To me, this is the flip side of the "predatory lending" coin: People who did it to themselves. I'm not even sure what the point of the article is supposed to be, if not a warning against financial irresponsibility.
This person made mistakes. Yeah, we all do that, and some people's have worse consequences than others, but we're all pretty much stuck with them. In this case, someone went to law school, made some very contradictory life decisions (having kids -- and failing to prevent having more -- kind of takes away whatever victim angle might have been there), realized they were doing very poorly but kept going anyway, and then... for years and years... did not pursue a career that could possibly have any chance of addressing the debt before the rates ballooned.
So we end up with someone who screwed up, screwed up some more, and then decided she'd screwed up so much that she's going to screw up again, by just not even trying to address the negative results of the previous screwups.
Not very responsible, in my opinion, and certainly not a good lesson to pass on to your kids (along with your debt, because guess where that's going when you die, since you've decided not to pay it off?).
I guess I'm still just not sure what the article is going for.
> Not very responsible, in my opinion, and certainly not a good lesson to pass on to your kids (along with your debt, because guess where that's going when you die, since you've decided not to pay it off?).
What? Loans don't pass to kids at death, that's absurd. They stay with the estate. If the estate doesn't have enough funds to cover the debt, tough shit for the lender. Though there are lenders who try to con kids into taking over their parents debt obligations. There is a special place in hell for them.
Public loans are discharged upon death, so there's that. Private loans are not though, and there can still be tax consequences for public loans.
I think the most important theme to this article, aside from the individual story of debt and irresponsibility, is that this looks an awful lot like the way the housing bubble came about. Cheap debt that the borrowers are unable to afford long term. The difference here is that student debt cannot be discharged in bankruptcy, so it seems there would be more people defaulting.
As a side note, the price tag of a degree should not be so high that a career with that degree cannot pay back the debt. This story is unique in that the debt is much older and ballooned due to interest accrual, but there have been a lot of recent graduates with high debt right out the gate with degrees that are much less employable than they used to be.
She had a 6 figure job, but quit because she was miserable. Not to sound Callous...but she should have kept that job and made paying down those loans the first priority.
> She graduated in 1994 with more than $100,000 of debt. Within three years, she had one daughter, a surprise set of twins, and was earning less than $50,000 per year.
3 kids while earning < $50k and trying to pay off > $100k in debt? If that's not the embodiment of America's dire lack of financial and family planning skills, then I don't know what is.
> "I’ve stressed to my daughter the importance of not borrowing any money."
Maybe she should just teach them to make responsible decisions instead? Borrowing money can be the right thing to do, but you need to carefully measure the costs and benefits.
Also, it would help not to have 3 kids when you're up to your ears in debt and only earning enough money to support yourself.
I read this as: as much as possible, poor, unfortunate, or unlucky decisions you made in your early 20s should follow you around for the rest of your life (60+ yrs).
By extension, having children is a privilege only for either those who were lucky enough to be born into wealth (i.e. no or minimal debt) or those who were lucky enough to make the correct decisions early in life.
However, moral duty is relevant when it comes to how society should think about debt. Everyone has things they would like to do if they had more money. Society should not be arranged to give people a free pass just because they want to do something that requires money.
> However, moral duty is relevant when it comes to how society should think about debt.
A debt is a contractual obligation and should be treated as such. One should not moralize contractual obligations.
E.g. During the housing crisis, there was a lot of moralizing about homeowners walking away from their underwater mortgages. Moralizing about debt in that way is bullshit. When lenders make a loan secured by collateral, they take the risk of the value of that collateral dropping. There is absolutely nothing immoral about forcing a lender to eat a risk it knowingly on.
Similarly, a corporation would not hesitate for a second, on moral grounds, to restructure its debts through bankruptcy, and neither should individuals. No moralizing needs to enter the equation. There is a penalty for declaring bankruptcy and failing to pay your debts, and that is future lenders being wary of lending you money. There is no need to add a moral dimension to the issue.
What I meant was that when designing rules for bankruptcy etc., but also for how education is funded and other things, society has high level goals which are guided by morality.
