Student Loans, Gateway Drug To Debt Slavery

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One of the most important lessons students learn in college is how to get into debt and stay there. It’s crucial to the success of the Republic. An indebted population is easier to control; needing to pay off crushing debt – a debt that if defaulted on has been stripped of many normal consumer protections and rights – graduates more willingly shuttle into cubicles, becoming the square pegs demanded by the square holes. After a few futile years of floundering idealism, their souls have been successfully jackbooted into powder and they’re ready to keep the thumb on the next generation of would-be drones so as to protect their empire of matchsticks. But how did we get here? This chunky infographic examines the origins and (d)evolution of the student loan leviathan.

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  1. Clyde Barrow says:

    Fantastic break-down on the student loan scheme. Good job!

  2. Demonpiggies says:

    “How did this happen?”

    By college students learning not to proof-read what they’ve written on… lol

    • apd09 says:

      I was going to say the same thing, it is a pretty poor time to have a typo when you are talking about kids education.

    • Supes says:

      Because there are so many other options for most of those student.

    • Applekid ┬──┬ ノ( ã‚œ-゜ノ) says:

      Thanks to exemptions to the Truth in Lending Act, it doesn’t matter what the paper they sign actually says.

      • Bohemian says:

        Um yea this. My last loan was supposed to be one loan. Somehow it was broken into 2 different loans that they refused to consolidate. So I was expected to make payments each month on both jacking my minimum payment. The entire thing is a joke when less than $5000 in outstanding student loan debt can be jacked to over $12000 and there is nothing you can do about it other than pay for it the rest of your life. I pity those who had loans for their entire 4 years in the 100k plus range.

        This whole house of cards is going to fall harder than the housing bubble. Something has to give.

    • ldub says:

      Those loan agreements are incredibly convoluted and difficult to understand. It’s not reasonable to expect an average student/parent to comprehend them. And when the professionals they’re working with are not playing fair, it’s a set up to fail for the borrower.

      I

  3. jayde_drag0n says:

    Hey how about classes that make it completely impossible to buy used books, and pass your class if you don’t? Music Appreciation online requires the purchase of a $120 book w/ cd’s inside this book is a one-time use ONLY serial number that you have to enter into the online school site, if you do not enter this number, the tests will NOT be open to you. There is ZERO possibility of using the book from the library (they carefully remove the cover page w/ the serial number), you will not be able to buy a used cheap book (that code is a ONE TIME use), and without it.. you will not pass the class.. even if you COULD have passed the tests

    • El Matarife says:

      Don’t take the class. Not everything in life is free.

      • mythago says:

        I realize the comment was off topic, but you missed the point by a couple of miles. You might want to update your GPS.

      • s73v3r says:

        Learning shouldn’t be controlled by DRM. We don’t tolerate DRM in our music, why do we tolerate it in our schools?

      • partofme says:

        Because you commit to a degree program. And then, when you take a required course for that degree program, the professor that semester decides to use one of the every-four-years ripoff books, rather than something cheap. Believe me, I love those professors who look out for our books expenses. It’s not hard to find quality books for cheap, but not everyone does it.

  4. mythago says:

    It also keeps students from doing low-paid work that helps those pesky poor people. Choosing between a public-service job that offers no hope of paying your bills, much less paying off your loans, vs. working for The Man and possibly receiving a living wage? Pretty much a no-brainer.

    • Thyme for an edit button says:

      I think Income Based Repayment and Public Service Loan Forgiveness are designed to address this problem.

      • Xay says:

        The problem is that public sector (non-federal, that is) jobs are paying so little right now that even with income sensitive repayment, you may be paying less than the interest on your loan. And the public sector forgiveness program requires 10 years of payments and continuous service for a public sector employer.

        • mythago says:

          Yup. And reduced student-loan payments based on income doesn’t mean reduced loans. It just means you pay less while the interest runs.

  5. backinpgh says:

    Great graphic. Although the numerous misspellings make them lose a bit of credibility.

