The Student Financial Aid Crisis
The mortgage meltdown has been in the news lately. As we all know, lenders have been making bad loans and borrowers have been borrowing too much lately. This has led to people loosing their houses and people loosing their jobs. There is another problem on the horizon, the mountain of student loan debt. There are actually three kinds of student loan crisis’s, the student who can not get money to finish college, the student who has borrowed too much money and the effect on the banking industry.
When I was in my last semester of Nursing School I was told I could not receive student loans to finish my education. This obviously caused a financial crisis for me and I had to borrow using a private student loan. For many students having 4/5 of a degree is about as useful as having no degree. I have known many students in this situation who had to make tough decisions about school and money and did not always make the best ones.
This leads into the problem where the student has too much debt either out of necessity or foolheartedness. This leads to the students having to put off buying a house or starting a family. This is especially troubling for students who didn’t finish their degree or get a job that allowed them to pay back the loans. This often happens with socially conscious students who want to make a difference because these professions do not pay very well.
As students borrow excessively and the lenders loan foolishly, this increases the risk for default. Many student loan lenders will find themselves in the same position as the mortgage brokers in the future with borrowers unable to pay back their debt, but it will be even worse. For you call repossess a house and sell it on the market, but you can not repossess a degree.
– The Dumb Kid
May 14th, 2008 at 3:29 pm
You remember in the past when you had to exhibit good credit to receive credit card applications??? Those days are long gone. When I was in college they had table after table of credit card companies and other lenders lined up outside the student union to take your application. I just wanted the free Tshirt! As a 20 something year old what did I know about the proper use of credit?? Free money??? I’ll take it!! Bill me later…..
Its a sad situation. To drive you need to take classes and pass a test to get your license. To gain a credit card you need to sign your name. Where is the education in learning about your finances?? Oh, thats right… that comes later when I’m strapped for cash and have to sell my blood at the blood bank.
It is in the interest of the lenders to strap you in. That is how they gain valuable lifetime clients. get ‘em while they are young….. And the same goes for student loans. Sure, the low interest rate is attractive but how many years do you think the term of the loan will go on for??? Oh, but when I graduate and get a really good job I’ll double up on payments…. Sure you will! we all have good intentions….. but… life has a way of changing on us all. Trust me, those loans will not get paid off in the 4 yrs it took to graduate. think more like a home mortgage of 20yrs. and do you think lenders care? They won’t even be around by then.
I guess my point is this: Where would or could that money have gone otherwise? Maybe towards a home? to a secure life? a happy family?
May 27th, 2008 at 9:07 am
Brendan,
I could not agree more.