The Money Mustache Community
Around the Internet => Antimustachian Wall of Shame and Comedy => Topic started by: Slee_stack on August 11, 2019, 06:26:10 AM
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No matter how fair or unfair one might view student loans today, this discussion group is disturbing...
Definitely Shame, not comedy.
https://www.reddit.com/r/studentloandefaulters/
Particularly the 'Users Guide' in how to actively dodge your debts by taking on additional debts as 'income' fraudulently:
https://www.reddit.com/r/studentloandefaulters/comments/cg1fd7/student_loan_default_a_guide/
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Very sad, the poster is clearly smart, and is using that to screw people(taxpayers) over instead of something more productive or even FIRE.
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I'm not much of a law-and-order guy. If people can figure out how to do it, this is cool and good and praxis, But tt's definitely too much of a risk when e.g. you've already got a steady middle-class job going and your student debt burden is low.
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The "user guide" guy is an idiot. So much time and energy spent getting rid of a problem he could knock out in just a couple of years.
But he's the top idiot in a sea of idiots.
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Read the main post, sans replies and had a wide eyed look of shock the whole time. That is ten tons of scheming, where simple repayment is all that is required.
On a serious note, the "just run" option apparently is real, has been the case for decades, and at least in the case of Australians moving to Canada, does not impede in academic job finding. Know of two people who earned Post Hole Diggers in Australia, moved to Canada after getting hired at a Canadian university, and never paid another cent on their loans. Absolute madness. I would have imagined two commonwealth countries having some arrangement where they don't let each other's citizens pull this kind of crap. Guess not.
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Why go to so much hassle and risk saving a low 5 figure sum when, if you put that smarts and effort into productive enterprise, you could easily earn that money many times over?
If you're going to be amoral, it's a lot easier to put that scheming to use earning money, than trying to default on debt.
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Stopped reading when I saw "Good old Noam"
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Very sad, the poster is clearly smart, and is using that to screw people(taxpayers) over instead of something more productive or even FIRE.
O'Rly?
I’ve been wanting to write this for a long time, and seeing that person be in $500,000 of debt and no one really helping him on r/studentloans, I felt it was time to summarize everything I’ve learned.
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Defaulting on student loans is not immoral or a sin. It is a business decision.
If someone is dumb enough to loan one of my children half a million dollars that they have no chance of repaying I will do everything in my power to help them default, just as a matter of principle.
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This is a serious, nuanced and frustrating problem for many people. To boil it down to "fair or unfair" is simply inaccurate. Unless you were raised with no financial instruction, given tens of thousands of dollars of debt for something you gained almost nothing from and then expect to repay that or they will destroy your credit, you cannot possibly understand these people's position. As someone with 30K of student loans it is the single biggest obstacle for me right now. It is the single biggest frustration of my life, it's hard to put into words how debilitating this is even now, when I finally make enough to start taking back control. Many people will never be able to, because they don't make enough, or they had kids, or they got an illness etc.
At 18 I was given 10K in student loans per year, the only problem is the school I went to was 20K per year. I had zero financial training or assistance from any loan officer, counselor etc. Loaning 18-20 year olds thousands of dollars to pay exaggerated and grossly inflated education costs is absolutely predatory, immoral and frankly disgusting.
Having student loans prevented me from finishing my education, costing me thousands and then severely impacting my credit when I had no idea what credit meant or did. Even now as I pay for school out of pocket, I am still have to be weary of highly predatory methods used by universities.
For example, they now charge $100/term to use an online copy of book. So you pay $100 to access some lesson plans for 11 weeks. Then they charge an additional $50/credit for online classes. These classes have videos that the professor recorded 2 years ago and use repeatedly. What reason would you charge students MORE money for classes that don't require a professor to block out time from his week, or a location for teaching to take place. How does that make any sense whatsoever?
And lastly, I reviewed my bill for 6 credits: $2999. In addition to all the fees they charge with out asking, they had included $875 for health insurance without asking permission. Why would, arguably the healthiest demographic there is, need to pay $875 for 11 weeks of health insurance? THEN, in order to opt out of this coverage, I had sign a waiver and provide proof that I had health insurance(luckily I got on my GF's just in time). Meanwhile I had accrued $300 in late fees for which I then had to fill out ANOTHER waiver to get removed.
The idea that 18 year olds could navigate this disgusting system is laughable(what fresh highschool graduate is going to go line by line through their bill that is automatically paid by the student loan system and is sent to them in a stack of papers).
Also many people do not have the option of making enough to pay off these loans while trying to move forward with their life(myself included until I discovered MMM). So if some people want to circumvent the corrupt system then they should go right ahead. I'm not saying everyone should do it, or that middle or higher income earners shouldn't just pay them off, but they have very valid reasons for the frustration and desire to use unethical methods to fight a system that is at it's core unethical.
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Very sad, the poster is clearly smart, and is using that to screw people(taxpayers) over instead of something more productive or even FIRE.
I don’t agree with these stategies. I find many of them unethical and the rest stupid (in that they further dig people in holes). But my I didn’t see any that screw over taxpayers....co-signers and banks, yes. He suggested people with fed loans go on IBR and then deal with the tax for 25 year forgiveness...that’s juts part of the program and involves making payments for 20-25 years, plus tax on the balance. The gov for most loans would still make money off this, which is part of the reason it’s an option. It a such bad suggestion because most folks who do this are going to end up paying so much more than if they just paid it off the loans on the standard or graduated plan. The unethical suggestions all involve defaulting on private student loans and he notes it’s only an option for private loans because for fed loans they will start garnishments.
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The idea that 18 year olds could navigate this disgusting system is laughable(what fresh highschool graduate is going to go line by line through their bill that is automatically paid by the student loan system and is sent to them in a stack of papers).
I would add that at least in the state where I went to school (Oregon) you could have ended up with legally enforceable student loan debt before your 18th birthday.
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This is a serious, nuanced and frustrating problem for many people. To boil it down to "fair or unfair" is simply inaccurate. Unless you were raised with no financial instruction, given tens of thousands of dollars of debt for something you gained almost nothing from and then expect to repay that or they will destroy your credit, you cannot possibly understand these people's position. As someone with 30K of student loans it is the single biggest obstacle for me right now. It is the single biggest frustration of my life, it's hard to put into words how debilitating this is even now, when I finally make enough to start taking back control. Many people will never be able to, because they don't make enough, or they had kids, or they got an illness etc.
At 18 I was given 10K in student loans per year, the only problem is the school I went to was 20K per year. I had zero financial training or assistance from any loan officer, counselor etc. Loaning 18-20 year olds thousands of dollars to pay exaggerated and grossly inflated education costs is absolutely predatory, immoral and frankly disgusting.
Having student loans prevented me from finishing my education, costing me thousands and then severely impacting my credit when I had no idea what credit meant or did. Even now as I pay for school out of pocket, I am still have to be weary of highly predatory methods used by universities.
For example, they now charge $100/term to use an online copy of book. So you pay $100 to access some lesson plans for 11 weeks. Then they charge an additional $50/credit for online classes. These classes have videos that the professor recorded 2 years ago and use repeatedly. What reason would you charge students MORE money for classes that don't require a professor to block out time from his week, or a location for teaching to take place. How does that make any sense whatsoever?
And lastly, I reviewed my bill for 6 credits: $2999. In addition to all the fees they charge with out asking, they had included $875 for health insurance without asking permission. Why would, arguably the healthiest demographic there is, need to pay $875 for 11 weeks of health insurance? THEN, in order to opt out of this coverage, I had sign a waiver and provide proof that I had health insurance(luckily I got on my GF's just in time). Meanwhile I had accrued $300 in late fees for which I then had to fill out ANOTHER waiver to get removed.
The idea that 18 year olds could navigate this disgusting system is laughable(what fresh highschool graduate is going to go line by line through their bill that is automatically paid by the student loan system and is sent to them in a stack of papers).
Also many people do not have the option of making enough to pay off these loans while trying to move forward with their life(myself included until I discovered MMM). So if some people want to circumvent the corrupt system then they should go right ahead. I'm not saying everyone should do it, or that middle or higher income earners shouldn't just pay them off, but they have very valid reasons for the frustration and desire to use unethical methods to fight a system that is at it's core unethical.
I borrowed $74,000 and I have repaid $41,000 of it so far. It's not really that hard if a person is willing to do what it takes. It's just that people think that luxuries and frivolous nonsense are necessities because they've been brainwashed by advertising and the media.
We don't need brand new "label" clothes. You can buy them for pennies on the dollar at Goodwill.
There is no need to even pay $1 for that little packet of chicken nuggets at McDonalds, when you can eat much better at home for cheaper and it takes nearly no time.
Have an apartment balcony or even a south-facing window? Then grow a few vegetable plants in pots. Then the food is free.
Have two legs? Walk to places you want to go. Need to go farther? Ride a bicycle you bought off Craigslist for $40.
Need entertainment? Watch TV for free with your antenna or get a book or DVD from the library. You already paid your library taxes, so you may as well get your money's worth rather than paying for this stuff a second time.
