Easy money, hard to repay

College borrowers with $75,000-plus in debt say they didn’t understand what they were doing, according to a new report, Lost Without a Map: A Survey about Students’ Experiences Navigating the Financial Aid Process.

“High-debt borrowers often do not have a clear idea about the consequences of the loans they take out, with many experiencing misunderstanding or surprise regarding repayment terms and interest rates,” says the report, by the firm NERA Economic Consulting and the youth advocacy group Young Invincibles.

Only 55 percent said they’d received financial counseling before taking out federal loans, even though colleges are require to provide counseling.

When financial aid falls short, colleges encourage parents to take out federal Parent Plus loans, reports ProPublica in The Parent Loan Trap.

As the cost of college has spiraled ever upward and median family income has fallen, the loan program, called Parent Plus, has become indispensable for increasing numbers of parents desperate to make their children’s college plans work. Last year the government disbursed $10.6 billion in Parent Plus loans to just under a million families. Even adjusted for inflation, that’s $6.3 billion more than it disbursed back in 2000, and to nearly twice as many borrowers.

. . . The loans are both remarkably easy to get and nearly impossible to get out from under for families who’ve overreached. When a parent applies for a Plus loan, the government checks credit history, but it doesn’t assess whether the borrower has the ability to repay the loan. It doesn’t check income. It doesn’t check employment status. It doesn’t check how much other debt — like a mortgage, or other student-loan debt — the borrower is already on the hook for.

If the parent can’t pay the loan, the government can seize tax refunds and garnish wages or Social Security checks. With a few exceptions, Parent Plus loans aren’t eligible for deferment or income-based repayment plans open to student borrowers.

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Cindy Walsh

As we know, the cost for college tuition grew over this last decade as universities were pushed to become innovation centers with great jumps in administrative costs. That is the tuition increase along with drops in state contributions as corporations pay less tax.

What current students and families have as an experience is one where student loans were manageable….I graduated with $10,000 or so in debt. People don’t understand that their government is working in the interest of corporations now and not the public (corporate democrats) and so they simply assume the change in finance will be augmented by future salary. Why would a school……existing for the benefit of the public take advantage of people after all? That is what is missing. It’s like people agreeing to mortgage loans that seem too good to be true because they think the government would not let these businesses exist if they hurt people.

That is how our society used to work and we need to elect politicians who move us back to that!

Cindy Walsh

I would also like to remind people that the Bush Administration actively marketed advanced degrees from his podium as he emphasized masters degrees would be necessary to compete in future job markets. This pushed people beyond comfort zones. What Bush was doing was sending billions to banks that he had made eligible for giving private student loans. It was a scam just as the for-profit ‘career’ programs were scams.

[...] Not surprisingly, people who borrowed heavily for college now say they didn’t understand what they were getting …. [...]

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