didn't know where to start. After getting accepted, and getting some loans, he spent the bulk of the money buying stereo equipment, fancy tennis shoes, etc. When I asked him why, his answer was "Because those are things all the other students spend their loan money to buy." Of course, he dropped out soon thereafter and left the city/state. I don't know where he is now, but as long as he's alive, I bet he's still paying on those loans.

There should be some way to make sure that student loans go to pay for education, school, not living expenses and certainly not "extra's". But of course, that probably was tried and didn't work either. Maybe the schools should have to pay some of the loans back too.... make them more careful about taking money from someone who is unlikely to finish their education or obtain a job after graduation!

0

Richard Heckler 2 years, 8 months ago

Stimulate The Economy = Forgive Student Loans! http://www.thepetitionsite.com/1/Real-Economic-Stimulus-Forgive-Student-Loans/

After all if the government can forgive the white collar crooks that wreck the economy and send millions upon millions upon millions of jobs to other countries such as communist China why not forgive the group that got screwed big time.

Now that this group is well educated,which is awesome, they may as well go to Johnson County Community College and learn a trade in clean energy or whatever so they MIGHT become gainfully employed. This time go for grant money or scholarships if available.

0

Ron Holzwarth 2 years, 8 months ago

A few years ago, I overheard a conversation between two students. One of them was going to Padre Island for spring break, and the other was wondering how he could afford it. The explanation was simple:

"Just take out a student loan! After you graduate, the payments will only be about a hundred dollars or so."

Apparently he had not taken his math classes yet, or perhaps did not learn anything from them.

0

lawslady 2 years, 8 months ago

Like many things, this is a topic that has many moving parts. Back "when," only the very wealthy went to college. It was considered a luxury (along with the trip to Europe that was the reward for graduation). However, along came the end of wars (I, II, Korea and Vietnam) and there were suddenly far more workers and not enough jobs. In order to keep the glut of workers down (which would have caused massive unemployment numbers along with the other social ills that come from such conditions) It became economically expedient (and necessary) to delay individual's joining the work force. Thus, the importance of a college education was pushed (and largely accepted by employers and workers alike) and the amount of public funding assistance increased. It's an economic ploy that is not all that uncommon. Supply and demand being adjusted, as much as possible.

Now, fast forward. Baby boomers are growing old. People are having fewer children. Global economies, technology, and ease of rapid transportation advance. Resulting in a lower demand for high-paid workers, and an increased demand for skilled workers, health care providers, etc.

No longer is a college degree worth what it costs, to those who do not have specific goals in mind or those who are not learning a skill for which there is still a demand. Getting a fine arts or liberal arts degree or a general studies degree etc may be fun, and delay having to grow, or impress other people (who don't know any better). But it will not in most cases, mean much to employers (who aren't related). Those employers with sense who have jobs to fill look for people with actual skills and experience. An employer with a job that needs done rarely cares nearly as much about whether Mary or Johnnie managed to get a sheepskin while partying (and racking up massive debts). The time of the professional student is passing. Unless you intend to teach or get a graduate degree in an field where there is still some demand, getting student loans is just dumb. Pay as you go. Or don't go.

Time to stop living in the past. Anyone who has children whom they do not want to support for 20 more years is well advised to (a) refuse to pay for a college degree that won't help their child get employed; (b) insist that the kid has some "skin in the game" (pay their own freight) so they learn the value of a buck; and (c) consider community or technical colleges first. If you want to help them, pay cash. Teach them to weld. Then they can pay their own cash for the 4 year degree in whatever (law, business management, or art history) if they want to spend more years in school.

0

Andini 2 years, 8 months ago

Seven years of college down the drain.

0

demonfury 2 years, 8 months ago

This is a perfect example of why KU and so many other state colleges are in decline. It's too darn expensive and the tuition rates keep going up to support the salaries and benefits of it's professors and administrators. When you cure the $100,000.00 + salary of the average KU professor and executive administrator, you cure the issue of decline. Since they are the decision makers, this isn't going to happen. They will do what Baker did last year, fire non-essential staff to make sure their salaries are untouched. Welcome to capitalism !!!

0

classclown 2 years, 8 months ago

Posted this elsewhere, but another thing to consider is how honest are collages about grads finding a job in their field of study after graduation.

http://news.yahoo.com/blogs/lookout/law-grads-sue-school-degree-indentured-servitude-205815018.html

0

KansasPerson 2 years, 8 months ago

If a loan-forgiveness program does happen sometime in the future, I can't imagine how angry that will make the people who struggled for years to pay theirs off.