My point was that when society considers what it's goals are, it should never be a goal that a person should be able to do things that "give their life meaning" when they can't afford them, because ultimately it is a person's own responsibility how they manage their money.
So my post was aimed at people who thought "isn't it horrible that this woman can't do what she wants in life simply because she can't afford it"
You're begging the question. Spilling oil into the oceans inherently hurts people and the environment in an uncompensated way. Bankruptcy, meanwhile, is just part of the rules of the game, just as much as enforceable debt obligations are part of the rules of the game. Everyone knows, a priori that repayment obligations can be enforced by recourse to the courts, and everyone also knows, a priori, that those obligations can be discharged by those same courts (what the federal court giveth it can taketh away). Because bankruptcy is part of the rules of the game, it's priced into interest rates. When a bank loans you money, it expects you to default with some probability and charges you a premium for that risk. There is nothing immoral about forcing them to eat the consequence if the risk you compensated them for.
It's not a matter of ignoring morality. It's a matter of not ascribing a moral dimension to something that doesn't inherently have one.
But by your own words, this woman's bankruptcy does hurt other people... the people looking to get a loan later. They are now paying the even higher interest rate due to her bankruptcy being priced in. The more people that default, the higher the probability that the next person will default and the higher the premium the bank charges for that risk.
The rates for subsequent borrowers will only go up if her bankruptcy was unexpected. That is to say, if the bank charged her interest assuming 10 of 100 loans would default, and she is one of those 10, then her bankruptcy does not change the interest rate the bank charges. On the other hand, if the default rate is higher than the bank expected, whose fault is that?
They can only do so much to predict the future based on the past. When they fund loans today based on today's default rate they have no way to know what crisis hits in 3 years to cause a spike in defaulted loans. The system must correct itself with enough padding to cover the smaller fluctuations.
If people thought this way on a large scale interest rates would probably be moderately higher than they are today. It's not clear to me if that would be an improvement on the status quo.
> Society should not be arranged to give people a free pass just because they want to do something that requires money.
Why not?
I mean, if it works for that society and it's democratically passed, why shouldn't a society do whatever it wants?
Use of the word 'should' makes it sound like there's a moral imperative for us to not help each other. I don't think that's the case, and I think there's a good argument that in future we'll need to consider different types of society that deal with abundance rather than scarcity; for example, with universal living wages.
What I meant was that the amount of wealth redistribution would be a function of your income, not the fact that you really need more money to do a particular thing.
So if I decide it would be really life assuming to quit my job and become an artist, society doesn't have more duty to help me do this than they do to help anyone else on a particular income.
Hey... give your life all the meaning you want... just don't come crying when people start coming around looking to collect all the debt you rack up while doing it.
She could have given as much meaning to her life as she wanted without racking up > 100K in debt. All this does is encourage people to not take responsibility of their own voluntary actions. (And no I am not referring to the children).
I call her 50% responsible. The other half is the lender (gov't-backed entity) squeezing her at relatively high interest. They shouldn't have got so greedy. Now they'll get no more out of her, and of course taxpayers eat the loss.
Interest rates were high back then. 8% is right on par with average student loan and mortgage loan interest rates of the late 90's. So she was not really getting squeezed. She was agreeing to what most people taking a loan were agreeing to at that time.
Contraceptives sometimes fail. Sometimes you make a really bad judgement call. Sometimes the guy might be an asshole intentionally break/remove the condom. Sometimes bad things happen.
Not everybody is comfortable with using abortions to deal with unplanned pregnancies even if it is the financially expedient thing to do.
Twins are much more common among people using fertility drugs than the majority of the population; so if you are on those drugs, you might expect them.
P.S. not trying to be snarky, just thought it was an interesting fact
This story is mostly about TERRIBLE money management, not the cost of education. Her parents paid for her undergrad in full and she got a full scholarship to law school. So really, none of this money went directly to education.
Apparently she couldn't work and focus on school at the same time, so she started taking out loans to cover living expenses. She took out $26k in federal loans each year (starting in 1994) to cover these expenses. Factoring in inflation, that would be like taking out a loan for nearly $41k/year in 2013 dollars. I think it's a hard argument to say that was even close to reasonable.