Almost every time, the people I see on social media complaining about repaying the student loans that they willingly took out for pay for the education for their career are people who also post photos of themselves having a lot of fun drinking $5 beers and $10 cocktails at the bar or traveling to exotic locations for vacations. Meanwhile, I'm busy doing the responsible thing and paying my debts.
And these people on social media are trying to say that I have it easy and they need me to pay their debts for them. Screw them. They have no idea.
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For example, they now charge $100/term to use an online copy of book. So you pay $100 to access some lesson plans for 11 weeks. Then they charge an additional $50/credit for online classes. These classes have videos that the professor recorded 2 years ago and use repeatedly. What reason would you charge students MORE money for classes that don't require a professor to block out time from his week, or a location for teaching to take place. How does that make any sense whatsoever?
And lastly, I reviewed my bill for 6 credits: $2999. In addition to all the fees they charge with out asking, they had included $875 for health insurance without asking permission. Why would, arguably the healthiest demographic there is, need to pay $875 for 11 weeks of health insurance? THEN, in order to opt out of this coverage, I had sign a waiver and provide proof that I had health insurance(luckily I got on my GF's just in time). Meanwhile I had accrued $300 in late fees for which I then had to fill out ANOTHER waiver to get removed.
You needed a different university. It wasn't like that where I went to school.
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Very sad, the poster is clearly smart, and is using that to screw people(taxpayers) over instead of something more productive or even FIRE.
But my I didn’t see any that screw over taxpayers....co-signers and banks, yes.
One of his strategies is to move to another country where they don't have to report taxable income so their IBR is $0 for 25 years, and then talked about strategies to get out of the tax bill caused by having so much forgiven.
Yes, most of his ideas screw over family members(co signers) and banks(which we own through VTSAX), but some of the ideas screw over taxpayers as well.
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Every rule or concession put in place (IBR, deferment, forbearance etc) encourages people to find ways to game the system.
Imagine a setup where quite simply, if you take out a loan, you have to pay it back over a max 20 year term. No concessions, no special treatment etc.
There wouldn't be any of this madness.
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Every rule or concession put in place (IBR, deferment, forbearance etc) encourages people to find ways to game the system.
Yes, lawmakers encourage IBR. No one can be blamed for taking advantage of a program that the government encourages. That would be like blaming GE for taking R&D tax credits.
One of his strategies is to move to another country where they don't have to report taxable income so their IBR is $0 for 25 years, and then talked about strategies to get out of the tax bill caused by having so much forgiven.
Yes, most of his ideas screw over family members(co signers) and banks(which we own through VTSAX), but some of the ideas screw over taxpayers as well.
So when big companies use tax avoidance schemes it's fine but when individuals do it they "screw over taxpayers?" I don't buy that. How much money did Apple park in Ireland? Why should I care if a couple of students take advantage of the law of the land?
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So when big companies use tax avoidance schemes it's fine but when individuals do it they "screw over taxpayers?" I don't buy that. How much money did Apple park in Ireland? Why should I care if a couple of students take advantage of the law of the land?
At what point did I say it was okay for big companies to use tax avoidance schemes? Why would you assume I would be okay with one and not the other? Let's stick to the debate at hand and not straw man arguments.
These individuals are doing this so they can manipulate a US student loan forgiveness program even when they are making sufficient money to pay back their loans. They borrowed the money, they should pay it back if they are able. This is a forum about financial responsibility and living frugally, paying back your debts is a "hair on fire" emergency!" Pay it back already.
I had about 30k in student loan debt. I graduated in 2008 with a Finance degree. It was hard to find a high paying job those first couple years, and I was on the IBR plan for a bit. Once I got a job with a higher income I dropped off the IBR and started paying the debt down in chunks. I've been debt free for a few years now. This is how I always saw the IBR functioning, a safety net during hard times or when student first graduate and their income is still low. However, that shouldn't be a permanent state. If you got a useful degree you should be making X more than someone with a HS diploma and X should be greater than your student loan payment. If that's the case the loans should be easy to pay back.
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So when big companies use tax avoidance schemes it's fine but when individuals do it they "screw over taxpayers?" I don't buy that. How much money did Apple park in Ireland? Why should I care if a couple of students take advantage of the law of the land?
At what point did I say it was okay for big companies to use tax avoidance schemes? Why would you assume I would be okay with one and not the other? Let's stick to the debate at hand and not straw man arguments.
You didn't, senators did. Either way big corporations are experts at tax avoidance "schemes' AKA following the law. It's the law of the land and we are a nation of laws. What did you expect?
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So when big companies use tax avoidance schemes it's fine but when individuals do it they "screw over taxpayers?" I don't buy that. How much money did Apple park in Ireland? Why should I care if a couple of students take advantage of the law of the land?
At what point did I say it was okay for big companies to use tax avoidance schemes? Why would you assume I would be okay with one and not the other? Let's stick to the debate at hand and not straw man arguments.
These individuals are doing this so they can manipulate a US student loan forgiveness program even when they are making sufficient money to pay back their loans. They borrowed the money, they should pay it back if they are able. This is a forum about financial responsibility and living frugally, paying back your debts is a "hair on fire" emergency!" Pay it back already.
I had about 30k in student loan debt. I graduated in 2008 with a Finance degree. It was hard to find a high paying job those first couple years, and I was on the IBR plan for a bit. Once I got a job with a higher income I dropped off the IBR and started paying the debt down in chunks. I've been debt free for a few years now. This is how I always saw the IBR functioning, a safety net during hard times or when student first graduate and their income is still low. However, that shouldn't be a permanent state. If you got a useful degree you should be making X more than someone with a HS diploma and X should be greater than your student loan payment. If that's the case the loans should be easy to pay back.
I am sorry but you are sounding very privileged right now. We have no idea whether these people can pay extra on their loans. Many cannot afford a $400/mon min payment even. And many, like myself, feel that this type of lending should not be legal and disagree strongly on ethical grounds, the same way people fought to end indentured servitude, debtors prisons, and create bankruptcy. What bank in the world should able to give an 18 year old 50K with very little instruction and then force him to pay it back for the rest of his life?
When you understand most Americans cannot afford a 400$ emergency and are years from being financially stable even with the most extreme mustachianism, you'll understand why people are tempted to do this. These people do not make 50K/year, they make $24K with $22K in expenses. These are college graduates who were allowed to borrow 100K for a degree that pays $12/Hr.
Imagine you make 1500, and you only have 300$ for discretionary spending. Now someone is saying you need to pay them $100-$200 of that? So eat ramen for 15 years to pay off a loan that they believe is wrong?
Many like myself, were given loans that didn't pay for college so they didn't even graduate. I was fortunate enough to use my physical body to make 35K/year, putting years of wear and tear just to be able afford to learn a new career. I am an exception, I dated a girl whose dad was a mustachian (he was a radiologist). That simple reason is why I am not just as hopeless as before. I didn't even know it was possible to do things like save a part of your paycheck with the intention of never spending it.
Something else people on here don't understand is that it's not like they are actively choosing to waste their money. Everyone they know spends it the same way. Corporations will spend $240B on advertising this year alone. They have dissected the mindset of every type of person and have figured out the best way to try to get them to spend their money. They have scientists of every type who make millions to try to take your money from you almost every second.
So you have people who gained nothing from loans, with no financial pathway to freedom, who barely make enough money to pay their rent nevermind extra payments on their car etc., in a world that tries every second to get the money they do have, and its shocking that they turn to extreme measures?
This bubble was created by poor financial regulation just like the 2008 collapse. A movement needs to be created to deal with it, it's not typical consumerism the way that we criticize here. It's a lot closer to exploitation. These are kids or barely adults and they are having their financial futures ripped from them.
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So when big companies use tax avoidance schemes it's fine but when individuals do it they "screw over taxpayers?" I don't buy that. How much money did Apple park in Ireland? Why should I care if a couple of students take advantage of the law of the land?
At what point did I say it was okay for big companies to use tax avoidance schemes? Why would you assume I would be okay with one and not the other? Let's stick to the debate at hand and not straw man arguments.
These individuals are doing this so they can manipulate a US student loan forgiveness program even when they are making sufficient money to pay back their loans. They borrowed the money, they should pay it back if they are able. This is a forum about financial responsibility and living frugally, paying back your debts is a "hair on fire" emergency!" Pay it back already.
I had about 30k in student loan debt. I graduated in 2008 with a Finance degree. It was hard to find a high paying job those first couple years, and I was on the IBR plan for a bit. Once I got a job with a higher income I dropped off the IBR and started paying the debt down in chunks. I've been debt free for a few years now. This is how I always saw the IBR functioning, a safety net during hard times or when student first graduate and their income is still low. However, that shouldn't be a permanent state. If you got a useful degree you should be making X more than someone with a HS diploma and X should be greater than your student loan payment. If that's the case the loans should be easy to pay back.
