Thursday, June 03, 2010

Whose fault is student debt?

The NY Times had an article the other day speculating about who gets the blame when college students end up buried in debt that they can’t pay off. The article related the story of one NYU student that graduated in 2005 with $100,000 in debt.

She and her family pulled out all the stops to get her into the best school they could. They started with her mother co-signing two Sallie Mae loans totaling $20,000. When they went for a third loan, Sallie Mae rejected the application because by then the mother had returned to college and was also borrowing money.

NYU suggested a federal Plus loan but that would have meant immediate payments which the mother couldn’t afford. NYU then suggested a private student loan from Citibank.

Citibank approved loans totally about $40,000. She was digging a chasm of debt that it would be very hard to get out of. At the moment she has about $97,000 in debt. She’s attending night school so payment can still be deferred but the interest charges are accumulating.

The article speculates on where the blame should be placed. It clears Sallie Mae because the first two loans were for a modest amount, were co-signed for by a responsible adult and the company refused any future loans.

The article rightly questions what Citibank was thinking when it approved an additional $40,000 in loans to someone who had at best only a potential way to pay the money back. The author then questions whether the NYU financial services office should have suggested, once the debt began to pile up, that perhaps she should consider transferring to a less expensive school.

At the moment our NYU graduate, with a degree in Religious and Women’s Studies, is living in San Francisco and making about $22 an hour. After taxes she apparently takes home about $2,300 a month and is paying $750 in rent. Repaying the student loans would run around $700 per month. The Times reports that our erstwhile student “badly wants to call a do-over on the last decade” and says “I don’t want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back. It feels wrong to me.”

Ok, where to go with this. I agree that Sallie Mae acted correctly and should get no blame and I don’t think it’s the place of the university’s financial aid office to provide advice to students about the level of debt they can handle or suggest they transfer to a less expensive school. The ones I dealt with at TCNJ, Hofstra and Seton Hall constantly provided warnings that students, and their families, needed to consider very carefully how they were going to handle having to repay loans. I can only assume that the financial aid office at NYU did so as well.

As for Citibank, what can I say? It seems as if the entire banking industry went through financial dementia in the latter part of the first decade of the 21st Century. I have no other way to explain the idiocy of some of the decisions including this one.

Even so, the ultimate responsibility falls upon the student and her family. Ahh, the poor dear just HAD to go to NYU, one of the most expensive universities in the country while living in NYC, one of the most expensive cities in the country. This is not to mention getting a degree in Religious and Woman’s Studies. What the hell is that anyway and what kind of job do you get with it?

You can’t get a “do-over” in real life just like you can’t get a “respawn.” If you screw up, you have to deal with it. I have no sympathy for our NYU grad. Start paying off the loan darling and if that leaves you a little short, get a flexible hours kind of job flipping burgers or waiting on tables.

You’re young; putting in a few extra hours of work won’t kill you. Besides, the more you work the less extra money you’ll need because you won’t have any time to spend it.

It’s your debt; you earned it; you held the dance so now its time to pay the band.

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