0

gatekeeper 2 years, 8 months ago

So many kids just don't think and don't plan out their college degrees. I stayed at home, went to JCCC for two years and worked full time to pay for my college. Then I transferred to KU. I spent four more years at KU to get my undergrad degree, usually taking three classes per semester so I could still work full time. I only took out loans to pay for tuition. Books, rent, bills, etc.... were all paid from my pocket. The only times I used any credit cards were for medical emergencies (impacted wisdom tooth, etc...).

So many kids take the loans and use them for rent, food, partying and maybe work a few hours a week if they're forced to. Loans should be used for tuition and maybe books and that's all. All students should have to work to earn money. It makes you grow up.

Because I worked my way through school, I have one great line on my resume that says "I worked full time to pay for all expenses while in college." Every place I've ever had an interview with told me that made my resume stand out amongst all the others. It shows you are a hard worker and didn't major in partying while at school. Because I worked full time, I also had a pretty good job before I graduated that turned into a career and I didn't have to start from scratch when I graduated.

Kids have this B.S. dream that they're going to go to school, party hard and find a mate, graduate and have a great job fall in their lap. It's a b*tch when real life hits.

0

Laurenepierce 2 years, 8 months ago

It's ridiculous that college graduates who are going to public universities are being saddled with such outstanding debt. If we were actually efficient with our tax payer dollars then maybe we wouldn't have to deal with such a ridiculous economic burden.

0

unite2revolt 2 years, 8 months ago

Chiming in with somedude and tbaker. I never understand why articles like this fail to mention the ways you can serve your community or someone else's and work off your debt at the same time. I have a plan, it will take ten years after I finish school but I will have easily 90-95% of my student loans forgiven while making very affordable payments. But I also don't understand why people get liberal arts degrees, or get stuck at dead-end jobs for any real length of time.

0

Jimo 2 years, 8 months ago

One more way that we steal from our children so we can keep shoveling money into the hands of the wealthy.

0

dmdbro21 2 years, 8 months ago

If any of you guys are struggling with student loan debt or need a place to vent out your frustrations we have a pretty sweet group set up on Facebook - http://www.facebook.com/groups/forgivestudentloandebt/

I ask that you please join our group of mostly college graduates as we educate and create awareness about bills currently being circulated in Congress regarding tackling student loan debt and other related issues. Your voice deserves to be heard!

0

Buddylove 2 years, 8 months ago

Students often don't plan ahead... There are less expensive ways to do college. 2 years at JCCC and 2 years at KU, your diploma says KU! I personally got my master's degree at a highly prestigious private university ranked in the top 5 of my field. Guess what? I don't make any more money than my KU colleagues. Yet I paid 4x more for it. It is very rare for your career to hinge on where you went to college. Most employers don't care.

0

imastinker 2 years, 8 months ago

So many kids I went to school with went straight out, got a job, a new car, and a big house in the suburbs. Then they can't figure out how to pay back student loans.

We lived a lower standard of living for a few years, but are debt free now and our friends ask us how we afford stuff....Paying off student loans was the best thing we did. I sold my new truck to do it.

0

tbaker 2 years, 8 months ago

These people should move out of the parents house and strongly consider the fact the Army has a fine student loan repayment program. So does the National Guard, as well as a number of federal government agencies - which of course - are hiring.

0

somedude20 2 years, 8 months ago

Join the military, go to war, get injured then get a free ride to the school of your choice! Some people pay an arm and a leg, me, I just had to give a chunk of it and bam, Penn State degree!

0

hwk4life 2 years, 8 months ago

Do you think students ever think about loans? I see my friends having a good time, spending lavishly on concerts and having parties. All i can say is learn to make sacrifices. If you are that worried about repaying back your loan, do cut back on your spendings.

0

thepianoman 2 years, 8 months ago

Interesting about your co-worker, Costello.

People these days have no concept of finances, spending and saving. It's all about choices I suppose. If you want to live (or want your kids) that rich, lavish lifestyle of new cars, fancy electronics, etc, etc, then go for it. You'll pay for it later.

0

thepianoman 2 years, 8 months ago

Interesting article. I graduated from Washburn in 2005 with a B.A. in "Mass Media." I worked in tv (WIBW) for seven years.

I, like this individual, was expected to go to college following high school. I thought I wanted to become a music teacher, but I never did pursue it and I'm actually glad of that.

To this day, I continue to struggle with finding a career I enjoy. I've been exploring different possibilities, but haven't had much luck. Anyway, I digress....