    • goodpete says:

      Nice to see I wasn’t the only nerd here who noticed that. I’m guessing the author, in a bid to be more frugal in his/her scholastic endeavors, skipped the class where they explained proper apostrophe use. :-)

      That being said, I took option A. Sure, it may have been easier to call my congressperson than it was to Save, Aid, Work, Frugal, and Wait; however, I don’t think calling my congressperson would have led to my graduating from college debt-free. But maybe I was wrong?

      • s73v3r says:

        Do both. Option A will help you pay off your loans, while Option B will help bring those bastards to justice, and hopefully make it harder for future students to get fucked like that.

    • Lolotehe says:

      It was the its/it’s thing that bothered me the most.

  6. zegota says:

    Haha, wow, what useless tips. “Save? Work?” Cause no college students do that. The other tips are “Don’t go to college! Bill Gates didn’t, and he’s a billionaire!” Go ahead and try it. For the 99% of people who don’t go on to found a giant corporation, you literally can’t get a job past menial labor or serving anymore with just a high school degree.

    The fact of the matter is, student loans suck big time, but there’s really no other choice if you’ve exhausted other routes for money.

    • GenXCub says:

      “The fact of the matter is, student loans suck big time, but there’s really no other choice if you’ve exhausted other routes for money.”

      You could go to a school that you can afford. Just like we have to do with every other facet of our financial lives.

      • zegota says:

        I guess you can get an Associates Degree from a community college, but outside of a few professions like healthcare, that’s not much better than a high school diploma.

        If you’re talking about a University, which college, praytell, would be considered affordable? The state school I went to is considered one of the cheapest in the nation, and the tuition is now around $9,000 a year (not including books, fees, room/board, of course). If you work full time at a $9 an hour job (which is probably good for not having a college degree), that’s half of your pre-tax income, leaving you with about $9000 a year to actually live on. Half or so of that will go to rent.

        • Megalomania says:

          You don’t have to graduate in 4 years. I know several people who took a semester off for two years to work 40 hours a week. Also, you can quite often find jobs paying well more than 9 an hour as a college student in a hard science.

          • Framling says:

            I would expect that in the Venn diagram of “Places with Affordable Colleges” and “Places with Jobs Paying $9 an Hour or More,” the overlap is pretty slim. Affordable colleges will usually be in places where the cost of living is low. Places where the cost of living is low will usually have lower wages.

        • AnthonyC says:

          It depends on how good of a school you can get into. Many of the best schools have big enough endowments and financial aid budgets that they guarantee they’ll meet all of your need with grants, not loans. At a few top schools, even students whose parents make $200,000 a year aren’t expected to pay more than half the tuition. Very few people are actually paying $50k/year for their undergraduate education, unless a) they can afford it, or b) they chose to go to a school with bad financial aid.

          You could also move to a state with low in-state tuition for state schools, and apply the next year. Yeah, it’s a pain, but guess what? Money buys options, and if you don’t have it, your options are more limited. Being a great student opens other options, and if you’re not a great student, you’re going to have to work harder for college.

          • abby2992 says:

            Many of our best schools HAD big endowments. Those were some of the hardest hit funds in the recession. Most schools with large endowments lost upwards of 30% of their value. It’s actually the schools that don’t operate off of endowments that managed to stay afloat and maintain, if not increase, their financial aid budgets. And hire all of the great professors who got cut from the top institutions.

      • mythago says:

        Of course, the ‘affordability’ of schools is pushed up by the assumption that everybody will get student loans to pay for tuition.

      • Anonymously says:

        After you find that mythical school, can you help me find a yeti and a unicorn?

        • jamar0303 says:

          Look abroad. Mine costs about US$3750 a year. Now transferring credits back if you want to finish off in America and get an American diploma isn’t exactly a piece of cake (My options look to be either the UC system or University of Michigan if I want schools with equivalent recognition in the US) but still doable.

    • Bohemian says:

      When I see jobs for receptionists and phone CSRs that require a Bachelors there is a very big problem. The 4 year degree started becoming what a HS diploma used to be. So now even low level jobs mandate that huge level of debt just to have a job. We also lost almost all of our manufacturing sector at the same time. So yea, the current set up has made us all slaves to our debt and wage slaves to any job that pays enough so we can…. pay off that debt. This sounds like a dog chasing his tail.