The article doesn't say how long she was in school, but if I'm doing the math right, it took her at least three years (isn't that a long time for a full time law student with no other job?).
Then, after school while she's studying for the BAR, she takes out another $20k in private loans to cover living expenses ($31k in 2013 dollars).
Her father, a doctor, paid for a year of her undergraduate studies, leaving her free to dodge student loans for a while.
Not full, just one year.
"My intention was to go back to work after my first year of law school," she said. "[But] I did so poorly that I didn't think I could [keep a job at the same time]. So that’s when I started borrowing money."
I seriously doubt she had a 3 year scholarship to law school, especially after doing poorly the first year.
Also, she graduated in 1994, so either that year, or 1993 was the last year she took out student loans.
I have seen a lot of these articles on student debt, and they use the most bizarrely unsympathetic subjects. The meat of this article is not that student loans are bad, but rather that you shouldn't go to law school (or any graduate program, in my opinion), without first deciding what you want to do and your priorities in life. It's way too common to see people watch a lot of Law & Order and go straight through from college (my wife calls them "K-JD's") and then realize that $200k of debt is a lot and they really don't like working 12-14 hours a day at the beck and call of clients. Your first 80 hour work week sleeping with your Blackberry under your pillow is a shock, and you should really get it out of the way and decide if you're okay with it before you're $200k in the hole.
She HAS a degree.
She HAD a 6 figure job that she quit because it was "too hard"
She still HAS debt.
Me? That's right. Injured, under Voc rehab. I'm going to a 2 bit state school (drafting, cad). Right now, I can't afford the GAS to get to and from school. Voc rehab (state agency) will pay for it, only after a 6 week wait. And I don't have the money.
What I'd need is a few hundred to get to and fro school. Food would he nice, but soup kitchens provide that. I can sleep in my car to reduce trips.
It's not coming, because the business media intentionally uses articles like this in order to pit the members of struggling underclass against each other (and it doesn't matter what your job title is, if you have >$100,000 in non-dischargeable debt you are a serf).
If she had a full tuition scholarship how did it cost $26k a year to live in the '90s? I started college in 2005 and could get by spending $11k to $15k a year for rent, food, books, and such. It ought to have cost even less in the '90s... (Of course I did without a car for nearly 4 years and lived in cheap apartments and such, but that seems pretty normal. And I'm pretty sure my cost of living wasn't even as frugal as some.)
Son of a bitch that is a lot of debt. It stresses me out just reading about it. I guess few people do the math correctly when they go get a degree.
Can anyone here who opted to take a student loan for a technical degree speak to whether it is daunting to them or they are comfortable with the trade?
My student loans weren't quite $100k, but I was single-minded about paying them off. I got a (decent, but not spectacular pay) software job right out of school, and managed to get back to zero debt in about five years.
I'd say it worked out well for me, but my situation is very different from that of the woman in the article. First of all, I graduated in 2005. Interest rates were much lower, and dollars worth a little less, than in 1994. I also didn't have children, or any intention of having them in the near future -- children are very expensive. Finally, I did have to live frugally for that period. For example, I carried groceries about 3/4 mile so that I wouldn't need a car. It wasn't poverty by any means, but I skipped many things my peers considered "essential".
For that reason I'd say, while it worked out for me, it is certainly not for everyone.
For realistic people, it's not that big of a deal and speaks more to how people value money and things. However, I'll admit that I wish, as a 22 year-old kid, I was more knowledgeable about all those loan papers I was signing at the time.
I'm a doctor who had about $160,000 in student loan debt by the time I finished residency (during which I paid $1,000/month on a $45,000/year salary and lived like a student). After residency, my wife and I started throwing about $4-5k/month at it. Yes, that means I didn't go out and buy a brand new S55 AMG fresh out of residency, but I didn't care. I know plenty of people who will lose more on mortgages when their house doesn't appreciate like they thought it would. Or when (not if) the market crashes again.