I am sorry but you are sounding very privileged right now. We have no idea whether these people can pay extra on their loans. Many cannot afford a $400/mon min payment even. And many, like myself, feel that this type of lending should not be legal and disagree strongly on ethical grounds, the same way people fought to end indentured servitude, debtors prisons, and create bankruptcy. What bank in the world should able to give an 18 year old 50K with very little instruction and then force him to pay it back for the rest of his life?
When you understand most Americans cannot afford a 400$ emergency and are years from being financially stable even with the most extreme mustachianism, you'll understand why people are tempted to do this. These people do not make 50K/year, they make $24K with $22K in expenses. These are college graduates who were allowed to borrow 100K for a degree that pays $12/Hr.
Imagine you make 1500, and you only have 300$ for discretionary spending. Now someone is saying you need to pay them $100-$200 of that? So eat ramen for 15 years to pay off a loan that they believe is wrong?
Many like myself, were given loans that didn't pay for college so they didn't even graduate. I was fortunate enough to use my physical body to make 35K/year, putting years of wear and tear just to be able afford to learn a new career. I am an exception, I dated a girl whose dad was a mustachian (he was a radiologist). That simple reason is why I am not just as hopeless as before. I didn't even know it was possible to do things like save a part of your paycheck with the intention of never spending it.
Something else people on here don't understand is that it's not like they are actively choosing to waste their money. Everyone they know spends it the same way. Corporations will spend $240B on advertising this year alone. They have dissected the mindset of every type of person and have figured out the best way to try to get them to spend their money. They have scientists of every type who make millions to try to take your money from you almost every second.
So you have people who gained nothing from loans, with no financial pathway to freedom, who barely make enough money to pay their rent nevermind extra payments on their car etc., in a world that tries every second to get the money they do have, and its shocking that they turn to extreme measures?
This bubble was created by poor financial regulation just like the 2008 collapse. A movement needs to be created to deal with it, it's not typical consumerism the way that we criticize here. It's a lot closer to exploitation. These are kids or barely adults and they are having their financial futures ripped from them.
Are you aware what forum you are on?
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Hey JJ - I'm naturally inclined to be sympathetic to your cause here, but I kind of balk at your post when much of the factual basis for your argument is exaggerated.
When you understand most Americans cannot afford a 400$ emergency ...
This claim surprised me, and then when I looked into it, it's not true.
You're referring to the recent report from the Federal Reserve covering 2018 (https://www.federalreserve.gov/publications/files/2018-report-economic-well-being-us-households-201905.pdf), in which they discuss the ability of Americans to handle a surprise $400 expense. However, the report states:
61 percent of adults in 2018 say they would cover it, using cash, savings, or a credit card paid off at the next statement ... the remaining 4 in 10 adults who would have more difficulty covering such an expense, the most common approaches include carrying a balance on credit cards and borrowing from friends or family. Twelve percent of adults would be unable to pay the expense by any means.
... so 60% can pay, 28% would carry some credit-balance to get it paid, and 12% cannot pay. They also note that this is a small improvement since the last report.
That's quite different than your characterization that most Americans can't afford a $400 emergency.
... and are years from being financially stable even with the most extreme mustachianism ...
It also surprised me that anyone here on this forum would believe this. I don't have an original-source to refute this of course, since it's your opinion, but it just seems so wrong on its face.
Mustacianism (let alone extreme mustachianism) certainly could help most Americans to become financially stable over the course of a few years. (Stable means stable. Paying their bills, developing an emergency fund, meeting their needs. Not necessarily positive net-worth, and certainly not FI, but at least getting beyond paycheck-to-paycheck living.)
I think this is just obvious, from everyone here's first-hand experience with mustachianism, from case-studies, etc.
So although I am sympathetic to the cause of reforming the price/finance structure of college education ... I think most people won't respond well to exaggerated rhetoric like this. I think there's definitely a case to be made for reform. I just don't think this is the way to do it.
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I am sorry but you are sounding very privileged right now.
Did you read the following?
I had about 30k in student loan debt. I graduated in 2008 with a Finance degree. It was hard to find a high paying job those first couple years, and I was on the IBR plan for a bit.
More details: It was tight for about 5 years. $300 for discretionary spending? That sounds about right. Without IBR my payment would have been $330, with IBR it was $120, but I still tried to pay more when I could. I always had a roommate, I drove a cheap car, I very rarely ate out, and I worked OT whenever I could just to have a little extra. In retrospect it helped a lot. I found MMM shortly after getting a higher paying job. I had been living super tight for years, I suddenly had some disposable income, and here was MMM telling me I should stick to that tight budget and save the new income. Living that tight for years put the FIRE behaviors in place.
So you have people who gained nothing from loans, with no financial pathway to freedom, who barely make enough money to pay their rent nevermind extra payments on their car etc., in a world that tries every second to get the money they do have, and its shocking that they turn to extreme measures?
They already have IBR. IBR is very forgiving. Under IBR payments are VERY reasonable compared to income, and if income is low enough the payment is $0. The people on Reddit are abusing a system that is already forgiving.
When you understand most Americans cannot afford a 400$ emergency and are years from being financially stable even with the most extreme mustachianism, you'll understand why people are tempted to do this.
Some people are so low income that they have no room to cut or save. Those people exist, but they are not 'most Americans'.
The average American:
Income: $47k (Median, not average. I could only find the average for entire households.)
Car payment: $523/month
Credit card debt: $5,700
Mortgage payment: $1030/month
Just a little bit of frugality would cut that car payment in half, cut the mortgage payment by 25%, eat out less, and that would quickly clear out that credit card debt and replace it with savings in the bank. That's just a little frugality. Extreme mustachians would cut the car payment to $0 because they bike, rent or Airbnb multiple rooms cutting the mortgage by 50-100%, etc.
I'll repeat my first comment. If the Reddit posters are smart enough to figure out all of these tricks to avoid paying their debts they are smart enough to understand FIRE.
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No I actually didn't. That is really awesome you were able to do that and stay on the ball when the extra money came in. I can't imagine waiting 5 years with no improvement in my financial situation. I honestly could guarantee 5 years ago I would have given up hope of using those skills to be successful and try to find something new.
More details: It was tight for about 5 years. $300 for discretionary spending? That sounds about right. Without IBR my payment would have been $330, with IBR it was $120, but I still tried to pay more when I could. I always had a roommate, I drove a cheap car, I very rarely ate out, and I worked OT whenever I could just to have a little extra. In retrospect it helped a lot. I found MMM shortly after getting a higher paying job. I had been living super tight for years, I suddenly had some disposable income, and here was MMM telling me I should stick to that tight budget and save the new income. Living that tight for years put the FIRE behaviors in place.
I would say that is very much on the mustachian if not extreme mustachian end. I am not sure if you include food and gas etc. in discretionary spending or the $300 was entirely a budget surplus but either way to spend half of that on student loans is very rare. You got lucky to make more money without having any new expenses(I.E children) and get through it, but many people(myself included) did not understand frugality, or didn't believe it's possible. Even in your case, IBR meant that you could have been paying almost all of your available investing money on student loans, and unless you got a raise(which many people do not) you could have been doing that for half or more of your working career. How much more could you have saved without student loans? Could you have started your own business? More aggressively looked for a new job? Maybe even saved enough to move to a new city where income was higher?
When I say you are thinking from a privileged standpoint, I mean that you only look at things from your worldview which happens to be the one of a success story due to early understanding of frugality, other personal qualities such as patience, and the success of both completing a degree and getting a higher paying job in the future.
I am biased in my worldview as well(when I say MOST Americans, I am thinking about the people I interact with, which are 25-34 year old, non-college graduates), and that view is starkly different than yours. I couldn't even finish college, my loans would only cover half of what school actually cost. So I was stuck making minimum wage until I could figure out away to go to community college part-time etc. I had no understanding of frugality, my family was actively wasteful(which is why they couldn't take out Parent Plus loans for me) and most of my friends relied heavily on their parents to pay rent etc. I was absurdly wasteful, I actually would actively live paycheck to paycheck. The mentality to spend until your balance is zero is a lot more common than you think. There are a lot of people just like me out there. And as you may have noticed, these problems work in tandem, each one exacerbating the effect of the other until I had to completely rewire my brain to just have a chance.
I think it's important to be specific on what I am talking about (thanks @shuffler for calling me out on the vagueness).
So here let me be sure to cite everything I am saying. Most young people are not taught an even basic understanding of finances.
https://youth.gov/youth-topics/financial-capability-literacy/facts
In 2008 only 28% of youths could understand a simple interest rate calculator.
High school seniors only scored an average of 48% on a test related to financial literacy.
70% of highschool seniors go to college but only 2/3rds graduate
https://lendedu.com/blog/college-dropouts-student-loan-debt/
This puts these people in a position of making less than you did, with even less chances of finding a higher paying job in the future.
