Author Topic: Freshman with almost $70k in student loans!  (Read 1684 times)

FIT_Goat

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Freshman with almost $70k in student loans!
« on: March 17, 2017, 08:06:14 PM »
Tonight, I was talking to a younger family member of mine who is getting a degree in a field where the median salary is less than $50,000 a year.  She mentioned that she just found out the aggregate balance of her loans. She has $54,000 in loans already and is applying for another $15,000 for the next semester.  She's a freshman and already is staring down $70,000 in student loans.  I don't know what the rates are.

I didn't even know what I say to her.  What is she planning on doing with these loans?  How does one run up this much debt?  She's taking out all the loans she can get approved for and using them to fund her current lifestyle while not working.  I happen to know she's even used some of this loan money to help her other family members.  It is like she thinks it is free money, but I know that she's not dumb.  She knows she has to pay it back eventually, she's just not thinking about it now.

There's another, sad, twist to this story.  The majority of these loans are cosigned, and her cosigner is terminally ill.  I don't know the specifics of her loans, but I know my private student loan was immediately due if my cosigner died.  That was a major stress for me, and pushed me to pay the loan off early even though it had a very attractive rate (2.7%).  I just didn't want to deal with the death of my mother and a massive balloon payment at the same time.  I've looked and such terms aren't universal but they aren't uncommon either.  If her cosigner dies, she probably will have to drop out of school.  That's even assuming they don't call the loans immediately.

If her cosigner doesn't die, what is she looking at in the future?  She could end up graduating with $250,000 in debt, and a job that pays 1/5 of that.  She could be looking at $2,000 a month student loan payments, and these loans are mostly private.  That means no IBR or forgiveness terms.  I just see a lifetime of trouble ahead of her.  She has as much student loan debt now as I had when I graduated.  And, I regretted getting into that much debt because I chose a private school for three years before I transferred to a much cheaper public school and changed majors.  I took the most expensive path to my degree, and she's outpacing me by far.

Edit: I just checked and my total peak student loan balance was $39,950.  So, she already has more than I did.  I swear it felt like I had more than $40k in loans!
« Last Edit: March 17, 2017, 08:24:56 PM by FIT_Goat »


boyerbt

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Re: Freshman with almost $70k in student loans!
« Reply #2 on: March 18, 2017, 08:28:21 AM »
I'm curious as to what college or university is your relative attending? Do you have any idea how much of the loans are actually going towards school versus lifestyle?

I can attest that I used student loans to live a better lifestyle in college than I should have and it cost me over $90k after it was all said and done. It was very dumb but I definitely didn't think about it at that time. If you are able to have a serious conversation with this person and explain the numbers it may help.
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FIT_Goat

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Re: Freshman with almost $70k in student loans!
« Reply #3 on: March 18, 2017, 10:58:27 AM »
I'm curious as to what college or university is your relative attending? Do you have any idea how much of the loans are actually going towards school versus lifestyle?

I can attest that I used student loans to live a better lifestyle in college than I should have and it cost me over $90k after it was all said and done. It was very dumb but I definitely didn't think about it at that time. If you are able to have a serious conversation with this person and explain the numbers it may help.

I don't want to give too many details, but it's a public university in Florida.  This year, she counts as an out-of-state student.  Her mother moved down here, so in the future she will be an in-state student.  That will reduce her costs, when it happens.  I have no real idea what the split is.  If I had to guess, it would be 40% tuition/room/board and 60% lifestyle.  I could try and talk with her, but I need to find a way that won't sound like I'm overreacting.  She already thinks I am a little crazy when it comes to money.  Her upbringing is definitely "spend what you have or even more" and not "save for the future."

My wife is very opposed to me saying anything.  It's her sister's daughter.  And, my wife insists that it's none of my business or my place to tell her what to do with her money.  I want to find a way to talk with her about it, otherwise she's looking at a lifetime of debt.

