It’s the holiday season again, which means it’s that time of year when universities try to raise more money from their alumni. Every year around this time, I start getting a call every day from an unknown number. At first, I ignore it, thinking it’s a wrong number. But I eventually realize that it’s someone calling from one of the universities I’ve attended and that they are not going to stop until they talk to an actual person.
It’s rare to hear stories about college students taking out private student loans from a lender like Sallie Mae and then beating them in court after being hounded and sued for money after defaulting on the loans. I was able to lock-in low interest rates on the private student loans I took out, but Stefanie Gray wasn’t able to get a cosigner on her loans (both her parents passed away when she was younger) and was given “credit card-like interest rates.” That was the beginning of Gray’s troubles, but this story has a happy ending.
Student loan debt is exploding. It has grown so much and so fast that it not only crushes millions of young people, but it also has started to weigh down our entire economy. Total nationwide student debt now stands at $1.2 trillion, more than the total credit card debt owed by everyone in America.
Former Indiana Gov. Mitch Daniels is now the president at Purdue University, and rather than raise tuition to make up for state cuts on college funding and rising administrative costs, he’s frozen tuition for the first time in 36 years and looking for ways to save (it should be noted that as governor, Daniels cut millions in state higher education funding, so he knows that to keep tuition from rising, he’ll have to find savings from the inside). Daniels has started by cutting the cost of student food by 10 percent and consolidating administrative jobs, but according to the Wall Street Journal, Daniels is also considering what students actually get out of college and encouraging departments to devise a program where students can graduate within three years, instead of four.
President Barack Obama joined David Karp, the founder of Tumblr, for a live chat about student debt Tuesday. One-third of Americans who applied for an educational loan this year also have a Tumblr account, said Karp, who fielded questions about educational costs submitted by Tumblr users. Here’s what POTUS had to say to today’s students.
My student debt was manageable, unlike yours.
Obama said that when he graduated with an undergraduate degree he was able to pay off his student loan debt in a year with a job that wasn’t particularly high paying. But today student loan balances average about $30,000.
Following up on Josh’s post, “We Need a New Kind of Financial Advice,” I’d like to posit the following, to be taught in all schools and financial literacy courses immediately:
For most of us, debt management is part of being an adult.
Right now, the standard financial advice is get out of debt immediately because debt is bad. Or, the more nuanced version: because the longer it takes to pay off your debts, the more you have to pay in interest.