The difference between someone with "some college" and a graduate is $16K/year.
https://nces.ed.gov/programs/coe/indicator_cba.asp
But you have to get to that 25-34 year old range to make $35K a year and I would assume most 20-24year olds without degrees make minimum wage of $15,010/year.
https://www.nytimes.com/2014/06/10/upshot/minimum-wage.html
How many of these people are there? Try 1/4 of all millenials are in this situation. That is from my worldview, the situation seems to be getting more and more dire each year with each new class.
https://www.cnbc.com/2018/05/24/students-would-drop-out-of-college-to-avoid-more-debt.html
The Federal Reserve estimated that the average monthly student loan payment increased from $227 in 2005 to $393 in 2016.
The same person that you were in 2008 would now have to put $240/mon towards student loans. Could you have eaten on $60/mon for years?
But to continue on with the generic millenial that has a 50% grade in basic finance. 19.6 million people have been to college and dropped out for various reasons in the millenial age(25-37).
https://hechingerreport.org/federal-data-shows-3-9-million-students-dropped-college-debt-2015-2016/
Making some assumptions, these people made 15,010/year from the time they were 21 till 24 so $45,030.
In the same time period a generic graduate would have made (assuming they make at least the average for the whole age group) $29,770 from 21 till 24 so $89,310
These people still have student loan payments that compound interest but about half the income to pay them.
It gets even worse when you look at the ability to pay back at 25-34 years old with/without a degree.
Average dropout will earn $315K over that time vs degree holder which will earn approx $459K.
So you will have approx $180K extra to pay off these loans vs about 20 million people in your age range.
It took you, someone who naturally leans very frugal, 5-7 years to pay of these loans. Now imagine you had made poor decisions along the way, like having a kid, or buying a new car, a new house etc(Or things you can't control like medical illnesses, family emergencies). How many more years would it have taken you to pay these off?
And I use example because this is pretty close to where I am, but things have gotten drastically worse since you graduated. Graduates now are getting paid the same as what you made at 21 where as the average student debt has gone from $20,000, to $29,000. A massive increase that means even if they were just as frugal as you, would still take 7-10 years to repay for same generic degree. And that is assuming nothing goes wrong with the economy, which it probably will since we are having the longest growth in history.
https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/
https://www.valuepenguin.com/average-student-loan-debt
You definitely benefited from the economy continuing to grow, most MILLENIALS cannot afford a $1000 emergency. Your situation was not the best but you were lucky nothing terrible happened. Most millenials cannot afford anything bad too happen(this time I brought the citation lol)
https://www.cnbc.com/2018/12/19/60-percent-of-millennials-cant-cover-a-1000-dollar-emergency.html
If the economy were to dip for this new generation(which of course it will in the next few years), they could be stuck with paying off the same degree you have for 10-15 years instead of 5-7. And again this is if they budget everything as well as you did which we all know doesn't happen for most Americans of any age.
And I agree that student loans can be paid by being more frugal(thanks for giving me a little more hope) and mustachian but some people don't make enough for it to matter and that $330 gap that you had is disappearing. Many people now cannot afford to even make IBR payments. So they are just stuck with this debt forever. People are desperate to get out from under a loan they made as a near child and they could be stuck with forever. The whole point of mustachianism is too be free from debt and own ourselves so we can find happiness. Most people want this and if they don't have the knowledge or the room in their budget to pay off these loans, we really shouldn't be surprised they turn to a dark method of becoming financially independent. Before we condemn them I think we should really sit and imagine having a bill that could hound you forever, prevent you from getting car loans/mortages etc, make you pay more interest on everything, and in many cases you will not be able to get rid of it for over a decade even if you do everything perfectly, spending wise.
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jj1800, many Millennials don't understand that a lot of the "necessities" in their lives are actually luxuries that human beings easily did without for 100,000 years. I watch Millennials complain about the economy when unemployment is 3.7% (which is essentially full employment) and the stock market has been growing steadily for 122 months. If someone isn't doing well under those conditions, it's because they aren't doing what is necessary to be successful and it's their own fault.
I had all the sympathy in the world for people who were suffering back in 2009-2010, but those days are long gone now. Millennials pointing at that stuff obviously aren't even trying. Meanwhile, the economic opportunities right now are absolutely incredible. All it takes is deciding that one is willing to take charge of one's life and go after those opportunities.
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Its actually pretty easy for most people to get out of debt if you know what to do. Its just many people don't know what to do. As someone who was formally clueless about money and grew up in a home culture where people didn't pay their bills, I am sympathetic of those who borrow to go to school at any cost then don't know how they will pay it back because they have no financial education.
You can pretty easily come back from 20-40K of student loan in a couple of years but loans of 6 figures and more seem pretty predatory to me. One wrong decision made at 18 or younger will impact your entire life. Of course other decisions made at 18 can impact your life as well but many teens think they are making the best decision for the future to go the best school that accepted then no matter the price tag.
I think people on this forum forget that frugality may have been obvious to them but some people have to come to it over time. People who don't know how to manage their money are not inherently bad or lazy they are just uneducated.
MMM was the key to me to see that my financial situation was based on a lot of my own choices not exactly the cards I was dealt. Luckily I hadn't made so many mistakes that I couldn't come back from by picking up an extra job and working really hard but this is not the case for everyone. I'm not saying write everyone a blank check but I do have sympathy for those who tried to do a good thing and go to college but didn't understand what they were signing up for.
EDIT: I do want to note that these choices are not things like leasing a high end sports car and setting $100 dollar bills on fire. They are choices like adopting a pet or choosing to live in a more expensive area to stay near family.
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jj1800, many Millennials don't understand that a lot of the "necessities" in their lives are actually luxuries that human beings easily did without for 100,000 years. I watch Millennials complain about the economy when unemployment is 3.7% (which is essentially full employment) and the stock market has been growing steadily for 122 months. If someone isn't doing well under those conditions, it's because they aren't doing what is necessary to be successful and it's their own fault.
I had all the sympathy in the world for people who were suffering back in 2009-2010, but those days are long gone now. Millennials pointing at that stuff obviously aren't even trying. Meanwhile, the economic opportunities right now are absolutely incredible. All it takes is deciding that one is willing to take charge of one's life and go after those opportunities.
I definitely agree with you that there are lots of opportunities right now, but that is much less for helpful for younger people.
https://inequality.org/facts/income-inequality/
Things are really bad out there for lots of people, and while the lattes and general lack of mustachianism are greatly hurting people, it's not just that. We can't just say that if you are not 100% pure mustachian, anything that happens to you, is your fault and no one elses.
Mustachianism should be an avenue for success: FIRE, happiness etc. You should not have to be mustachian just to make sure you are not homeless. And I applaud those that have been able to budget down to $100-300 but that is just not possible for a poorly financially educated population as a whole to do this, where any illness, accident, mistake, or even kids can lead to financial ruin.
If huge sections of the population needs to be budgeting every dollar just to avoid financial ruin, something is wrong.
Also this specific post is about that reddit write up. The first thing he tells you to do is pay them off. The other options are considered more extreme and for people that have lots of student loans and make very little money. These are not people who want to live happily ever after with their latte in hand as Uber drives them into the sunset. They are desperate, destroying their credit, ruining the relationship with their cosigner who most likely is someone close to them, or literally fleeing the US. There's no happy endings there. It's really just sad they have lost hope.
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jj1800, many Millennials don't understand that a lot of the "necessities" in their lives are actually luxuries that human beings easily did without for 100,000 years.
Many people with student loans they can't afford are single parents in economically depressed parts of the country who never finished their degrees. They often get roped in by for profit colleges that offer substandard education.
There are still plenty of people living in the US on 6~14K/year. Good luck paying back $40K of student loans when you are making $10K/yr.
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Also this specific post is about that reddit write up. The first thing he tells you to do is pay them off. The other options are considered more extreme and for people that have lots of student loans and make very little money. These are not people who want to live happily ever after with their latte in hand as Uber drives them into the sunset. They are desperate, destroying their credit, ruining the relationship with their cosigner who most likely is someone close to them, or literally fleeing the US. There's no happy endings there. It's really just sad they have lost hope.
I'm willing to bet a good chunk of change that the ratio of people talking about fleeing the US to people who actually do it is damn near zero. To pull this off you need resourcefulness and mental acuity, something in short supplies in these online debt defaulters online communities.
It's the same thing as people who threaten to move to Canada if Trump gets (re)elected.
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jj1800, many Millennials don't understand that a lot of the "necessities" in their lives are actually luxuries that human beings easily did without for 100,000 years.
Many people with student loans they can't afford are single parents in economically depressed parts of the country who never finished their degrees. They often get roped in by for profit colleges that offer substandard education.
There are still plenty of people living in the US on 6~14K/year. Good luck paying back $40K of student loans when you are making $10K/yr.
When people are carrying a supercomputer in their pocket with access to the entire Library of Congress (aka a smartphone), it should be fairly obvious what the difference between an unaccredited for-profit and accredited not-for-profit college is. I grew up eating rotten vegetables and wild berries but I used the public library (because the internet barely existed at the time.) There is no excuse for this stuff. None.
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Many people with student loans they can't afford are single parents in economically depressed parts of the country who never finished their degrees. They often get roped in by for profit colleges that offer substandard education.
