Here's yet another in what seems like a long line of clueless college students (for others, see College Debt Run Amuck, A College Debt Nightmare, and An Example of What I've Been Talking About.) Like the others, this one borrowed way too much and is now having a hard time paying it back (she owes $97,000). And if that's not bad enough, this article grates on my nerves because the author looks at who to blame for the problem -- it can't be the student and the parent alone, now can it? Is Sallie Mae, Citibank (private loan), or the university at fault? Ugh.
Let's look at a few comments from the piece that I think get to the heart of who is to "blame" for this mess:
Like many middle-class families, Cortney Munna and her mother began the college selection process with a grim determination. They would do whatever they could to get Cortney into the best possible college, and they maintained a blind faith that the investment would be worth it.
The second sentence is the killer. Let's dissect it piece by piece to see where they went wrong:
- "Do whatever they could" -- This can be translated "borrow whatever they need to borrow." Not a good idea no matter what you're buying (a house, a car, or a college education).
- "The best possible college" -- People equate "most expensive" with "best" when it comes to colleges. This is simply a (very) false assumption (as we have seen).
- "A blind faith" -- Having blind faith in anything is not a prudent financial move.
- "The investment would be worth it" -- Unfortunately they didn't do the math to see if their investment would be worth the cost before they borrowed. Big, big mistake.
That's just the first paragraph. We go on:
They and their families made borrowing decisions based more on emotion than reason.
Yep. And when you make financial decisions based on emotion and leave out reason, it's usually not going to end well.
"All I could see was college, and a good college and how proud I was of her," Cathryn said. "All we needed to do was get this education and get the good job. This is the thing that eats away at me, the naïveté on my part."
Yes, she was naive. How did she expect her daughter to get "the good job?" Did she think simply because she went to a specific school that she was guaranteed a certain income? Did they research the sorts of careers the school was getting its graduates? I'm guessing not. More than likely they simply assumed that the daughter would get a high-paying job and all would be well. Bad mistake.
To get the most financial benefit out of college, you must compare expected costs with expected post-graduation incomes. And you HAVE to do this before you decide which college to attend and how much you'll borrow (if any) to go there.
The daughter would simply like to have the debt forgiven (not likely since "federal bankruptcy law makes it nearly impossible to discharge student loan debts.") Her thoughts:
Ms. Munna badly wants to call a do-over on the last decade. "I don't want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back," she said. "It feels wrong to me."
How exactly is it wrong? You borrowed and now you must repay. Is that a difficult concept to understand?
Most of the rest of the piece is crap -- arguing how others conspired to give her money she could never repay. Take some responsibility, people!!!!
Anyway, here's how the situation nets out now:
The balance on Cortney Munna's loans is about $97,000, including all of her federal loans and her private debt from Sallie Mae and Citibank.
She recently received a raise and now makes $22 an hour working for a photographer. It's the highest salary she's earned since graduating with an interdisciplinary degree in religious and women's studies. After taxes, she takes home about $2,300 a month. Rent runs $750, and the full monthly payments on her student loans would be about $700 if they weren't being deferred, which would not leave a lot left over.
So she makes $46k per year. This is actually much better than I would have expected for a degree in religious and women's studies. Then again, she lives in San Francisco, not exactly a great place to live if you're trying to save money (though a beautiful city). Sure, why don't we just heap another major difficulty on the school loan one and make it even harder to get out of debt? What -- there are no photographers in other parts of the country? Ugh again.
Anyway, paying back $97k on a salary of $46k isn't impossible. She can do it if she buckles down and works at it for some time (no, it won't be easy, but she can do it.) How? Follow my seven steps to get out of debt.
And for those of you about to enter college (or if you know someone who is, please send them a link to this post), please, please, please think about where you are going to school, what you can reasonably expect to earn coming out of that school with the degree you'll have, and what it will cost to attend the school. Then do the math and see if it's a good financial move BEFORE you commit to going there.
Update: I guess others weren't too sympathetic either. Here's the woman's reponse to those who commented on the original piece (telling her to get a clue.) One quote that summarizes the whole mess:
"In retrospect, it’s absolutely clear to me that I should have thought more about the cost of the education versus career prospects. I didn’t think of it as a purchase."