It doesn't bother me one bit that many people on here get to ride the tech money train that I don't have a ticket for. Enjoy it, homies! But never forget (but don't stress about) the fact that the party music can stop at any time.
Everyone should enjoy what they've got and be reasonable about expenses. There's already enough to be worried about.
When I was in medical school, I taught myself some Python and C++ to help automate some of the data collection and analysis for a cancer research project I was doing. That project was attached to a drug that I now have a minority financial interest in. Been interested in technology since I was a kid. This weekend I was toying with the Keccak hash function code just for fun, even though it has absolutely no relationship to anything useful I could do programatically. The simple pleasures...
I have a financial relationship with Epic Systems, but that's more of a nepotistic thing than it is something I earned. As far as investing in new products, I don't really have an interest at this point. Things are stable and I like it that way.
It was the worst thing I ever did. I'm not as bad off as this women but I have around 80-90k in debt for school loans and whats worst is one of them is a private loan so it has some ungodly high interest rate compare to my others.
The reason your federal loans don't have an ungodly interest rate right now is that as part of the economic stimulus student loan interest rates were lowered. The temporary extensions have kept it down since then, but they could jump back up at almost any moment.
My wife and I each came out of our undergrad education with around 50k in college loans. But, we majored in Computer Science and both paid them off within the first two years of working and are now doing quite well <knocking on wood>. So we're quite comfortable with the trade.
That said, you shouldn't need to take those kinds of loans anymore. We went to a top-10 school for CS back when you still had to get loans for them. These days, there are nominal costs, but all of the top-tier schools I know of cover any difference between you/your family's ability to pay and the tuition. I would personally be somewhat skeptical of the lifetime earning potential you are getting from any institution whose alumni have not given so much money that they can easily afford to cover any gap you have in your tuition payments.
Yes, but it's still better than when I went to school. Back then, they took 100% of your parents' savings and all available income, too, but also saddled you with debt while doing it.
I'm firmly of the belief that for the top-tier schools they'd do better just having no tuition and making quarterly reminders of the value of their education, counting on getting it on the flipside from alumni donors down the road.
> I'm firmly of the belief that for the top-tier schools they'd do better just having no tuition and making quarterly reminders of the value of their education, counting on getting it on the flipside from alumni donors down the road.
At least when I went to school 20+ years ago, the very top-tier private schools were very close to that, having large endowments and using them for both merit-based and need-based financial aid in grant form, so that most students paid substantially less than the nominal tuition, and quite a lot of students paid very little to no tuition (and often were subsidized for books and housing, too), such that for most students they were less expensive than nominally cheaper less-elite schools.
I graduated 5 years ago with a BS/CECS and a MS/CS from USC. It was the best decision I've made.
I finished my program with $60,000 in debt. $40k for undegrad, and and another $20k for graduate. As bad as that sounds, I had a pretty good financial aid package; the estimated cost of attendance was $60k per year, and most of it was paid for through a mix of work study, scholarships, and a very generous need-based grant from the university [1].
I've made enough since I've graduated to repay my debts a few times over, have a great job, learned valuable leadership skills, participated in a couple research projects, and learned things I never would have known how to even approach had I not gone.
--
[1]: Good schools will give need-based grants if your financial aid package doesn't cover the estimated cost of attendance (minus your EFC, as calculated by the FAFSA). They'll ask you to take out Stafford loans, but those are capped at about $12k/year for undergraduate study.
That said, my advice is to stay far away from any school that asks you take out private (non-federal) loans. Those are uncapped, and will easily bury you more debt than you can handle.
I took on 6 figure debt to go to school. I'm happily employed and grateful for the life I have.
The way I see it: every option available to me coming out of high school had risk. Taking on debt to go to college is a risk. Not going to college is a risk. For some, these risks are low, due to a fortunate upbringing with financially stable parents. That wasn't the case for me — but I can appreciate having the choice at all, which many people don't.
I achieved the goals that were important to me given the risk I took: to get a job doing something that challenges me, makes me happy, and allows me to live comfortably. The debt is the cost I chose to pay in order to achieve this goal — one of many I could have taken, but there was always going to be a cost.
