Wednesday, June 27, 2012

Student Loans

Student Loans~

The news has been inundated with cries about the alleged student loan crisis. Granted, untold numbers of young people have left colleges and universities with record levels of debt. Knowing the maturity level of most undergraduates, I do not lay the blame at the feet of the students. Rather – the fault lies with the federal government, the institutions that loan the ridiculous amounts of money and fail to monitor where the money actually goes, the parents who encourage the students to incur the debt to obtain an education at an unaffordable university and don't tell their children that it should be 4 years and out, and the university and colleges that conspire with all of the above to in order to keep the tuition at record levels.

There are other causes when it comes to graduate students. I have known graduate students who take out loans to send their kids to private schools and to pay for the down payment on home loans – because it is cheaper than a traditional bank loan and easier to obtain because nobody checks the credit worthiness of a student.

First, let us look at the parents. My parents expected to send their children to college and planned accordingly. That meant saving money. It also meant sacrificing a newer house and fancy vacations. We were expected to work during summers and contribute to our spending money and support. I wanted to go to Europe. That meant working to earn the difference between my year of education at my university and the cost to spend a year overseas. It was also made clear that we would graduate in four years. Today, parents don't save money for their children's educations. It is expected that loans will be provided. Parents encourage their children to aspire to the most prestigious universities and believe it is okay to extend the time to achieve an undergraduate degree to 5 or 6 years. And students have no sense of honor or responsibility to graduate in 4 years. Too many change majors on a whim or change schools. Instead of changing majors, get a degree and then figure it out! I managed to graduate with a 4 year degree in 3 years while spending a full year at an overseas campus, a summer in France ( at my own expense), and worked 24 hours per week my senior year while taking 20 hours per quarter and still getting straight A's. social life suffered a bit. But, my parents were relieved from paying tuition for 2 college students at the same time for a second year. And no, I did not get a job in my chosen field; but I did get a job that paid the bills and developed into a career. 

The federal government is so misguided as to believe it is the federal government's duty to ensure all American's have access to any institution of higher learning they aspire to attend. Wrong! It is up to the states to provide access to higher education. If the states want to provide additional grants or scholarships, they can vote an increase in the sales tax to support it.  Most state universities are reasonably priced schools.  The tuition increases exponentially if one insists on attending an out of state school. So...stay in state! Or....conduct the research necessary to obtain a scholarship or a grant. Or start out at a community college and work while attending classes. Unless one is awarded a scholarship or a grant, the cost differential and accompanying debt is not worth the prestigiousness of the school. If you can't get a grant or a scholarship or can't afford the tuition – don't go there! Otherwise, stop bitching about the debt!

With regard to the lending sources – why on earth would any lender loan $100,000 in student loans to somebody who wouldn't qualify for an auto loan? So sorry – but if you can't afford a Lexus or wouldn't be approved by BMW to buy a car – you can't afford Harvard and shouldn't be loaned the money to go there. And if the federal government didn't subsidize the loans, no lending body would take the risk. So again, the federal government is using my tax money to subsidize a loan to a bad risk. And we wonder why the US debt is so high! And lenders should disclose in large print - just like credit card companies are now required to do - what the monthly payment will be after graduation with the combined debt. Full disclosure is warranted to inform students of the burden they are undertaking. 

If the feds and the lending institutions would stop encouraging the accrual of astronomical debt by students, the bastions of higher education would have to .....lower tuition. Universities are not charitable institutions. Despite the ivory towers, they will continue to increase tuition as long as the market will bear it. They increase tuition to support the athletic programs, research programs for the faculty, to subsidize scholarships, to beautify grounds or upgrade facilities. If the market changes, universities will have to join the same world as commercial enterprises and “downsize”, eliminate the prestigious research unless paid for by private grants.

Finally – cross reference the loan history to ensure a student is not incurring such outrageous debt. And decline to loan money to students who try to go from undergraduate to post graduate studies without some time in the market place in the interim. Today's students have been so cosseted by their parents and teachers that they fear having to actually work for a living in the real world. If a student has the talents to go to grad school, somebody will come through with a grant or a scholarship or they will have the time to truly consider it the graduate degree and increased debt from loans it worth it. If there is a shortage of scholars in a particular field, there will be a corporation or foundation to offer grants. Otherwise, don't just go to law school or business school believing you will find a pot of gold at the end of the diploma. The chances of that happening is about the same as winning a Power Ball jack pot.   Frankly, I resent that my tax money must subsidize students without direction, who don't work, who take extra time to get their credits, who think they are owed a subsidy to attend an out of state private or college, and who believe they are owed an education by the USA. And, it is possible to get a job with just about any degree if you market yourself properly. It may not be the job you want and you may have to move.....but jobs are out there. It takes COMPROMISE and an understanding that nobody starts at the top.

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