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Good Debt
Submitted by Julie on Wed, 02/24/2010 - 12:30
In a world where gainful employment for college graduates is sparse and tuition continues its astronomical ascent, how dangerous is your student debt? The Wall Street Journal reports how one woman, now a family practitioner, found out first hand. Michelle Bisutti finished medical school with about $250,000 worth of debt. Although this is already an intimidating amount, it has now ballooned to over twice as much at $550,000. How did this happen?
Many recent (and even not so recent) grads are facing mounting student debt in our current economic climate and unmanageable loan payments. Students with undergraduate degrees may be paying $300 or more monthly towards students debt, while those with graduate degrees can reach payments of around $800 a month. Some making these payments are being asked to pay even more or face additional charges, regardless of their income.
While Bisutti and others interviewed in the Wall Street Journal item admit that they willingly signed up for their debt initially, they also seemed shocked when they discovered the severity of pitfalls of missed payments and high interest rates. Even federal loans like the PLUS loan can carry interest rates as high as nine percent.
An even more frightening aspect of student debt presents itself when borrowers are in their worst circumstance: bankruptcy. Unlike credit card and even gambling debt, student loans often are not forgiven when a borrower files for bankruptcy, making an already difficult situation worse. While Dr. Bisutti has not filed for bankruptcy, she has incurred, in one case, a new “collection cost” fee of $53,870 charge as a result of her debt being turned over to a collection agency, pushing her deeper into debt.
Granted, many students will not be in such a compromising position upon graduation, at least 40% of American student debt is being actively repaid and some are able to manage their money much better after graduation and securing gainful employment. The main moral of these stories seems to be one of caution and responsibility. These cautionary tales remind us to be aware of the debt you are taking on while in school, and always read the fine print.
-Julie is a blogger for The New View. Check out her bio to see where her view comes from.
Read More
The $550,000 Student-Loan Burden, Wall Street Journal
Bigger Tuition Bills and Student Loans Coming in 2011, U.S. News & World Report
The Student Loan Effect, WSJ.com blogs
List of Colleges promising to cover all costs of attendance, ProjectOnStudentDebt.org
- Julie's blog
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Comments
The terror of taking out
The terror of taking out loans to go to grad school is mutual! What should feel like a great opportunity to increase your kowledge base and earning potential is made really daunting by loans and their terms.
When you have a bad economy mixed with ever rising tuition costs, graudates with expensive loans can't get quality jobs, and their extra debt just compounds the issue. I wonder what the exact numbers are, and if some students who took out loans have the same net income after loan payments as non-grads!
Bisutti's situation is extreme, but can you imagine having worked so hard and going to school for years and years to become a doctor and then not being able to get a house or car because you'll still be stuck in debt until you're 70? It doesn't seem so far fetched for those of us who have liberal arts degrees but it's especially shocking for someone in such a valuable profession.
This situation is just so
This situation is just so frustrating. We're told that without a proper education, the best job we can hope for is to end up manager of a fast food joint or something. So we go to great schools, get great educations, do great internships, participate in great extracurricular activities, and then graduate to an economy that can't afford to hire us. Even though my school gave me a great financial aid package, I still ended up with three student loans of varying amounts. I managed to land a great internship in January, but I'm not making enough to cover my monthly bills, so my savings are slowly dwindling. I don't regret taking out the loans to go to school one bit, it's just frustrating that it has to be this way.
I am not taking out a loan, but
I currently don't have a student loan for my undergraduate studies (and hopefully, I won't need one), but I am afraid I probably will need to get a loan if I am going to grad school. But the probability of taking out a loan and hearing horrible things about loans make me more reluctant to go to grad school. I think going to grad school will only help me, but I am just scared that I won't be able to pay back the loan. I guess I don't really have to worry about it right now, but it's a pretty scary thought.
For my undergrad, I was lucky
For my undergrad, I was lucky that I didn't need to take out any student loans. That wasn't the case for grad school though. I justified the high costing loan by reminding myself of how prestigious the school was, the networks I would make, and the opportunity for huge career (and salary) advancements upon graduation. Then, the economy tanked.
While I don't regret going to grad school and it has opened up doors and possibilities which I wouldn't have dared to take or risk before, I can't say that the gamble has paid off yet. My loads are on current deferrment til July. I'll definitely need to break out my glasses and take a look at the fine print and my repayment options.
I feel super bad for Bisutti though... that's a HUGE loan and repaying it during this economy is going to be brutal. It's tough to have worked and studied so hard and then not be able to really enjoy post graduation because of the huge debt that was accrued getting your education.