Hargrove

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Re: Freshman with almost $70k in student loans!
« Reply #4 on: March 18, 2017, 11:10:18 AM »
Unfortunately, loans aren't real to most people until after they've had to climb out of debt, and the most useful time to know is before you're in debt in the first place.

Nobody parses the rates to figure out what they're actually PAYING for these loans, and few realize minimum payments are a lifetime of debt. "I want to live today" is not as strong when it realizes "I want to not mortgage the rest of my life to debtors" requires a little delayed gratification.

The most terrible thing credit managed to do to us was convince us you could "Live today" on borrowed money.

You won't reach her if you talk to her as a corrective intervention. Most people who oppose these conversations say it's not your business. Those who support intervening think it's kind of you to take some initiative to help someone in need. It has to be a calm conversation. Ask permission. "Hey, I wanted to talk to you about a concern for a minute. Is that ok?" Tell her you that you just wanted to leave her a little bit of information, not give her a lecture, because you hope for her future happiness. Give the VERY MOST SUCCINCT and neutral argument for not being in debt you can find. "Once these come due, they can be more difficult than they seemed at first. Paying the minimum is usually not effective unless you have a great rate. You can rack up enough debt to be unable to pay it, which could hurt your credit, which would hurt your ability to rent, buy a house, or get a car. If your loan balance is high enough that the rate creates your minimum payment, you may not make progress on it, or you may feel unhappy about your progress." Give a few examples if she seems engaged or curious - SHORT ones. Offer, if she wants help combing through loan terms to make sure the cosigning won't create problems, you would be happy to volunteer, but leave it at that. Offer that she can contact you later if she has any questions and wish her the best. Then let it go.

Your challenge with your wife will be explaining you don't want to win, to be right, or to control the girl, you just don't want to know somebody tried to talk to her about this and gave her the chance. You may, because it's not YOUR niece, just have to ask your wife or her sister to have this conversation to preserve relationships. Explain what you plan to say. Promise you just want one shot to explain it and you'll leave it alone. I assume we're talking about an adult, but doing this against your wife's wishes, and especially against the student's mother's, may be a bad idea. If ultimately you decide not to do much, you could still say "hey, if you ever wanted to talk about student loans and finance, I know it can be tricky, and I wanted to leave you an open invitation."

Your best result probably won't be immediate. If the girl does NOT feel pressured by you, she may call you a week or a month later to ask you a question and engage you further. Don't gush if this happens - just use the same neutral tone to answer to the best of your ability.
« Last Edit: March 18, 2017, 11:35:18 AM by Hargrove »

FIT_Goat

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Re: Freshman with almost $70k in student loans!
« Reply #5 on: March 18, 2017, 11:34:30 AM »
Yeah, I was trying to explain to my wife why it would be good to intervene now.  If she has over $200k in loans, that's like $2,000 a month in payments.  A $50k a year job takes home around $3.5k a month.  She would have $1.5k to live off.  She'd be just as well off with no loans/degree and a $20k a year job.  The loans are cutting her future pay by nearly 60% (depending on rate and repayment term).

Hargrove

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Re: Freshman with almost $70k in student loans!
« Reply #6 on: March 18, 2017, 11:41:43 AM »
Your wife may just overwhelmingly believe that this is her sister's "thing." Your wife and her sister don't seem to be into the math of it. Your discussion would need more context. Try to explain it in terms of someone you knew. Maybe you knew someone who was stuck paying a big check every month and never watching his loan go down. Maybe he soured on even his education, became cynical at work, had difficulty even getting the jobs he was even qualified for, because nothing he did made ends meet with the giant loan that never went away.

I know someone with 100k in student debt who left without a degree. Got a job as a bank teller. He figured his best bet was being a bank teller for the rest of his life for the benefits and job security because he's terrified of taking any risk now, and that's... still what he's doing. Fear of what you've done in the past can dramatically reshape your future. I wish the girl luck.