The article meanders a bit but I think the story is a pretty common one for those of us in a lot of debt: it's a long term partnership. The "amount of debt you're in" is abstract and barely fathomable. It manifests monthly as a force that pushes against you and your bank account, and how you choose to respond to that reflects your priorities at that moment.
I have no idea where my situation falls in the "normal" range but here it is. I graduated from DeVry in early 1995 with a BS-EET. I had been given a 1/2 tuition scholarship from DeVry and took out loans for the remainder. I worked to support myself and used loans only for school. I came out of school owing something like only $18K. I say "only" now because almost 20 years later that doesn't feel like a lot of money. But fresh out of school, it sure felt like a lot... even making more money than I had ever seen in life to that point. But I had roommates. I opted to not buy a new car... driving my beater truck from school. I didn't get married and have kids. I actually made paying off my student loans one of my higher priorities and ended up doing so in less than 5 years [so not my top priority :)] Daunting? not really. It was very manageable. But I think times have changed... so my tale probably isn't as relevant today.
I started at a community college (and wish I had transferred in the full 60 hours). I went to a private university with 1/4th paid tuition. The other half (~12.5k/yr) was in my pockets. I stayed for 2.5 years. I achieved 100 hours of my bioinformatics/data science degree. I dropped out and went full-time at one of my internships with 40k in debt. I can comfortably pay back the $550/mo (over 10 years) to cover the loans. In fact, 80% will be paid off in the first 2 years if I am careful.
To add, a lot of community colleges have agreements with local high schools to waive or reduce tuition for high school students taking classes before they graduate. This is a pretty good route if you are advising any young folks.
I transfered 25 credits in when I went to college, so it was an easy way to get rid of classes that would lecture bowl type stuff in a much smaller / interactive setting.
I was a high school dropout with no job, car or money. I decided to go to college. I qualified for need-based grants, but I did have to take out some loans to bridge the gap. It's less than 20k. I went to a cheap state school, nowhere in the top 100 list for CS.
All things considered, I am happy with my decisions. My loan payments aren't that bad. Rent and car-related expenses are worse. I do live check-to-check, but I could probably get a much higher paying job if I looked.
I did... less than half the amount described in this story though. The bulk of it when towards one of those MS degrees another front page article talks about.
I have to say I have no regrets. The job opportunities that were available to me with my BS were depressing and (relatively) low paying. Even with my aggressive loan payments I'm still taking home more than I would have without the investment and the lower salary.
Daunting. I made a mistake, and am literally paying for it. It's not that I feel the degree itself was not worth it, but I chose my path poorly. I could have just as well gone to a public school and received an equal or better education than a private one. That rude awakening did set a more intense course of determination for the rest of my life however.
This is a pretty fluffy article. It says she borrowed $26k/year during law school, even though she was on a scholarship with tuition paid, and took out another $20k in private loans.
Hard to judge anything just based on this article, but I'd have to say that if you have a full tuition scholarship and still need to take on 100k in debt you might want to rethink it. Also she had 3 children within 3 years of graduating, which would make it impossible to pay off anything unless you get a much higher paid job.
A friend of mine and his wife took out something in the neighborhood of 100k/each, so they have(or had, been paying a bit now) 200k of student loan debt recently. I think it was a bit of a bad investment, since I think they could have gone to cheaper schools, however they stayed in NYC and make enough for this.
Short story: If you want to take on a big student debt, paying it off is going to require you to go where the high paying jobs are. If you want to raise a family and work for the state, don't take on the debt, your life will be easier.
If you want to raise a family and work for the state, don't take on the debt, your life will be easier.
If you have Federal Loans and hold a public service job for ten years (and make your payments of I believe 10% of your gross income), your remaining debt is forgiven. The same is true after 25 years if you aren't in public service I believe and I think Obama just railroaded a change to make that 15 years using Executive Order. This is the reason why if you are struggling with Federal Loans DO NOT consolidate them through a private lender. Their terms will suck for you if you think you will struggle to pay them off.
