“the borrower is servant to the lender”
Proverbs 22:7 (KJV).
The long-term drag of student loans on the lives of many college graduates is a horrible thing. And discussions about relieving that problem are important.
But long-term effects on students are a mere symptom of the problem. The underlying problem is this:
–Student loans keep high-price colleges afloat and raising prices, at the unacceptable cost of long-term servitude for many students.
I was on the campus of an exorbitant-price college, recently. They were bragging about their capital campaign that raised several billions of dollars so far. This is a College where costs of a degree can be in the hundreds of thousands of dollars. And they use easily-obtained student loans guaranteed by the U.S. Government to help fund those exorbitant costs.
This is insane. And it’s a disgrace.
Two Examples of Long-Term Servitude
—A Business Student
Consider this student.
He’s nearly forty years old. He has a good job, but he wants better. So he’s pursuing an MBA at one of the prestigious [i.e., exorbitantly priced] universities of our land. He had no problem getting government-guaranteed loans to fund the MBA effort.
Upon graduation, however, he will be over forty years old, and his job prospects will be nowhere-near commensurate with the cost of his MBA. So, as soon as he must start making payments on his student loans, he’ll need to get into one of those 20 to 25 year income-based repayment plans. And payments under those plans will probably fall short of covering interest accruals on those loans.
At the end of those 20 to 25 years, he’ll be near retirement age, at which time he’ll be able (hopefully) to obtain a forgiveness of his remaining student debt, through which he will incur (under current law) a large tax liability that he will probably be unable to repay.
Rhetorical Questions: How can this student ever build a meaningful nest egg for the future? How can he gain financial freedom? How can he prepare for retirement? The answer to all these questions is this: He can’t!
This is insane. And it’s a disgrace.
—A Couple in Their Mid-Fifties
And think about this couple.
They are 56 years old—it’s a second marriage for both. In Husband’s first marriage, both spouses had no problem getting large student loans for high-price colleges. Then, they consolidated their respective debts, making each spouse liable for the other’s student loans. Divorce ensued (as often happens with financial problems), but both former spouses are still liable for each other’s student loans.
Husband has been making payments for a while under an income-based repayment plan. Although he’s paying a lot of money on the consolidated loans, he isn’t keeping pace with the 9% interest accrual. His repayment plan will expire in 2035, at which time he will be more than 70 years old.
And now the Government requires that he complete a new student loan form, which looks like his second wife’s income will be drawn into the equation. They asked for assistance from the government and the loan servicer on how to deal with this new form, but no assistance was forthcoming.
A Rhetorical Question: For how long will the second wife be willing to put up with such things? I won’t venture a guess.
All of this is insane. And it’s a disgrace.
The Disgrace of High-Price Colleges
But the most disgraceful thing is this:
All the colleges that received money from the students mentioned above are still operating, are still raising huge amounts of donations, are still charging (and increasing) exorbitant prices, are still receiving payments from easily-obtained student loans guaranteed by the U.S. Government, and are still placing many students into long-term servitude that destroys their lives.
What the exorbitant-price college mentioned above ought to do with its billions of dollars in new donations, instead of physical improvements, is this:
–Find every one of its former students making income-based payments on their student loans and bail them out in a tax-sensitive manner.
But that’s never going to happen. Here’s why:
–Because luxurious campuses and future tuition receipts are more important to high-price schools than are the long-term servitude of their former students.
And that is, truly, a disgrace.
Until we address the underlying problem of easily-obtained student loans for high-price colleges, any student loan “fix” focused on students is a band-aid for some individuals. It solves nothing for the underlying problem.
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