We Have a New College Debt Queen

After detailing college graduates with $97,000 and $120,000 in debt, I thought I had reached the peak of "bad ways to finance college." I was so, so wrong.

Here's the story of a young lady who has $200k in college debt (from an undergraduate degree alone.) Yikes! Her words:

The severity of my situation goes a bit deeper than "I owe this money, help me" - I am actually forced to live with my parents (forced = I am lucky! But...) as the monthly payments for just my private loans are currently $891 until Nov 2011 when they increase to $1600 per month for the following 20 years... attached is my payment plan. I also mentioned I have a job - which is great! And I probably have my college education to thank for that! Except there is still no way to make these monthly payments, and live on my own as a contributing member of society. Neither of my parents, nor I, really knew how this would pan out — unfortunately — and now that I'm here, I see no real light at the end of the tunnel.

Ugh! Here's another person who simply didn't think through the college/education/debt/earning issues in advance -- and now she's paying for it.

But she's got another great idea! She's set up a website so people can donate and help her pay off her debt. Yeah, that's gonna be money well spent.

Let me say this again in the hopes that a future college student (or his parents) will read this: 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.

And be sure to read Thoughts on the "New" Way to Go to College before you take any actions. It will save you thousands of dollars.

As for the student above, I can't muster much sympathy. I suggest she puts her nose to the grindstone, makes as much as she can, saves as much as she can, and pays off as much of the loan as soon as possible. Yes, it will take her several years to do so, but if she works at it, she may just end up making lemonade out of lemons. I imagine hearing of her in ten years -- she'll have a best-selling book, a well-read blog, and be all over speaking to people on how she paid off $200k in college loans in five years. Here's hoping! ;-)

Comments

[BD]

My God! How the heck do people rack up those sort of bills in college? The four-year college I'm going to right now costs me roughly $7,000 a year for a full load of classes and all required fees and books. I'll be getting my entire Master's Degree for less than she paid for one semester.

Also, I wonder what degree she got. I didn't see it in the original article...did I miss it?

[Matt]

Bubble, money pit, I have not found a fitting word for these insane stories other that these people are just plain stupid. Just because you can borrow that amount of money for college does not mean you should.

Just like the housing bubble, just because you qualify does not mean you should.

We have two friende one who is going to college for nursing and the other for business. They are borrowing money to do this. They are in there 40ies. How are they going to pay for college loans when they only have 20 or so years left to work. Maybe they did not think that through.

Here I am in my 40ies and I am looking at community college courses after my kids are done with school for fun and enrichment.

[sammysosarules]

I had just under $29K in student loan debt and around $16 in credit card debt when I finally found permanent employment (about 10 years ago). It is all gone now, but if I had to do it again, I would have swallowed my pride and accepted help from others instead of going it alone. I probably could have at least got food stamps or lived at home. Although not $200K like the story above, it was a lot for 10 years ago.

How far I have come though since those days.

[Double A]

What's ridiculous is that this person has raised $8,000 dollars from strangers to help her pay back her loans. http://twohundredthou.com/progress

Maybe I should set up a website called www.onehundredthou.com that describes my sob story of being 100K in debt from undergrad (after having graduated in Jan. 2009 from a private school, and being the first in my entire family to graduate from college like her).

I don't live with my parents (and live in one of the most expensive cities in the country). I worked all through college (and didn't study abroad like this person because its too expensive). And every, single, solitary dollar that wasn't needed for living expenses went towards my loans *before* I even needed to start paying them back. I now have 60K left, and hope it will be gone soon.

Why rely on others to do this for you? What happened to owning up to your choices and taking hold of your responsibility?

[Ryan]

A year spent studying abroad on borrowed money. What was she thinking? Where was her calculator when she was signing all those loans?