  7. Hi_Hello says:

    after you graduate, why not take out a loan to pay off the student loan and the declare bankrupcy? the new loan won’t be a student loan.

    • TuxthePenguin says:

      You cannot consolidate student loans into anything other than another student loan

    • Tongsy says:

      Good luck finding a bank to give you a loan for such a high value with no collateral.

    • mac-phisto says:

      there aren’t a whole lot of people out there that will lend tens of thousands of dollars unsecured to a recent graduate with little or no work history.

      if you find one, please let me know. i’d love to try your tip on some post-graduate work…

    • tbax929 says:

      That’s a great idea, if you can get someone to loan you that much money straight out of college.

    • wrjohnston91283 says:

      Depending on how soon after you take out the 2nd loan, courts may find that you can’t discharge them – substance over form. Additionally, who’s going to lend a recent college grad enough money to cover student loans worth BK’ing over?

    • Skankingmike says:

      A better idea, would’ve been (during the housing bubble) graduate get a job, get a house and then take out an equity line of credit pay off your student loans, then just default on your house and rent for the next few years.

      Shady as hell but hey so are all the banks.

      Another thing that could be done (maybe even still)

      Get a few credit cards, and keep transferring balances around getting lower interest and no interest and small transfers. Often they will send you checks too to pay for your bills. (their words)

      Theoretically you could take those checks and pay off your student loans all while “paying” off one card with another. Most credit card companies send and increase limits all through the computer often never checking your credit history just that you paid off your current debts and they want you to spend more. (my credit line has increased while my salary has decreased over the last 5 years I got a huge increase in credit line last year when everybody was bitching about them cutting it)

      Ultimately you could transfer enough times to consolidate all your student loans to the point where no financial institution would’ve been able to track those records easily. It would’ve just been debt from one bank to another. A tad be more timely but hey you build up one hell of a credit run during the process.

      If the financial world can create Credit Default swaps I see no difference in the public sector. It’s risk reward right?

      Oh that’s right we have to be good little consumers and follow these “moral” codes of not defaulting on our obligations.. Unless you’re a corporation then see they have all the rights of individuals but none of our responsibilities.

      F that.

  8. Abu_Casey says:

    Can we avoid the nonsensical “debt slavery” rhetoric while still addressing the issue? Not to mention the fact that we certainly ought to place the burden on students who choose to get loans to get degrees that will be marketable. It’s fine if you want to study philosophy, but don’t take out loans expecting that you’ll easily get a job that will let you pay them back.

  9. ubermex says:

    I make my own student loans at home.

  10. holden190 says:

    Here’s a novel idea: pay back your loans! There’s no such thing as a free ride.

    Personal Responsibility.

    • ubermex says:

      Did you read the part where college costs are rising 4 times as fast as inflation because there’s no market force on the other side holding them down? This is not as simple as “people should be responsible”. Even responsible people can be screwed by this. You’re stuck between a life of terrible jobs and accepting a loan that you may not get a job good enough to pay.

      • DanRydell says:

        Uh… student loans being easy to get doesn’t absolve students from understanding that they’re actually spending the money they’re borrowing and will need to pay it back. The market force is the students’ willingness to pay the tuition at expensive colleges.

    • RevancheRM says:

      Wow…way to miss the point of the article.

      • DanRydell says:

        Way to miss the point of LIFE. People need to take personal responsibility for their decisions and quit blaming other people. Despite tuition inflation there are still affordable ways to get an education. The total cost of my education was $60k 7 years ago. I suppose that is a lot of money, but I make easily $30k per year MORE than I would make if I didn’t go to college.

        Some people SHOULDN’T go to college.
        Some people should go to less expensive colleges.

        • mac-phisto says:

          so, the point of life is that a teenager who makes the mistake of attending school when s/he shouldn’t have or attends a more expensive school than s/he could have should be subjected to a life of bad credit, monthly payments they can’t afford, harassing phone calls from collectors, wage garnishments, court appearances & all the other lovely stuff that comes along w/ defaulting a student loan?

          i’m all for people owning up to their decisions, but come on. the point of life isn’t to pay the consequences for a poor decision your entire life. & if you think it is, maybe you didn’t get such a great deal on your education after all.