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Re: Freshman with almost $70k in student loans!
« Reply #7 on: March 18, 2017, 12:16:21 PM »
The most terrible thing credit managed to do to us was convince us you could "Live today" on borrowed money.

If it's a choice between living and dying... yes. However too many people don't understand the difference between "living today" and "living it up today".
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Laura33

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Re: Freshman with almost $70k in student loans!
« Reply #8 on: March 18, 2017, 05:47:31 PM »
I'm curious as to what college or university is your relative attending? Do you have any idea how much of the loans are actually going towards school versus lifestyle?

I can attest that I used student loans to live a better lifestyle in college than I should have and it cost me over $90k after it was all said and done. It was very dumb but I definitely didn't think about it at that time. If you are able to have a serious conversation with this person and explain the numbers it may help.

I don't want to give too many details, but it's a public university in Florida.  This year, she counts as an out-of-state student.  Her mother moved down here, so in the future she will be an in-state student.  That will reduce her costs, when it happens.  I have no real idea what the split is.  If I had to guess, it would be 40% tuition/room/board and 60% lifestyle.  I could try and talk with her, but I need to find a way that won't sound like I'm overreacting.  She already thinks I am a little crazy when it comes to money.  Her upbringing is definitely "spend what you have or even more" and not "save for the future."

My wife is very opposed to me saying anything.  It's her sister's daughter.  And, my wife insists that it's none of my business or my place to tell her what to do with her money.  I want to find a way to talk with her about it, otherwise she's looking at a lifetime of debt.

Would the terminally-ill cosigner give you an in?  Maybe that wouldn't sound so much like a lecture, as that's something no one would have reason to know unless they had been through it.  Something along the lines of, hey, just FYI, one thing I learned from my own student loans . . . . 

I don't think you can take it too far beyond that even if she listens to that much, unfortunately.  But maybe the thought of having to drop out next year and get a job might sneak through that hard head.
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FIT_Goat

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Re: Freshman with almost $70k in student loans!
« Reply #9 on: March 18, 2017, 08:50:48 PM »
I was able to have a short conversation with her, tonight, when everyone went out to dinner.  She brought it up, starting with how she was denied for the new $15,000 loan.  She said her mom will help her through this semester.  I did point out that this helps in that she will be a resident when she applies for the next semester, so that will save her money in the long run.

That brought her to talk about costs.  This year cost around $36,000, including everything.  I guess it was $18,000 in "lifestyle" costs.  Next year will be $21,000.  I also pointed out that she could reduce a lot of her need for loans if she started applying for grants that are available for residents.  She seemed interested in that, as she is worried that she might not get approved for any more loans.  She also talked about getting a job, so she could pay for things without more loans.  She'll probably still "need" the $6,000 or so in Federal loans.    That will still leave her with $80k+ when she graduates (due to the new loans and compounded interest).

Tonight, I got the distinct impression that she didn't need me to tell her how bad her loan situation was.  I think the $54,000 balance sank in, overnight, and she realized what amounts could be in her future.  She's not dumb, I just think she didn't realize how quickly the loans add up.  And, she probably went home and started thinking about where she could be if she continued taking $60k a year.

This is still an expensive misstep.  We just talked about it.  The fact that she brought it up, to me, makes me think that she trusts me as someone she can talk to about these things.

Hargrove

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Re: Freshman with almost $70k in student loans!
« Reply #10 on: March 18, 2017, 09:09:07 PM »
I was able to have a short conversation with her, tonight, when everyone went out to dinner.  She brought it up, starting with how she was denied for the new $15,000 loan.  She said her mom will help her through this semester.  I did point out that this helps in that she will be a resident when she applies for the next semester, so that will save her money in the long run.

That brought her to talk about costs.  This year cost around $36,000, including everything.  I guess it was $18,000 in "lifestyle" costs.  Next year will be $21,000.  I also pointed out that she could reduce a lot of her need for loans if she started applying for grants that are available for residents.  She seemed interested in that, as she is worried that she might not get approved for any more loans.  She also talked about getting a job, so she could pay for things without more loans.  She'll probably still "need" the $6,000 or so in Federal loans.    That will still leave her with $80k+ when she graduates (due to the new loans and compounded interest).