Anyway, there are plenty of people that have saved 300K+ in ten years on modest salaries, maybe this will teach her how to save at an early age and she can keep it up. If you want the math behind it, take a salary of $50K (assume after-tax), spend $20K (no car, roommates/living with parents, no dining out, etc) save $30K for 10 years = $300K. But if she got an English degree she is really going to have to hustle to get a salary of $50K. With something like accounting it is not that hard.

[Arimack]

While the girl is clearly irresponsible (one year abroad, c''mon) I have another question: How could the system allow her to rack up that kind of debt? It speaks to the failure of the entire banking system and the cheap credit problems that have caused so much of the recent economic downturn. She was allowed by loan officers somewhere to create this situation. She may be naive (not a good excuse) but honestly the loan officers who allowed her to dig this hole are criminal. If this were a house payment, using standard debt to income ratios, she needs to make a salary close to $5700 a month to make this $1600 payment to service her loans and that is with no collateral (as in no house!) That would mandate a $68,000 a year as a starting salary on a bachelor's degree. Who in their right mind would make that kind of loan looking at it from that perspective.
One other thing not mentioned here is her degree. I hope it is in a field where she can make some money. God forbid if her degree is in Ancient English Literature or some other niche liberal arts field. Also, shame on her for not finding an afordable school sometime during the last four years and transferring. It can not be overstated enough, where you went to school for undergraduate has very little impact on your marketability after your first job or your Master's Degree.

[Christine]

Sadly, it probably wasn't that difficult to rack up that kind of debt. Aside from the obvious year abroad, many schools cost tens of thousands of dollars per year. The school I went to costs roughly $40K/year. But private schools also give out tons of scholarships... did this girl have any? Anyway, for a school that could have conceivably cost me 160K, I think the final amount was closer to 6K. Not to bad. I have no debt from undergrad... though I do have a little bit from grad school (about 19K).

[MC]

OK, let's all pile on an shame this person!!!!!

It's kind of getting boring, profiling all these foolish people who took on too much house, too many student loans etc. Well, there's tons born every minute just like them. Yup, they're fools, now can we change the subject?

[jim]

I agree with FMF 100% on this. People really have to look at college on a financial basis. If you take out loans then they should not be more than 1 or 2 times your expected future salary. When I went to college the finances were the major decider for me. I went to the school I could afford with minimal loans.

[jim]

Arimack makes a good point with the question : "How could the system allow her to rack up that kind of debt?"

But the problem with student loans is that the lenders are making the loan before the student has a job. Its based on the assumption that the student will get a job after graduation. So its hard / impossible to use a debt/income ratio to figure lending rates. I do think that private lenders should be regulated more and one key reason that we have this kind of problem is that private student loans are protected in bankruptcy. If you could get out of private student loans in bankruptcy then I don't think we'd see this problem since the lenders are loaning the money with the knowledge that the borrower will be stuck with it forever.

[W A G]

The only people dumber than this ditz are the ones sending her money. Reminds me of a Barnum huckster of old.

[Billyb11766]

Fake paper $ issued by private banks (Fed) enslaving us all forever, yet another violation of our rights. Add it to the list of gov’t violations of our right:
They violate the 1st Amendment by placing protesters in cages, banning books like “America Deceived II” and censoring the internet.
They violate the 2nd Amendment by confiscating guns.
They violate the 4th and 5th Amendment by molesting airline passengers.
They violate the entire Constitution by starting undeclared wars for foreign countries.
Impeach Obama and sweep out the Congress, except Ron Paul.
(Last link of Banned Book):
http://www.iuniverse.com/Bookstore/BookDetail.aspx?BookId=SKU-000190526

[bredin]

can you not just rack up as much college debt as possible, and once you have your degree but before you get a job... declare bankruptcy, essentially paying off you debt in a couple of years??

[Justin]

Nope. The laws changed not too long ago to allow the banks to chase you to your grave for student loan debt. No more racking up loans and filing bankruptcy. There is a reason that student loan financing flows like it does.

