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Giving Up Paying Off $186,000 Student Loan Debt

businessinsider.com

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Re: Giving Up Paying Off $186,000 Student Loan Debt

#11

Post by elmuchoprez »

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).

She screwed herself, plain and simple.

Re: Giving Up Paying Off $186,000 Student Loan Debt

#12

Post by jack-r-abbit »

gangst wrote: post #2

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?

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.

Re: Giving Up Paying Off $186,000 Student Loan Debt

#13

Post by grecy »

steven2012 wrote: post #4

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?

I also would love to know the long term plan here.

Re: Giving Up Paying Off $186,000 Student Loan Debt

#14

Post by sliverstorm »

steven2012 wrote: post #4

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?

You can't clear student loan debt through bankruptcy

Not entirely true.

I'm not sure what her options are to never pay off the debt.

She can always just stop paying, and try to call the lender's bluff and force them to go through court to garnish her wages.

Re: Giving Up Paying Off $186,000 Student Loan Debt

#15

Post by pragone »

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.

Re: Giving Up Paying Off $186,000 Student Loan Debt

#16

Post by elmuchoprez »

steven2012 wrote: post #4

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?

"I'm not sure what sort of choice she has..."

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.

Re: Giving Up Paying Off $186,000 Student Loan Debt

#17

Post by Glyptodon »

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.)

Re: Giving Up Paying Off $186,000 Student Loan Debt

#18

Post by modarts »

Irregardless wrote: post #9

> 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 $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 jus…

Exactly; how much of a "surprise" could the kids really have been?

Re: Giving Up Paying Off $186,000 Student Loan Debt

#19

Post by dlf »

obviouslygreen wrote: post #5

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 c…

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.

Re: Giving Up Paying Off $186,000 Student Loan Debt

#20

Post by sliverstorm »

modarts wrote: post #18
Irregardless wrote: post #9

> 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 $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 jus…

Exactly; how much of a "surprise" could the kids really have been?

Well, twins probably would have been a surprise. That's probably what the article was referring to; who expects twins?
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