Tonight, I got the distinct impression that she didn't need me to tell her how bad her loan situation was.  I think the $54,000 balance sank in, overnight, and she realized what amounts could be in her future.  She's not dumb, I just think she didn't realize how quickly the loans add up.  And, she probably went home and started thinking about where she could be if she continued taking $60k a year.

This is still an expensive misstep.  We just talked about it.  The fact that she brought it up, to me, makes me think that she trusts me as someone she can talk to about these things.

Perfect. Not an ideal number but not insurmountable. More important that it has become a topic, and that she doesn't have excuses not to get a job in college.

boyerbt

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Re: Freshman with almost $70k in student loans!
« Reply #11 on: March 19, 2017, 06:03:13 AM »
I was able to have a short conversation with her, tonight, when everyone went out to dinner.  She brought it up, starting with how she was denied for the new $15,000 loan.  She said her mom will help her through this semester.  I did point out that this helps in that she will be a resident when she applies for the next semester, so that will save her money in the long run.

That brought her to talk about costs.  This year cost around $36,000, including everything.  I guess it was $18,000 in "lifestyle" costs.  Next year will be $21,000.  I also pointed out that she could reduce a lot of her need for loans if she started applying for grants that are available for residents.  She seemed interested in that, as she is worried that she might not get approved for any more loans.  She also talked about getting a job, so she could pay for things without more loans.  She'll probably still "need" the $6,000 or so in Federal loans.    That will still leave her with $80k+ when she graduates (due to the new loans and compounded interest).

Tonight, I got the distinct impression that she didn't need me to tell her how bad her loan situation was.  I think the $54,000 balance sank in, overnight, and she realized what amounts could be in her future.  She's not dumb, I just think she didn't realize how quickly the loans add up.  And, she probably went home and started thinking about where she could be if she continued taking $60k a year.

This is still an expensive misstep.  We just talked about it.  The fact that she brought it up, to me, makes me think that she trusts me as someone she can talk to about these things.

Perfect. Not an ideal number but not insurmountable. More important that it has become a topic, and that she doesn't have excuses not to get a job in college.

Agreed - it is great that she is willing to openly discuss this. The current debt number is not great (obviously) but it is much better than it could have been if she had continued down the path for the duration of her schooling.
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Mezzie

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Re: Freshman with almost $70k in student loans!
« Reply #12 on: March 19, 2017, 07:15:01 AM »
Grants are great, but so are private scholarships. At my college, there was a whole wall in the scholarship office with private scholarships for people with this or that major. They were mostly by local elderly people wanting to give back to the community and generally involved writing a brief essay. I got $5,000 (spread out over several semesters) for writing one such essay. Now that the topic has been breached, you might advise her to visit the scholarship office at her school.

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Miss Piggy

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Re: Freshman with almost $70k in student loans!
« Reply #13 on: March 19, 2017, 10:23:28 AM »

craiglepaige

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Re: Freshman with almost $70k in student loans!
« Reply #14 on: March 19, 2017, 04:49:05 PM »
Seems like she's understanding her situation a lot better than you initially thought, which is great.

One thing that was posted above regarding you "not being her uncle" because it's your wife's sister's daughter - although I understand the reasoning behind it, I still think you are family, specially if you have been together with your wife since before she was born(not sure).  I want the best for my nieces and nephews, same as I would like for my own son, so for you to not be able to give some guidance is somewhat crappy.

Maybe it is because of the difference in cultures, but coming from a Hispanic (Caribbean) heritage, I had a lot of aunts/uncles who were not blood relatives but who I still consider family to this day.  My father's brother in law's brothers, they are not related to me in any way, shape or form, but I still look up to them for guidance and support, although like I said, they are clearly not blood relatives. 