There are still plenty of people living in the US on 6~14K/year. Good luck paying back $40K of student loans when you are making $10K/yr.
When people are carrying a supercomputer in their pocket with access to the entire Library of Congress (aka a smartphone), it should be fairly obvious what the difference between an unaccredited for-profit and accredited not-for-profit college is. I grew up eating rotten vegetables and wild berries but I used the public library (because the internet barely existed at the time.) There is no excuse for this stuff. None.
Lots of people making $6K/yr don't have supercomputers in their pockets. Also, I never said that these colleges weren't accredited, I said that they sucked.
But more importantly, someone that has a supercomputer in their pocket and grew up using a public library should understand what a bell curve is. They should understand that there is a normal distribution of abilities and that for everyone on the right side of the curve (for everything - income, luck, health, college completion, aptitude, intelligence, etc) there is a corresponding point (AKA person) on the other side of the curve. Not understanding this is inexcusable.
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Many people with student loans they can't afford are single parents in economically depressed parts of the country who never finished their degrees. They often get roped in by for profit colleges that offer substandard education.
There are still plenty of people living in the US on 6~14K/year. Good luck paying back $40K of student loans when you are making $10K/yr.
When people are carrying a supercomputer in their pocket with access to the entire Library of Congress (aka a smartphone), it should be fairly obvious what the difference between an unaccredited for-profit and accredited not-for-profit college is. I grew up eating rotten vegetables and wild berries but I used the public library (because the internet barely existed at the time.) There is no excuse for this stuff. None.
Lots of people making $6K/yr don't have supercomputers in their pockets. Also, I never said that these colleges weren't accredited, I said that they sucked.
But more importantly, someone that has a supercomputer in their pocket and grew up using a public library should understand what a bell curve is. They should understand that there is a normal distribution of abilities and that for everyone on the right side of the curve (for everything - income, luck, health, college completion, aptitude, intelligence, etc) there is a corresponding point (AKA person) on the other side of the curve. Not understanding this is inexcusable.
Well, finance, in a nutshell, is how people from the right side of the bell curve (particularly when it comes to intelligence) take advantage of the people from the left side. I'm not saying it's good or bad, it's just what it is.
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Well, finance, in a nutshell, is how people from the right side of the bell curve (particularly when it comes to intelligence) take advantage of the people from the left side. I'm not saying it's good or bad, it's just what it is.
Is it really? Market makers add valuable liquidity. Credit, in general, is not a bad thing. Being able to borrow reasonable amounts at reasonable interest rates isn't bad. Being able to borrow too much at usurious interest rates is bad. The student loan debate is only a big deal because since 1997 you haven't been able to discharge them in bankruptcy - unlike every other form of credit/debt in the USA.
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PDXTabs is killing it in this thread.
People got all moral and righteous about mortgage defaults during the financial crisis too. For some reason, when you can attach a name and a face to default, people like it a lot less. Defaulting on debt isn't even a disqualifier to become President of the United States. Hell, a former candidate made a career out of strategically navigating defaults.
I'm not gonna be mad cause Joe Redditor figured out a way to ditch his student loans. Good for him.
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jj1800, many Millennials don't understand that a lot of the "necessities" in their lives are actually luxuries that human beings easily did without for 100,000 years.
Many people with student loans they can't afford are single parents in economically depressed parts of the country who never finished their degrees. They often get roped in by for profit colleges that offer substandard education.
There are still plenty of people living in the US on 6~14K/year. Good luck paying back $40K of student loans when you are making $10K/yr.
When people are carrying a supercomputer in their pocket with access to the entire Library of Congress (aka a smartphone), it should be fairly obvious what the difference between an unaccredited for-profit and accredited not-for-profit college is. I grew up eating rotten vegetables and wild berries but I used the public library (because the internet barely existed at the time.) There is no excuse for this stuff. None.
I definitely understand where you came from and grew up in a very similar situation. Except I didn't even have access to a public library. That was 10mi away and we only left the property 2-3x per year. We did have a computer though.
It's not about an excuse, specifically in the for profit college instance, there is no question that these people were the victim of a scam. If you get into the car with an Uber driver and he turns out to be a murderer, is it your fault for not looking up his drivers license and doing a full background check on them? These people were scammed out of their money, especially low income people, minorities, and veterans. It's not me saying this, it is the US government.
https://www.csmonitor.com/USA/Education/2018/0824/For-profit-colleges-face-fraud-complaints-as-DeVos-weakens-rules
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PDXTabs is killing it in this thread.
While I appreciate your comment I really view it more as a team event.
I grew up eating rotten vegetables and wild berries but I used the public library (because the internet barely existed at the time.) There is no excuse for this stuff. None.
I grew up hungry, growing our own food, and with a public library too, but I wanted to circle back to this. Plenty on people in this country do not have access to a public library. Just off the top of my head Camden, NJ a city of ~80K people didn't have a public library for something like five years (https://en.wikipedia.org/wiki/Camden,_New_Jersey#Libraries).
I would add that plenty of people that used to grow their own food in Appalachia have had their home gardens as well as drinking water ruined by coal dust from local coal mining and production. Just because I grew up gardening and using a library, it does not follow that those options are still available to all folks. In particular I would suggest that you go to your local library and check out a copy of Days of destruction, days of revolt by Chris Hedges and then follow it up with a copy of Dignity: Seeking Respect in Back Row America by Chris Arnade.
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If someone is dumb enough to loan one of my children half a million dollars that they have no chance of repaying I will do everything in my power to help them default, just as a matter of principle.
Yes. This. Many student loans are predatory.
The burden should be on the loan officer to determine whether or not the borrower will have sufficient means to pay. The banks are not doing their due diligence, and thus they completely deserve to get burned in this mess. I realize that the responsible among us all get penalized a little bit in this as the amount defaulted gets spread around thinly, but the amount being lent to students has gotten completely out of control and it needs to stop. My children will take no students loans . . . at least I won't be co-signing for any.
For the record, I paid off all of my student loans. But my loans were for a reasonable amount. Now? They seem to let people borrow to infinity with no due diligence that they will ever be able to pay. The lenders deserve to get burned on these.
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I cleared off $48k of debt after my graduation in approximately 2 years. In the first year after graduation, my pay was around $75k and the subsequent year, it was $50k. I took a bus to go to job, didn't eat outside, and pretty much lived to clear that debt during those 2 years.
However, I see no wrong in people devising strategies to game the system. To each their own.
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You know who wishes they could borrow money to go to college: Kids in Somalia. Americans complain about so much.
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I'm willing to bet a good chunk of change that the ratio of people talking about fleeing the US to people who actually do it is damn near zero. To pull this off you need resourcefulness and mental acuity, something in short supplies in these online debt defaulters online communities.
It's the same thing as people who threaten to move to Canada if Trump gets (re)elected.
A close friend of mine moved to Europe, and decided to stay when he realized he could very legally go on IBR and pay $0 on his student loans. After the last presidential election, he decided to stay for the remainder of the 20 years until his loans will be wiped out.
I can't say how common these folks are, but I have one good friend who's done both.
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A close friend of mine moved to Europe, and decided to stay when he realized he could very legally go on IBR and pay $0 on his student loans. After the last presidential election, he decided to stay for the remainder of the 20 years until his loans will be wiped out.
I can't say how common these folks are, but I have one good friend who's done both.
I have one too with maybe $200K of debt from law school. It works, but the tax bill at the end is still a big problem (they'll be getting six figures on a 1099-C one day). So they're investing their overseas earnings so that maybe they will have a chance to pay the tax bill. Of course, the way around that is to renounce your US Citizenship and never come back. But that's a pretty extreme solution to a problem that congress will probably address before the tax bill gets to them.
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PDXTabs is killing it in this thread.
People got all moral and righteous about mortgage defaults during the financial crisis too. For some reason, when you can attach a name and a face to default, people like it a lot less. Defaulting on debt isn't even a disqualifier to become President of the United States. Hell, a former candidate made a career out of strategically navigating defaults.
I'm not gonna be mad cause Joe Redditor figured out a way to ditch his student loans. Good for him.
As a Wells Fargo customer, I feel pretty confident saying that there's nothing a customer can legally do to a bank that the bank wouldn't do to the customer 10x over without a second thought.
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PDXTabs is killing it in this thread.
People got all moral and righteous about mortgage defaults during the financial crisis too. For some reason, when you can attach a name and a face to default, people like it a lot less. Defaulting on debt isn't even a disqualifier to become President of the United States. Hell, a former candidate made a career out of strategically navigating defaults.
I'm not gonna be mad cause Joe Redditor figured out a way to ditch his student loans. Good for him.
As a Wells Fargo customer, I feel pretty confident saying that there's nothing a customer can legally do to a bank that the bank wouldn't do to the customer 10x over without a second thought.
Careful. I got mod-slapped for impugning the virtue of a bank. I believe I compared Chase to a "juicy whore" and invited people to take advantage. I wasn't aware that a Chase card was one of the ones on the MMM preferred list at the time. Oops. Bad Grim.