  11. TuxthePenguin says:

    I used to say that we needed to switch to an entire private system, treat it like any normal debt and have the government step away. Credit card abuses are bad, but not as bad as a permanent debt.

    Now with the government doing all the loaning… I don’t see how to really fix it.

    I would have said that we need to change how we loan the money – someone who is majoring in “Prehistorical Icelandic Art” probably does not have the earning potential as someone who is studying Engineering or Accounting. Maybe factor in the five/ten year average salaries for graduates with those degrees, somehow. Maybe its still possible – have the IRS collect what degree (if any) the taxpayer holds, cross reference it to their career and use that data. Its possible.

    The other thing that could be done is to get away from the idea that we want “well-rounded students.” I took two years of relatively worthless classes way back when to get my degree. I’ve yet to use anything I learned in my astronomy class in my career. And while “Communication” seemed to be something I could use, half the class was wasted making me watch other people give speeches. We didn’t learn how to write or communicate better, we learned about the history of speech… waste of time.

    • partofme says:

      Most schools are already implementing a “differential tuition” scheme for engineering students. They’re getting charged more. It’s also pissing them off, because engineering colleges are usually the biggest moneymaker in a university. English departments aren’t bringing in multi-million dollar research projects. Engineering departments are. At some level, the work the students do is already subsidizing the existance of these other departments.

      As far as “well-roundedness” goes, that’s generally up to departmental requirements. If your degree program has two years worth of useless classes just to “round out your education”, then maybe your degree program should be a two-year degree. My four-year engineering program had an entire one semester of social sciences and humanities electives. Why so few? Because we had a bunch of other stuff that was really relevant that we needed to take. A lot of people took pretty easy courses for those credits, because they wanted a break, but you could still often find a way to utilize them in a way that was beneficial to your future work.

      • AnthonyC says:

        Engineering *schools* may bring in a lot more research funding, but that has little to do with tuition. It takes a lot more money to train a chemical engineering major than it does to train an English major; at most schools, the tuition from English majors and pure mathematicians is subsidizing the training of engineers and scientists.

        And for grad school, business and education schools are the real money makers.

        • partofme says:

          Except that research money does things like pay large chunks of salaries for faculty members…. and purchase equipment that is then later used in coursework. Ya know, the two reasons why engineering students are more expensive to educate.

          And yes, in grad school, business and education students actually pay money for their education, while engineering students have their education paid for. Why is this? Because engineering grad students (at least, of the PhD variety) are the ones responsible for bringing in the aforementioned multi-million dollar grants. In addition to doing all the work on the papers that give faculty members the clout to bring in such grants, they often do the actual writing of the proposals for such grants (my grad student officemate just recently wrote a large Army Research Office grant… do engineering grad STUDENTS get credit for this? No, faculty do). So yea, there’s a good reason why engineering students hate LAS students for getting all the sympathy. Especially grad students. We could make more than twice what we’re getting in grad school if we just went into industry…. because, ya know, we actually learned something useful in our education.

      • skirl hutsenreiter says:

        Not to mention, engineering students subsidize departments they have to take classes in. Money to cover service courses is how those departments cover the gap in grant money. Those engineers complaining about a mandatory writing class (that they usually desperately need) are making their TAs’ grad school possible.

        • partofme says:

          This is really a two-edged sword. Take math departments for example. The biggest complaint I heard from all variety of engineers was “the math classes are too theoretical, we don’t learn how to apply things”. I personally really disagree with that sentiment, but there are a LOT of engineering students who complain about it. I know of one engineering dept that started offering its own math classes, eventually spinning it off into an entirely separate applied math department. For writing, my undergrad dept used to require a technical writing course in the english dept. They finally dropped it, saying “we’ll require more pieces of technical writing throughout the other required departmental courses”. These types of things make a huge difference to the amount of money flowing into these LAS departments. They may hate engineers for getting paid more after college, but the last thing they want is for us to go away.