I don't know, maybe it's just an American thing. Nothing against it, just different.

Best of luck!
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FIT_Goat

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Re: Freshman with almost $70k in student loans!
« Reply #15 on: March 19, 2017, 05:15:32 PM »
In my own family, things work like you describe.  We're all family, blood or not.  To me, it was natural to want to help her avoid a bad situation.  My wife's family is not quite the same as mine.  But, I think she still considers me an uncle and doesn't care about the blood relationship, even though I've been with my wife for less than seven years and not her whole life.  My wife thinks I am opinionated and openly state what I am thinking, positive and negative, too much.  It's probably true, but that's how I was raised.

She is my niece.  I want the best for her.  I will help her however I am able.

craiglepaige

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Re: Freshman with almost $70k in student loans!
« Reply #16 on: March 19, 2017, 05:26:53 PM »
In my own family, things work like you describe.  We're all family, blood or not.  To me, it was natural to want to help her avoid a bad situation.  My wife's family is not quite the same as mine.  But, I think she still considers me an uncle and doesn't care about the blood relationship, even though I've been with my wife for less than seven years and not her whole life.  My wife thinks I am opinionated and openly state what I am thinking, positive and negative, too much.  It's probably true, but that's how I was raised.

She is my niece.  I want the best for her.  I will help her however I am able.

That's exactly how I feel.
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WhiteTrashCash

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Re: Freshman with almost $70k in student loans!
« Reply #17 on: March 19, 2017, 05:29:51 PM »
This is the kind of thing that happens when a student is born into a family that doesn't understand personal finance. I went through something similar and ended up $74,000 in student loan debt (of which I have paid off $20,000 so far). There unfortunately isn't much that can be done when someone's parents are unable to teach them how to handle money. It's sad.

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Re: Freshman with almost $70k in student loans!
« Reply #18 on: March 20, 2017, 12:30:52 AM »
What you may not know is that the relative co signer has life insurance, which will pay off the student loan when they die.   Therefore, the strategy of getting more loans than you need right now, to cover some immediate costs for the person who is dying, may not be a bad one.

Also,  not getting extra working jobs may be a strategy to spend more quality time with family, now, while they can.

(I realize that there is only a 20 percent chance that this optimistic financial scenario is the real one, but my point is that you don't know.   So if you talk to her, be prepared to hear a well planned, rational response.)

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Re: Freshman with almost $70k in student loans!
« Reply #19 on: March 20, 2017, 04:48:22 AM »
I'm impressed a single year of college can cost $70K at a public university. When I went to college a few years ago, they wouldn't even loan me the whole amount for my first two semesters, so even if it had cost $70K I couldn't have taken loans out to that tune. (Rates were so good, I wanted to milk them for every cent of cheap money they'd give me!)
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FIT_Goat

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Re: Freshman with almost $70k in student loans!
« Reply #20 on: March 20, 2017, 02:48:54 PM »
What you may not know is that the relative co signer has life insurance, which will pay off the student loan when they die.   Therefore, the strategy of getting more loans than you need right now, to cover some immediate costs for the person who is dying, may not be a bad one.

Also,  not getting extra working jobs may be a strategy to spend more quality time with family, now, while they can.

(I realize that there is only a 20 percent chance that this optimistic financial scenario is the real one, but my point is that you don't know.   So if you talk to her, be prepared to hear a well planned, rational response.)

Well, I live down the street from her mom's house (literally).  I can answer all those assumptions.  There is no plan for the dying relative's estate to pay any part of her loans.  There's no life insurance,  but he has enough money to pay them.  I just doubt that they will.  If the estate is forced to pay, I can imagine the man's wife suing my niece for the amount.  She's a lovely woman.  ;)

The job thing is just because she didn't think she needed a job.  She had all the money she could spend, why work?  Now that she's aware of how much it was costing, she's going to try and get a job.  She wasn't using that time to spend with the family (at least not the sick relative).