I agree with your assessment of Wells Fargo because they allowed a felony level theft of a bank draft sent to me. It took months for them to admit that they didn't bother to follow their own procedures. It doesn't surprise me that they were in the middle of a massive fraud scandal. They only had one honest executive, and she died because she was sucked out of an airplane window.
In my family, financially sodomizing banks is considered a sport. We compete to see who can exploit financial institutions to maximize personal gain without ever being charged interest or fees.
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You know who wishes they could borrow money to go to college: Kids in Somalia. Americans complain about so much.
We just passed the 50% level of people in the world even having internet access, and yes there are still people who starve to death, which is truly tragic and a failure of humanity. But this is a red herring in this argument about different ways to cope with America's predatory student loan situation.
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PDXTabs is killing it in this thread.
People got all moral and righteous about mortgage defaults during the financial crisis too. For some reason, when you can attach a name and a face to default, people like it a lot less. Defaulting on debt isn't even a disqualifier to become President of the United States. Hell, a former candidate made a career out of strategically navigating defaults.
I'm not gonna be mad cause Joe Redditor figured out a way to ditch his student loans. Good for him.
As a Wells Fargo customer, I feel pretty confident saying that there's nothing a customer can legally do to a bank that the bank wouldn't do to the customer 10x over without a second thought.
Careful. I got mod-slapped for impugning the virtue of a bank. I believe I compared Chase to a "juicy whore" and invited people to take advantage. I wasn't aware that a Chase card was one of the ones on the MMM preferred list at the time. Oops. Bad Grim.
I agree with your assessment of Wells Fargo because they allowed a felony level theft of a bank draft sent to me. It took months for them to admit that they didn't bother to follow their own procedures. It doesn't surprise me that they were in the middle of a massive fraud scandal. They only had one honest executive, and she died because she was sucked out of an airplane window.
In my family, financially sodomizing banks is considered a sport. We compete to see who can exploit financial institutions to maximize personal gain without ever being charged interest or fees.
Lol what are the best ways you guys have come up with? I was looking at the bank account churning page but all the ones I saw were 10K+. Anything with lets say 1-5K?
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You can pretty easily come back from 20-40K of student loan in a couple of years but loans of 6 figures and more seem pretty predatory to me. One wrong decision made at 18 or younger will impact your entire life. Of course other decisions made at 18 can impact your life as well but many teens think they are making the best decision for the future to go the best school that accepted then no matter the price tag.
Big loans like that seem predatory to me, too. But just HOW are people getting $100k plus in loans?
- Federal loans for undergrad degree of that 18 year old max out at $31k. It would take 5.5 years of school in order to max out that loan, too. This is for dependent students, which the vast majority of unmarried 18-22 year olds are.
- If you parents can not qualify for loans, then your maximum increases to $57.5k. But note, that if they don't qualify based on income, then there are quite a few bursaries (need based scholarships) to help low income students around. In fact, need based scholarships are the majority of scholarships available. So, if your parents have exceptionally bad credit, your max able to borrow increases to $57.5k without other free money in sight.
- Very few students under 24 will qualify for taking out additional loans because they need income and credit history. Some will be able to put money onto credit cards (I had several friends do this), but those max out, too, when you have limited income.
--- At this point the undergraduate took 5.5 years to amass $57.5k in student loans and hopefully has a degree. They are now at least 23 years old. If they finished in 4 years, as a dependent student, that debt is $27k-$30k --
$30k of debt has a monthly repayment over 10 years of $333/yr. assuming 6% interest. That is 15% of your pay if you make $27k per year. IBR would be less per month if the single student makes less than $45k/yr. Obviously the new graduate with credit challenged parents and $57.5k in debt will be on IBR for 20 years or until their income increases to more than $70k/year.
So the question is -- can someone making $27k/yr afford $333/mo in payments for student loans? Can someone making $45k per year on IBR?
The massive student loan debt really only starts to accumulate because of MASTERS degrees
A student applying for a MASTERS degree is now 22 years old. At what point do we say that a college educated adult is old and sophisticated enough to figure out if the large debt is the best choice for them. ? To make their own mistakes? Eyes wide open baby... you have 3+ years of college completed and are 22. Financial aid offices and Google exists to help you figure it out. You have access to friends with these loans, too.
If you are about to take on massive MASTERs degree debt, frankly because you are choosing a masters program with very little work-study, research grant funding that you will get, or other means of making it affordable, then maybe you should go find a job for a couple of years, pay down your existing loans, save up for your Masters or find another way to get into the industry you are choosing?
I find it hard to be overly sympathetic about a bad masters degree decision a 22+ yr old college student made that has logical and easily understood consequences.
*** But wait! you say -- I have missed the Parent PLUS loans and the co-signed loans...amounts ***
To this I will be frank... the Parent PLUS loans are just like a parent taking out a HELOC to pay for thier kids' college, or cash flowing it. Parent PLUS loans just are easier to get loans with deferred payments. It is very obvious to the parent filling out the forms that this is the PARENT'S loan. The form is clear on that. AND, they are only given to parents with credit / income to support it.
Privately funded Co-signed loans are perhaps the nightmare, here. I can certainly understand how some parents would think that these are not their own loans, given the way they are marketed and the bill statements are generally not sent to them. At the end of the day, however, it is up to the combined student / parent to find the money to fund them.
I do think that private students loans need more regulation / scrutiny -- I don't think that there should be co-signed loans where one party does not have the income / credit to cover even half of the loan.... I don't think that someone in bankruptcy should still be on the hook for these. Private lenders need to be made to be more cautious and hand out less money.
Maybe co-signed loans in general (including car loans) need to be eliminated / reframed as "joint loans" so that the primary person responsible (the co-signer today) is actually the person paying off the loan and named as the primary on the loan, and they can collect from the second party directly as they choose.
What have I missed here? The independent 24 yr old who goes back to school to improve work opportunities? Again, I say eyes wide open, Adult.... and more regulation over the private lenders to reduce the amounts that they give out by increasing their share of the risk.
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What have I missed here? The independent 24 yr old who goes back to school to improve work opportunities? Again, I say eyes wide open, Adult.... and more regulation over the private lenders to reduce the amounts that they give out by increasing their share of the risk.
IDK, the fact that you are posting for BC where student loan debt is still dischargeable in bankruptcy?
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Um... I took out almost 40k in private student loans. So did my husband. So you can certainly get loans above and beyond the federal loans. I would say those are predatory. My rates were above 8% for many years and at one point DH's were a steady 9.6%. FYI, I got them at age 17 with my parent's as cosigner. It's really easy to a high amount of student loans for school.
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What have I missed here? The independent 24 yr old who goes back to school to improve work opportunities? Again, I say eyes wide open, Adult.... and more regulation over the private lenders to reduce the amounts that they give out by increasing their share of the risk.
IDK, the fact that you are posting for BC where student loan debt is still dischargeable in bankruptcy?
Well, I have lived in the USA, too. So my comments are all based on the USA facts, including my comments about private loans not being discharged in bankruptcy and private lenders needing to share more of the risks...
What else do you think is missing? I mean, how does someone under 22 get loans more than $100K (or even more than $50k?) - Real question...
....and why are people pitying decisions made by 23 year old college students who should be smart enough to figure out this stuff?
I think that there is a huge media spin on the student loan crisis, unless someone can shine a light on where the non- co signed loans over the federal limits, given to those "18 year olds" are coming from...?
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What have I missed here?
17 year old commits to going to a college. Because they're 17, they don't really know how money or credit work. The big tuition numbers are just abstractions. Assume they come from a family that lives an upper middle class life and money isn't an issue they discuss, even though the family is living paycheck to paycheck.
Comprehensive fees (tuition, room, and board) run from the high teens to low twenties at state flagships. Privates average about 30k/year after discounting, which is about half of the sticker price.
Let's assume the 17 year old manages to graduate from college in four years. At a state flagship, that's going to be 60k out of pocket, and at a private more like 120k. Federal loans cover 31k. Depending on the state, there might be another 10k or so of state-based loans available. So maybe there's $40k of Federal and state loans available on average, which have an historically high interest rate of 5%+ (in the late 70s and 80s the Dept of Ed was originating loans at 2% interest when inflation as above 10%).
Where does the extra $20-80k come from? Parents? That's how it's supposed to work with the Parent PLUS loans, but plenty of parents don't take the debt on themselves. Instead, they cosign private loans for the student, often at 8-12% interest that begins accruing immediately. Even 20k at 8% interest balloons in a hurry.
Now the student is on the hook for a bad loan taken out to shift the expected parent contribution to them, that's been ballooning the entire time they've been in school. There's no IBR, PSLF, or often even a forbearance option. The repayment timeline is 10 years for most of these loans. Not only is their credit on the line, they're also in the awful position of having their parents' credit on the line, too.
What you're missing is that the student I describe above is common, and that student has gotten f'ed by every adult in the room, from their parents, to their financial aid office, to private banks, to the Dept of Ed.
