The unbearable heaviness of student debt.

Maybe you read the article about the doctor with $555,000 of student loan debt. In addition to that horrific sum (which started out as $250k in 2003) were a few other scary numbers:

  • A laid-off factory worker whose $300 unemployment check is garnished down to $180 because of the PLUS student loan she took out for her son.
  • A woman who after 14 years of deferment and forbearance (and bankruptcy) saw her Sallie Mae loan leap from $28,000 to more than $90,000. Her monthly payment was once $230; now it’s $816.
  • An estimated $730 billion of outstanding federal and private student-loan debt exists, and just 40% is being repaid. The rest is in default, deferment or forbearance.

Gargantuan loans taken out with no clear idea of how they’ll be repaid. Sound familiar?

Actually, there’s a crucial difference between subprime mortgages and student loans: You can’t return your diploma to the school and walk away from college debt. In fact, such debt can’t even be discharged in a bankruptcy. Student loans stay with you until you pay them back.

 

Some of the people who find themselves in trouble have made costly mistakes, such as choosing a pricey faraway university over cheaper local options. But such decisions aren’t made in a vacuum. They’re made because the students grew up in a society that encourages us to go after the top-drawer stuff — homes, cars, gadgets, education — whether or not we can actually afford it.

Buy now, pay for decades?

Or whether we actually need it. The old belief was that college loans were always “good debt,” always worth the pain because a degree qualified you for higher-paying jobs. But that’s not as true as it once was, according to an article called “Is college worth the money?

“Bottom line: College, particularly an expensive private college, is a high-risk investment which, for many, won’t pay,” personal-finance columnist Scott Burns writes.

What I’ve heard, and also read on MSN Money message boards, is that high school students are urged to apply to the “best” schools. Sure, you’ll have to take out loans, they’re told, but everybody does that.

More and more, that means private loans. Tuition has risen fivefold since the early 1980s and federal student loans can’t keep pace. That’s why private loans now account for 22% of all college financing, compared with only 5% in 1997.

These loans are often marketed directly to teens, with no advice or oversight from the schools they select. Yes, I know that you’re technically an adult when you graduate high school. But for heaven’s sake, picture yourself at age 18. If you were lucky — and that’s a big if — your parents had tried to instill an idea of the true cost of any loan. But that doesn’t mean you really understood.

I’d be willing to bet that a majority of 18-year-olds are so naïve, and so dazzled by the prospect of Harvard or Stanford or Vassar, that they simply sign on the dotted line. After all, a diploma from one of the “best” schools automatically means a huge salary upon graduation. They’ll pay it back then.

Besides, some parents also buy into this hype. Maybe they truly want what’s best for their children and they think that a “name” school is always preferable. Or maybe they like the fact that Junior is going to Princeton. Worst-case scenario: These parents take out loans to help pay their kids’ tuition, neglecting their own financial well-being.

Lives put on hold

I believe that American high-schoolers are being sold a bill of goods — Top schools mean top dollars later on! – whose payments are impossible to make. Liz Pulliam Weston, a columnist for MSN Money, heard from a mom whose son graduated $75,000 in debt. Now he’s a teacher making $24,000 a year. His loan payments are $1,400 a month.

And what about the ones who don’t luck into decent jobs? They do temp work or pull coffee for $8 an hour. They either share a place with as many roommates as zoning allows, or land back with Mom and Dad.

How will this generation manage to buy cars or homes? Or have families? Or fund retirement?

Teach your children well

Just as with the subprime loan mess, it’s tempting to dismiss drowning-in-debt students as a bunch of nitwits. They knew the cost going in. Why in the world would they sign up for loans they might not be able to afford?

Because that’s the American way: Buy now, and never mind the “pay later” part. Just buy. If you want it, you should have it.

To all of you parents of teenagers: I am begging you to read Liz Pulliam Weston’s column, “Are college loans a life sentence?” Discuss it with your kids. If they’re still bent on “dream” schools, be very clear about what you can and cannot contribute. Help them decide whether four years of prestige is worth a decade or more of grueling monthly payments.

And hey, all you high-school seniors: Itching to get off to college? Can’t wait to get out of the house? Imagine coming back to your childhood bedroom at age 22. That room might seem a little suffocating. Or possibly that’s just how a hundred grand worth of debt feels to someone who hasn’t yet earned a dime.

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