Students borrow for living costs

“Some Americans caught in the weak job market are lining up for federal student aid, not for education that boosts their employment prospects but for the chance to take out low-cost loans,” reports Josh Mitchell of the Wall Street Journal. Some don’t care if they earn a degree, writes Mitchell.  They use the loans to pay living costs or to avoid paying back previous student loans.

Take Ray Selent, a 30-year-old former retail clerk in Fort Lauderdale, Fla. He was unemployed in 2012 when he enrolled as a part-time student at Broward County’s community college. That allowed him to borrow thousands of dollars to pay rent to his mother, cover his cellphone bill and catch the occasional movie.

“The only way I feel I can survive financially is by going back to school and putting myself in more student debt,” says Mr. Selent, who has since added $8,000 in student debt from living expenses. Returning to school also gave Mr. Selent a reprieve on the $400 a month he owed from previous student debt because the federal government doesn’t require payments while borrowers are in school.

Selent earned a bachelor’s degree in communications from a for-profit college, but it didn’t help him find a good job. Now he’s taking theater classes. He wants to be an actor. The odds he’ll earn enough to pay back his loans? Not high.

Tommie Matherne, a 32-year-old married father of five in Billings, Mont., has been going to school since 2010, when he realized the $10 an hour he was making as a mall security guard wasn’t covering his family’s expenses. He uses roughly $2,000 in student loans each year to stock his fridge and catch up on bills. His wife is a stay-at-home mother who also gets loans to take online courses.

“We’ve been taking whatever we can for student loans every year, taking whatever we have left over and using it to stock up the freezer just so we have a couple extra months where we don’t have to worry about food,” says Mr. Matherne, who owes $51,600 in federal loans.

If the Mathernes never raise their earnings, which seems like a good bet, they may be able to use Pay As You Earn to avoid repaying their loans.

Students are allowed to use a portion of federal loans to cover living expenses. In theory, that lets them work fewer hours, concentrate on their studies and complete a degree more quickly. But colleges can’t deny federal loans to students who appear to be overborrowing.

Dorie Nolt, spokeswoman for Education Secretary Arne Duncan, says the Obama administration is “exploring alternatives to see how we might ensure that students don’t borrow more than necessary.”


POSTED BY Joanne Jacobs ON March 11, 2014

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[…] Americans caught in the weak job market are lining up for federal student aid, not for education that boosts their employment prospects but for the chance t… reports Josh Mitchell of the Wall Street Journal. They use the loans to pay living costs or to […]

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