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What else do you think is missing? I mean, how does someone under 22 get loans more than $100K (or even more than $50k?) - Real question...
Ignoring that your brain isn't done developing until 25~26:
My son is on track to graduate with his undergrad before his 20th birthday. If he immediately goes to grad school he will be 20 in the fall and he will be considered an independent student and will be able to take on $31,000 per year just in federal student loans. This will be on top of whatever undergrad loans he took out (which in our case will be none, but use your imagination). While he is in school all of his unsubsidized loans will be accruing interest at 4.53% for the undergrad loans and 6.08% for graduate school.
So it's pretty easy even without private student loans to end up at $100K+ as long as you get a masters/MD/JD. But you might not ever finish the degree. You can post from the comfort of Canada about how these loans needn't be dischargable in bankruptcy, but I don't buy it.
EDITed to add - and there are plenty of students that are considered independent students at 18 including but not limited to foster kids, parents, people with two dead parents, married persons, homeless kids, emancipated minors, etc. I was independent by the time I was 20.
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What have I missed here?
17 year old commits to going to a college. Because they're 17, they don't really know how money or credit work. The big tuition numbers are just abstractions. Assume they come from a family that lives an upper middle class life and money isn't an issue they discuss, even though the family is living paycheck to paycheck.
Comprehensive fees (tuition, room, and board) run from the high teens to low twenties at state flagships. Privates average about 30k/year after discounting, which is about half of the sticker price.
Let's assume the 17 year old manages to graduate from college in four years. At a state flagship, that's going to be 60k out of pocket, and at a private more like 120k. Federal loans cover 31k. Depending on the state, there might be another 10k or so of state-based loans available. So maybe there's $40k of Federal and state loans available on average, which have an historically high interest rate of 5%+ (in the late 70s and 80s the Dept of Ed was originating loans at 2% interest when inflation as above 10%).
Where does the extra $20-80k come from? Parents? That's how it's supposed to work with the Parent PLUS loans, but plenty of parents don't take the debt on themselves. Instead, they cosign private loans for the student, often at 8-12% interest that begins accruing immediately. Even 20k at 8% interest balloons in a hurry.
Now the student is on the hook for a bad loan taken out to shift the expected parent contribution to them, that's been ballooning the entire time they've been in school. There's no IBR, PSLF, or often even a forbearance option. The repayment timeline is 10 years for most of these loans. Not only is their credit on the line, they're also in the awful position of having their parents' credit on the line, too.
What you're missing is that the student I describe above is common, and that student has gotten f'ed by every adult in the room, from their parents, to their financial aid office, to private banks, to the Dept of Ed.
YES. This is exactly how I ended up with 100k+ in loans. Luckily I graduated and got a job out of it. I also want to add, that a lot of private universities purposefully make their credits untransferable through spreading around course content or semester length. So once you start school, even if you realize you're paying out the nose, you are stuck and you better graduate. If you transfer, you're practically starting over with very low amount of credits.
At 17 I couldn't be trusted by the state to drive after 9pm. But I could be approved for 25k+ in student loans!
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Careful. I got mod-slapped for impugning the virtue of a bank. I believe I compared Chase to a "juicy whore" and invited people to take advantage. I wasn't aware that a Chase card was one of the ones on the MMM preferred list at the time. Oops. Bad Grim.
lol I think it was probably the colorful language, rather than the impugning of the bank that solicited the mod slap.
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Thanks caleb and PDXTabs. Two great points that I missed:
1) There are also in-state loans and administered separately, with separate caps.
2) The unsubsidized portion of the federal loan acrues interest right away... and that interest is very high
PDXTabs -- re bankuptcy, I said the exact opposite, we agree. I definitely think that a validated bankruptcy in front of a Judge should lift the student loan. Not allowing that created a vicious predatory lending cycle from many parties (private colleges, banks, others). By returning to allowing bankruptcy as an aid for heavy student loan debt, it would put more of the risk back onto the lender.
The point that the 17/18 year old undergrad has been screwed by everyone, including the parents (especially the parents? who refuse to pay for the Parent Plus loan or help with co signed loans?)... parents that are fully grown adults that should look out for thier kids... well, that seems hugely correct.
Why aren't people railing against the loans that the parents took out? Even if the 19 year old student begged them to do it, they should have put on the adult vision. Suze Orman has been decrying co-signing for decades... much longer than this student loan crisis. Shouldn't the parents buck up and pay for their share of the mess too, or is that only the student's responsiblity?
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Why aren't people railing against the loans that the parents took out? Even if the 19 year old student begged them to do it, they should have put on the adult vision.
That you for the thoughtful reply, I appreciate it.
As for this question, probably for the same reason that if a patient has a botched surgery we don't blame it on the patient, we blame it on the surgeon. Say you have a lower than average IQ, you never went to college, and this college counselor is telling you to sign some papers so that your kid can go to college. This college counselor has a degree that you don't have. You love your kid and you want them to have a good future and this expert is telling you to sign a piece of paper. What do you do? What do some of these people do? Who's "fault" is it? The whole system was setup to get them to sign the piece of paper.
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The point that the 17/18 year old undergrad has been screwed by everyone, including the parents (especially the parents? who refuse to pay for the Parent Plus loan or help with co signed loans?)... parents that are fully grown adults that should look out for thier kids... well, that seems hugely correct.
Why aren't people railing against the loans that the parents took out? Even if the 19 year old student begged them to do it, they should have put on the adult vision. Suze Orman has been decrying co-signing for decades... much longer than this student loan crisis. Shouldn't the parents buck up and pay for their share of the mess too, or is that only the student's responsiblity?
Um, yes, the parents should buck up. And it's even worse in many cases than you're describing it. At privates where the tuition tag is now $60k+, the experience is marketed to the parents as much or more than the students, and parents are often ongoing consumers of the experience. There are parent events throughout the year. Parents are at the sporting events. Parents are in the library and the cafeteria on the weekends. Parents can often audit classes for free.
And of course parents consume the experience in all sorts of soft ways every time they tell their friends and family that their child is at Country Club U, even if they never set food on campus.
The parent experience is funded in large part by tuition. And in the case of the parents who aren't paying the expected family contribution part of the bill the student is debt financing all of that tuition, and so the student is paying for the parent experience with their debt. The students in these cases are subsidizing the parents' experience of college, rather than the other way around.
I think that's f'ed up, and I think it happens because lots of parents are more concerned about the appearance of being a successful adult and parent (big house, new cars, kid at Country Club U) rather than actually setting their kids up for success as adults by helping them get a start in life.
So why aren't we talking about it? Well, if you were one of those parents, would you want to talk about the fact that your family life was a sham enabled by throwing your kid under the financial bus? And if you're their kid, do you want to have a public discussion about the fact that your parents shirked their responsibilities and let you debt finance their parenting dreams? Me neither.
This isn't just a financial crisis, it's a moral crisis on all sorts of levels.
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So what is to be done?
1) Restore bankruptcy protections for all private lending. I can see an argument either way for Federal loans since that risk is imposed on the public. But if private banks want to lend to students or parents, they should fully internalize the risk.
2) Prohibit co-signed private loans. Right now, many of these loans are the functional equivalent of what liar mortgages were during the housing bubble: they're a financial instrument to load up people who aren't creditworthy with debt. There's a built-in co-signer release after a certain number of on-time payments, so that the debt shifts - without income verification or a credit check - 100% into the student's name. What these co-signed loans functionally do is get debt into the name of a person without any assessment of their creditworthiness. Banks aren't concerned, because this debt is non-dischargeable (see above), so they run little or no risk of having to write it off even if it's not punctually repaid.
3) Stop sending Federal student loan money to for-profits. Their outcomes are abysmal, and they serve no niche that isn't better and more cheaply filled by community colleges. A for-profit model is a bad idea for higher ed. We've tried it, and there's nothing good about it.
4) Aggressively enforce the gainful employment rule. If your students can't get jobs and pay back their loans, you shouldn't be getting Federal student loan money.
5) Reduce Federally mandated administrative overhead:
- a) Reign in the accreditation process to reduce costs. Focus on back-end outcomes (see the gainful employment rule above) rather than process-oriented assessments that are super labor intensive.
b) Clarify and reduce institutional responsibility arising from Title IX. Change the rules and guidance to direct institutions to refer all potentially-criminal conduct to law enforcement, and clearly spell out institutional responsibility for non-criminal behavior.
6) Do not allow the co-mingling of tuition with other money or expenses. Require that funds charged as tuition be used for no other purpose than faculty salaries, the library, and direct classroom facility expenses. This will clarify for the students and the public exactly how much of their money is going to the classroom.
7) Forgive some small amount of existing Federal debt across the board. Most of the loans in default are small, less than $10k. It doesn't make sense to chase debtors around over small balances.
8) Reduce Federal interest rates by a significant amount. We can debate what the proper rate should be, but it seems that fairness would say we should use recent generations as a benchmark. Maybe it's the rate of inflation, or the prime rate, or the overnight funds rate, or set as a function of the total program costs. Regardless, it doesn't seem like Federal student loans should be a the money maker they are now.