Wow, I wasn't aware of this at all. Luckily I don't happen to have any student loans, as I was lucky to have parents who could afford my tuition and did some part time work. Of course, I went to a state school and my maximum tuition cost for a semester was I think $1800 at the time.
I'm not sure what sort of choice she has, besides not working again. You can't clear student loan debt through bankruptcy, so unless she decides to not work again, I'm not sure what her options are to never pay off the debt. Maybe this is a negotiation tactic with the debtors to pay a fraction of the loan instead?
She could have stayed at the lucrative Manhattan law firm where she was making enough to cover her loan obligations. I get that it's rough on the kids, but that was a decision she made, and tons of other people make that situation work.
I thought this article was going to be somewhat insightful as to another option for me, as, like many others, I have quite a bit of student loans. Including interest, I owe about $250k (BS and MS). I don't regret going to the school I went to - the experience and what I went through there was life changing for me; however, it does put a severe stranglehold on what I am actually able to do in life right now. I am basically forced to work for others at a decent salary (which I am certainly very fortunate and thankful I'm in the software engineering field) instead of being able to completely set off on my own.
I'll also add that I do understand what you're saying. I have been self employed for 16 years and my wife worked as well so there was somewhat of a cushion. Back in 2008, though, my first son was born 3 months premature and I had this "oh shit" moment where I thought, "ok, wife isn't working, I have a sick baby, we have a mortgage and two car payments, there is no way this is going to end well". I stepped up my hustle big time and five years later we have two kids, very little debt and things are fine. You really just have to take look at the glass as half full. As a software engineer, you're in a sellers market. There are SO many companies out there looking for people like you, you just don't realize it yet.
Either way, best of luck. If you do want to strike out on your own, please don't wait until you're "comfortable" because it will be too late.
I don't follow... how does having student loans put a stranglehold on your ability to set off on your own? Saying you're "forced" to work for others seems a little dramatic. Self employment isn't about working in your PJs as much as it is about being on the hustle every day (http://www.youtube.com/watch?v=5betFZRICVg). There will always be a million and one reasons why working for yourself is harder than having a job, if it's not student loans it will be something else (age, family, etc). You have to look past that.
I'm sure we can all pick this apart and talk about all the bad decisions she's made. The fact that she'd allow an article to be written about her regarding this just shows that she's certainly not the sharpest tool in the shed. The only thing I would ask is if she's not going to pay for her education, go ahead and take down that law degree that your private practice is established on and find some other kind of work. I know it sounds ridiculous, but so does her whole story. Not going to pay for it? Don't use it. You can't have it both ways.
If you "give up," your lenders will eventually garnish your wages anyway. Better to pay what you owe voluntarily than have the choice of how much and how long to be taken away from you.
One of the great advantages of third world countries - good education is cheap. A student at a top rated engineering school (iit/nit) in India pays less than ~$2k/year in tution, and about ~$200/month in other expenses. Sure, even this is not affordable to everyone without loans, but the salaries these people draw make the ROI tremendous. No wonder these schools are so hard to get into.
Where exactly is the guy who fathered these three children? Is he at least paying child support or am I missing a chunk of this story? It seems like with that money she would have been able to get the loans paid with her own money.
The article sounds like bad career planning given the missing or unwanted partner.
This person made mistakes. Yeah, we all do that, and some people's have worse consequences than others, but we're all pretty much stuck with them. In this case, someone went to law school, made some very contradictory life decisions (having kids -- and failing to prevent having more -- kind of takes away whatever victim angle might have been there), realized they were doing very poorly but kept going anyway, and then... for years and years... did not pursue a career that could possibly have any chance of addressing the debt before the rates ballooned.
So we end up with someone who screwed up, screwed up some more, and then decided she'd screwed up so much that she's going to screw up again, by just not even trying to address the negative results of the previous screwups.
Not very responsible, in my opinion, and certainly not a good lesson to pass on to your kids (along with your debt, because guess where that's going when you die, since you've decided not to pay it off?).
I guess I'm still just not sure what the article is going for.