Thankfully, I have $0 debt from college. I lived at home, worked full-time and split the costs of books and tution with my parents 50-50. It woked well. As a matter of fact, I have no debt in my life right now!! YEAHHH!!!!! No complaints from me!

My advice to young people is to slow down, and take the time to figure out what you want do. For gods sake, don't sentence yourself to a life of horrendous debt and not know exactly what you want to do. I sometimes am amazed at someone who gets a BA or Masters in Theatre or Dance?? Honestly, what in god's name are you going to do with this degree? You've spend tens of thousands of dollars+ to get a degree in Theatre?????!!!!

High school counselors should encourage students to explore other alternatives such as vo-tech, etc. Anyway......

0

snitty 2 years, 8 months ago

It may yet be necessary for the government to reschedule or forgive loans like this in order to free up the economy and escape from this recession. We have shot ourselves in the foot by making education prohibitively expensive.

0

TheRealClarkKent 2 years, 8 months ago

Here is a great question, why did he continue to pursue a degree in English if he lost the passion for it? I am a recent college graduate and at the half way point a person is just wrapping up their general education courses....math, science, foreign language, etc. Typically I believe most higher level courses (degree specific) can not be taken until you have most of your gen. ed. completed. So at the half way point I think it would have been fairly easy to change directions and pursue another degree.

I am not pointing fingers at Ian but it appears his priorities and goals for going to college were misguided. I think there are a ton of kids on college campuses that don't have a direction. I think universities need more career counseling but they can only help if someone ask for assistance in choosing a field to pursue.

I think often kids are just looking to find a way out of their parents house but not be responsible like their parents...going to school and getting loans to pay for it is the easy way to get both of those things accomplished.

0

DRsmith 2 years, 8 months ago

It also might help to choose a useful major. Helps to actually get paid after college.

0

itwasthedukes 2 years, 8 months ago

College bubble is next. It has been built just like the housing bubble. Government backed loans that few can repay.

0

rtwngr 2 years, 8 months ago

I know, from first hand experience, that defaulting on a student loan can ruin you financially for more years than you can imagine.

0

tweetysvoice 2 years, 8 months ago

The unfortunate thing is that a lot of students would not even be able to afford college without these guaranteed student loans. I, for one, am one of those people. If I didn't have access to student loans I would never be able to go back to college. I realize how much debt I am getting myself into. It's much better to go to college with a specific goal for a degree than just getting a general lib arts degree which might or not not land you a job.

0

worthlessljworldposter 2 years, 8 months ago

DRG sucked. Lots of desperation, very little pay. Was there 4 years.

0

SnakeFist 2 years, 8 months ago

There's nothing wrong with getting an english degree, but going $50,000 in debt for it is just plain dumb. With tuition as high as it is, there has to be some thought to treating college as a financial investment that has to pay for itself at some point.

It is naive of students and irresponsible of counselors to think that the only consideration in choosing a major is that it should be something you love - you'll spend four years doing something you love and the rest of your life working a miserable job to pay for that indulgence.

0

Gandalf 2 years, 8 months ago

On the bankruptcy issue. Student loans could be dismissed in bankruptcy in the past in some circumstances depending on the law in effect at the time the loan was taken out.

The law was change in 98 and it made it nearly impossible then. A blanket bankrupcy order won't do it. The judge has to aprove and sign a specific order dismissing the loan due to undue hardship. I saw a couple of those, but they are extremely rare.

0

Gandalf 2 years, 8 months ago

Another point students may want to take note off. If you have a tax offset coming and you think it may be close to paying the loan off. Call the ED reps or CA's chance's are you can work out a compromise. For a payment in full, from any source. you can usually negotiate a reduction of 10% or half the back interest whichever is greater. Remember though the payment has to be received by ED within 90 days of the agreement and if the offset has been taken already it's too late to negotiate.

0

Gandalf 2 years, 8 months ago

Couple of points Ron. ED has around 30 different collection agencies working for them at any one time.

CA's cannot garnish SSDI or SSA but ED can. No part of any federal offset goes to any collection agency. The IRS takes a 15.00 fee as an offset charge then the rest is applied to back interest first then principle if any is left. By the way the IRS offset charge is taken every month from SSA, SSDI or any monthly offset (nice racket)!

Tax offsets are not all bad. If the offset pays off the principle and interest any CA fee is waived. IE the agency does not get paid because they didn't collect.

The maximum AG charge is 25% but it was higher years ago.