9) Cap private interests rates at the Federal rate, or the Fed rate plus a few points. Writing loans at 12% doesn't benefit anyone but the banks.
10) Give student loan payments a partial tax deduction without limit to put them on par with a 529 plan. It violates basic principles of fairness that parents who save for their children's education through a 529 get better tax treatment than a student trying to pay off loans for their own educations.
So that's ten ways to tackle the problem. Maybe they wouldn't be enough, but I think they'd go a long way toward addressing it.
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The reason these loans aren't dischargeablde is because they used to be and that didn't work well. People went to law or med school, then declared bankruptcy. I knew a couple of people who pulled every loan they could, bought houses, sheltered them, ( I believe that loophole is gone now, too) and then did a bankruptcy. Fun times.
My concern is the underlying premise that everyone must go to college. And everyone must live in dorms. And take trips for Spring Break, etc, etc, etc.
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The reason these loans aren't dischargeablde is because they used to be and that didn't work well. People went to law or med school, then declared bankruptcy. I knew a couple of people who pulled every loan they could, bought houses, sheltered them, ( I believe that loophole is gone now, too) and then did a bankruptcy. Fun times.
But after 1990 you still had to wait seven years to discharge them in bankruptcy (five years from 1978-90). This means that you either were paying them for seven years or in default for seven years. In the default case you could have had your wages garnished the entire time if you were actually a working professional - also, you would be signing up for 17 years of bad credit: seven years of default and 10 years of bankruptcy on your file.
You aren't wrong that a few people filed for bankruptcy to get out of their obligations that could have paid them. But we also threw a whole lot of folks under the bus because of a couple of rich assholes.
EDITed to add:
My concern is the underlying premise that everyone must go to college. And everyone must live in dorms. And take trips for Spring Break, etc, etc, etc.
I don't disagree with this. But if a bank gives an 18 year old money for spring break, who should have been the responsible party?
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The 18 year old... whoever borrows the money is the one responsible. If the student is doing this with their federal loans, well, with the caps on those amounts, tuition and living costs from some other cash.... money is fungible and all of that.
BUT!
At this point, it is still a loan on parent's credit. I think the point of the posts above is that the bank is lending money to the parents (co-signers) and lying to them / misleading them to get them to sign (your student will have a wonderful life and make lots of money to pay this back, it is not your loan, etc), and then they both are flipping it around to make the student responsible for payments a year or two into the loan repayments, without validating the student's ability to carry it first. (If I got that right).
So..
End co-signed loans.
Provide a means for bankruptcy to discharge private loans. (A lot more time / rigor than standard bankruptcy is fine.. someone with 7 years of low / no income should be able to get loans discharged in bankruptcy, not someone only 3 years out of school that took a gap year after and now is just starting to work steady after a long job search and contract positions).
Do not flip a loan back onto someone, instead have them refinance it into a new loan their own name based on their own credit.
Don't go directly into a Masters (without substantial work study or other funding to offset) if you already have a large student loan.
But also -- keep caps on these loans! If someone can't afford it now, they can't afford it later, either.
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The 18 year old... whoever borrows the money is the one responsible. If the student is doing this with their federal loans, well, with the caps on those amounts, tuition and living costs from some other cash.... money is fungible and all of that.
I'd be fine with that if this was the normal "responsible" that society has decided on for every other kind of debt. But it is an extra responsible that only applies to student loans.
BUT!
At this point, it is still a loan on parent's credit. I think the point of the posts above is that the bank is lending money to the parents (co-signers) and lying to them / misleading them to get them to sign (your student will have a wonderful life and make lots of money to pay this back, it is not your loan, etc), and then they both are flipping it around to make the student responsible for payments a year or two into the loan repayments, without validating the student's ability to carry it first. (If I got that right).
Unless they are one of the many independent 18 year old students as reference earlier in this thread.
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The reason these loans aren't dischargeablde is because they used to be and that didn't work well. People went to law or med school, then declared bankruptcy. I knew a couple of people who pulled every loan they could, bought houses, sheltered them, ( I believe that loophole is gone now, too) and then did a bankruptcy. Fun times.
But after 1990 you still had to wait seven years to discharge them in bankruptcy (five years from 1978-90). This means that you either were paying them for seven years or in default for seven years. In the default case you could have had your wages garnished the entire time if you were actually a working professional - also, you would be signing up for 17 years of bad credit: seven years of default and 10 years of bankruptcy on your file.
You aren't wrong that a few people filed for bankruptcy to get out of their obligations that could have paid them. But we also threw a whole lot of folks under the bus because of a couple of rich assholes.
EDITed to add:
My concern is the underlying premise that everyone must go to college. And everyone must live in dorms. And take trips for Spring Break, etc, etc, etc.
I don't disagree with this. But if a bank gives an 18 year old money for spring break, who should have been the responsible party?
Ahem, I was referring to the pre-1990 era, because I am old.
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Ahem, I was referring to the pre-1990 era, because I am old.
Everything I wrote was also true starting in 1978, just for a slightly shorter time.
Anyway, I'd be totally fine going back to seven years of payment/default before you could file for bankruptcy. This is in fact the exact same time-frame as Canada.
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Here's how to dodge student loans:
1. Ace some AP exams or enroll in dual-enrollment programs while in high school.
2. Go to a public in-state university.
3. Graduate in four years or less, especially if you did dual enrollment.
4. Major in something that has value in the marketplace.
5. Spend time in college interning for companies that might actually hire you.
6. Get a job while in college that pays the costs.
7. Live like a college student - no eating out, going to bars, traveling on breaks, etc.
Why is this so freakin' difficult?
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Here's how to dodge student loans:
1. Ace some AP exams or enroll in dual-enrollment programs while in high school.
2. Go to a public in-state university.
3. Graduate in four years or less, especially if you did dual enrollment.
4. Major in something that has value in the marketplace.
5. Spend time in college interning for companies that might actually hire you.
6. Get a job while in college that pays the costs.
7. Live like a college student - no eating out, going to bars, traveling on breaks, etc.
Why is this so freakin' difficult?
Because it's not what the Instagram people do or what "college students" do in movies or on TV.
I'd also add:
8. Live with your parents or a relative and have a work-in-lieu of rent agreement to keep your expenses low.
9. Buy secondhand books, or rent them.
10. Don't take on other debt such as a car loan.
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9. Buy secondhand books, or rent them.
International editions (thin paper, black and white only) on ebay worked wonders in the early 2000's, seems like it's still a thing too.
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9. Buy secondhand books, or rent them.
International editions (thin paper, black and white only) on ebay worked wonders in the early 2000's, seems like it's still a thing too.
I went to college in the mid 00s; international editions had the exact same content but the book questions were in a different order. So if it was a class where you had to turn in homework from book questions, you had to find someone who paid for the real book to write down which numbers in the real book corresponded to which numbers in the international edition.
I did have a few professors who recommended international editions and would either give homework as printed-out questions or have the assignment list the question numbers for both editions, but that was rare.
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9. Buy secondhand books, or rent them.
International editions (thin paper, black and white only) on ebay worked wonders in the early 2000's, seems like it's still a thing too.
Or do like a student I knew in one of my classes - download a B&W PDF of the textbook, find access to a free printer somewhere on campus in someone's work study office probably and print out the book. All on one side of the paper of course. He said it was printed on one of those really slow mid-90s Laserjet printers (when we were in school in the mid-90s) and took forever... He did a chapter at a time as needed.
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9. Buy secondhand books, or rent them.
International editions (thin paper, black and white only) on ebay worked wonders in the early 2000's, seems like it's still a thing too.
Or do like a student I knew in one of my classes - download a B&W PDF of the textbook, find access to a free printer somewhere on campus in someone's work study office probably and print out the book. All on one side of the paper of course. He said it was printed on one of those really slow mid-90s Laserjet printers (when we were in school in the mid-90s) and took forever... He did a chapter at a time as needed.
This is actually something I am okay with, because the textbook companies have become dicks and started requiring people to do all kinds of registration online to prevent the purchasing of used books. It's kind of like how tech hardware companies use proprietary technology to prevent people from being able to repair their own devices. When companies pull shenanigans like that, then as far as I am concerned, the gloves are off.
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9. Buy secondhand books, or rent them.
International editions (thin paper, black and white only) on ebay worked wonders in the early 2000's, seems like it's still a thing too.
I stopped buying textbooks. Most of it's bullshit anyway. Especially in law, where you have access to the whole world's databases at your fingertips (via the university Lexis/Thomson/etc subscriptions), textbooks are just an unnecessary "secondary source" of information. They don't measure up to primary sources. And there are legal encyclopaedias and textbooks available via the university subscriptions anyway.
Go to a uni you can afford. Get a scholarship if possible. Don't buy everything you're told to buy (academic, lifestyle or otherwise). Do well enough to get a high paying job. It ain't brain surgery or rocket science, unless you happen to be majoring in that.