[LotharBot]

If you're going to blame the lenders, blame the biggest lender -- and the one that regulates all the others -- in the Federal Government. The feds essentially force other lenders to make these bad loans, and then allow them to repackage them and resell them in disguised format, such that the banks are not the ones actually on the hook for bad loans. Quite a bit like housing, really. It's quite frankly a huge surprise that we don't hear even more of these stories.

[Jeff]

Bredin: Bankruptcy does not discharge student loan debt because the government has guaranteed your loan. If you do not pay it the fed will buy it from whomever lent it to you and the IRS will garnish your wages until you pay it back. I've heard stories of people in over 300k debt who at their current income will never pay it off.

[kitty]

One has to give her points for the idea of getting donations. I can't believe people donate money to her when there are so many worthy causes. If she had at least done something to show that you are paying for some service e.g. some funny stories on her website that people like to read, blog, information. But I guess the fool and his money are easily parted.

"One other thing not mentioned here is her degree"
I am curious about it myself. If she spent one year abroad could it be that it was some foreign language literature or something like art history?

To be fair, back in my days as an undergrad, I took a loan for 2-months study abroad program. I had a minor in Italian Language and Literature (my major was Computer Science), at the time I had thought of making Italian my 2nd major and maybe even pursuing it further, gave up on the idea after I saw how difficult it is to find a job and how much less I'd be making compared to CS; got MS/CS instead. But... 1) my trip was half-paid from the money I saved from my scholarship 2) the loan was for $800 3) it was a subsidized state-guaranteed loan with no interest while I am in school (including grad school) and the interest rate after than lower than those on bank CDs. When the time came to start repaying it, I just sent them a single check for the full amount. Never regretted the trip, still have memories.

[Mike Hunt]

Didn't Pres. Obama try to put something forward where if she worked for the gov't for x number of years her debt would be forgiven?

-Mike

[Kevin Beair]

these people who owe huge amounts of money are screwed, there are no jobs available for these people with no work experience, it's going to take 20 years to pay off at $891 - $1600 a month?? They dont have a chance of paying that back, these people need to look into bankruptcy, If I was in this situation I would just not pay anymore on this scam, I wonder if here parents had to cosign for these loans, if so they are on the hook and could lose bigtime.

[Jeff]

Again Kevin, Bankruptcy does not discharge student loans. You're on the hook for life.

[Funny about Money]

Well, I can understand how she might have racked up the debt if she seriously thought the training would get her a six-figure job.

My son's roommate and RM's girlfriend both attended the Thunderbird School of Global Management, a graduate institution that (until the depression) had a sterling reputation with a renowned placement program for graduates. They were assured they would walk into jobs starting in the low 100s. They started before the crash and had good reason to believe that in 18 months they would have master's degrees that would launch them on very good careers.

RM is independently wealthy and paid for his degree in cash. Girlfriend is the daughter of a single mother struggling to make ends meet on a blue-collar wage; GF therefore borrowed up the wazoo.

In the middle of their programs, the economy fell apart. When they went to the job fair organized for their class, company spokespersons said the only reason they were there at all was that before the depression started their companies had contracted to show up, but that they were not hiring. No one was hiring.

GF moved back in with her mother. She continued to look for work, but could find nothing better than brewing coffee at a Starbucks. She makes her actual living under the table, seasonally harvesting marijuana for growers in central California. She's on the hook for $1600/month payments -- more than my son is paying on a mortgage for a nice, centrally located house on a generous plot of land.

RM moved to Singapore, where when last heard from he planned to start a business speculating in currency with a cousin of questionable repute. But at least he doesn't owe $100,000 plus interest for a useless graduate degree.

BTW, on the year abroad: not necessarily indicative of a liberal arts degree. Thunderbird requires its master's students to spend some months overseas, observing business operations and schmoozing with executives. RM spent his time in Dubai and then stayed a couple weeks in Germany on the way home.