0

Ron Holzwarth 2 years, 8 months ago

Pioneer wants some income coming in from you, and they will take what they can get. They have one of the most lucrative businesses in the world, and they collect on so many student loans that some individuals that are behind the orginazation have to be making millions of dollars off of students that are sweating their next payment, or their next call from Pioneer.

In many or most cases when you fall behind, you will literally be paying on that loan for the rest of your life. And, by the way, your credit rating may very well be affected. Do you think you will ever want a credit card? Do you think you might want to finance a car or buy a house in the future? You better very seriously think about those issues before you take out a student loan.

Oh, and in case you're wondering exactly how large my student loans were, I took out two of them for $2,500 each. And, I did make payments on them for years before times got bad.

0

Ron Holzwarth 2 years, 8 months ago

There is a point made in this article that I can make a correction to, because I am an expert on trying to pay back student loans that were so easy to get and spend, and then became literally close to impossible to repay when they became due. The high paying job I thought I was going to get in only a few years just simply never panned out.

Here's the statement that is not true:

"And it’s all but impossible to get rid of student loan debts through bankruptcy — either federal loans or private ones, Kantrowitz said."

Mr. Kantrowitz is in error on that statement. It might be possible to get a student loan from a private company discharged through bankruptcy, but a federal loan is a debt to the federal government, and it is not at all possible to get it discharged through bankruptcy. Federal debts are never wiped out by bankruptcy. The only way to have one discharged is through disability, and the requirements for that are quite strict.

Are you on SSDI? That's not good enough, the requirments to get a student loan cancelled are much more strict than those required to recieve SSDI from Social Security.

There is another way to get it cancelled, and that is to die. When you die, your student loan is cancelled, and it is not deducted from your estate. Be thankful for at least that kindness.

There is another thing that most students are probably not told. And that is, if you fall behind to far on your payments, your student loan debt is then sent to a collection agency. The one used at present is one named Pioneer, and they operate out of New York City.

Here's what you're not told when you first take out your loan: If your loan is sent for collection to Pioneer, the amount due is increased by a penalty rate that I believe 30 %.

The amount due on my student loans increased from $8,000 to $11,000 overnight. Then your calls start coming from Pioneer. Some of the people there seem to be very friendly, and others are quite nasty. The one thing they have in common is that they all want money. I'm quite sure that they operate on a commission basis.

Pioneer, as a collector for the US government, has collection powers that are staggering. They claim that they can garnish from your SSI or SSDI check, I believe they can actually do that, which no private collector can. The only exception is a disability check from the VA, they are not allowed by law to touch that.

You can arrange for a very reasonable payment arrangement through them, and it will be deducted from your checking account every month. Of course, they will call you later to try to get that increased.

Kicker is, that 30 % penalty goes directly to Pioneer first, and after that 30 % of your loan is paid, then the rest of the payments will go to the federal government if you live that long, which is unlikely.

0

Gandalf 2 years, 8 months ago

  "Leticia Gradington knows that students don’t often understand the ramifications of their debt choices. As KU’s program director for its Student Money Management personal finance program, she deals with students looking for answers every day.

Things like compound interest, monthly payments, expected salaries and other budgeting basics are often confusing."

No wonder the students are in trouble! There is no compound interest on federal student loans, just simple. Although once they tack on a 25% collection agency fee it can sure seem like it.

Another problem is any money collected by an agency is their fee comes out 1st, then any remaining is applied to back interest. If anything is left after that it will go on principle.

0

Gandalf 2 years, 8 months ago

If you have Direct Student Loans you can keep them in perpetual forbearance (at least until congress decides to change). All you have to do is call and say you want to pay but can't right now. You can be granted a forbearance either on a month by month basis or for 6 months at a time.

Be very careful though about requesting a reduced payment plan based on income (ICRP). They will require yearly proof of income. If they don't get it timely they will automatically default the loan, that's when all the horror stories you hear come true.

ED is well aware of all the tactics that the collection agencies use but they turn a blind eye because those tactics work. that the collection agencies use but they turn a blind eye because those tactics work.

0

Gandalf 2 years, 8 months ago

That reminds me of one file I looked at while working for Vangent. The last entry was their request for disability was denied. The next to last was the person was deceased. Only about 20% of disability claims thru the Dept of Ed are ever approved.

It was under bush that they started offsetting SSA from retired or disabled individuals if they make more than 750/month. I saw many accounts where people were trying to live within their means and ED was taking $30 from them plus the IRS offset fee of $15. That could be stopped sometimes in case's of hardship. The one case that really stands out was a federal retiree who got her offset stopped because her rent was over $2000 in D.C.

0

Commenting has been disabled for this item.