    • Al Swearengen says:

      Interesting thought. If school costs are going to be inflated, then perhaps they need to cut out the crap class requirements that have no bearing on the degree. Did I really need to take 2 philosophy classes, 2 religion classes, a public speaking class, and social science classes to get a biology degree? No. The biology degree could have been completed in two and a half years tops. If I am paying a lot of money for a degree, don’t force me to take a bunch of irrelevant and expensive electives. Its like if I want to buy a car, I shouldn’t be forced to get a higher trim package than is necessary.

  12. Megalomania says:

    The most perverse part is that this money is part of what leads to skyrocketing tuition at private colleges (and, to an extent, at state colleges, although those are subject to the outrage of the taxpayers who subsidize them to some degree and can’t get away with it as much). There’s no reason NOT to boost tuitions if you can fill all your slots, as the government will pay what the students can’t.

    • ubermex says:

      And there’s no reason for lenders to give anyone a break, since they can’t declare bankruptcy.

      With any other kind of loan, you can say “well, either my rate goes down, or I have to declare bankruptcy and you’ll probably only see a fraction of this” and they have to work with you. Without that bargaining chip, they have absolutely no reason not to just milk you forever.

      People like to talk a big talk about personal responsibility, but there are 2 parties in a loan agreement and allowing one of them to be a total douchebag is not “personal responsibility”

  13. El Soze says:

    Yay, let’s have the government help us more! They obviously know what they are doing.

    • zegota says:

      Because the privatized sector has done so well thus far!

      • Stickdude says:

        It’s not the private sector that made student loans non-dischargeable in bankruptcy.

        • Thorzdad says:

          True. The private sector just lobbied like hell for the exemption. So, of course, they have no responsibility whatsoever.

      • Traveshamockery says:

        The private sector has sprung up to take advantage of the virtually guaranteed profits from Government guaranteed loans.

    • Traveshamockery says:

      I think part of the point is that the government has created huge incentives for companies like Sallie Mae to profit from student loans with NO RISK involved.

      Risk is a critical element of capitalism. Companies profit because they undergo risk. When risk is removed (by government guarantees of loans, government bailouts, government regulations that give debt collectors almost unlimited power) then there’s no natural market force to control the behavior of corporations.

      So many student loans default because the student loan companies will loan to almost anyone! They’ll loan to almost anyone because the government has removed any risk of failure.

      TL;DR? = Government social engineering has led to high risk lending practices in the student loan market, which are bad for everybody except the company doing the lending.

  14. misterfweem says:

    Work a part-time job during school and full-time during the summer. That’s what I did to earn a bachelors degree with only $1,500 in student loan debt, which I had paid off 6 months after I got my degree.

    Work a full-time job during school. That’s what I did to earn a masters degree with $0 in student debt.

    Best way not to get stung by student loans? Don’t take any out in the first place.

    My wife’s now in the same masters program I just finished, and is re-using my textbooks. She will also finish the program debt-free, because we won’t take out any loans to pay for schooling.

    • Gort42 says:

      Yeah…I did that too…in the eighties. If you haven’t noticed, tuitions have skyrocketed and hourly pay has…not.

    • pinkbunnyslippers says:

      Just curious – in what decade did you manage this? I went to a private 4-yr, with FinAid, grants, etc., PT job all 4 years of school (3 simultaneous ones going my Senior year), was an RA, and worked FT all 4 summers, and I’ve still got about $12k of debt left 8 years after I graduated.

      Not sure where you’re getting your degrees and which PT/FT jobs you’re landing to net you enough money to completely glide your way through school, but the truth is it’s just not as easy as you make it sound.

    • Bohemian says:

      LOL. Yea right. That is not happening today no matter how hard you work and how well you pinch a penny. Our oldest is having a hard time finding any job at all. You can’t “work your way through school” when there is no work.

      What is going to happen when all these people who went back to school because the economy stinks graduate in 2-4 years if the economy isn’t better?

    • crashfrog says:

      Who has time to work a job?

      The rule of thumb is that per 1 credit-hour, you should be studying three hours outside of class per week. I’m taking 14 credit-hours this semester, a slightly-less-than average workload, and therefore the time I need to study per week is 42 hours a week. Plus the actual time I’m in class, that’s 56 hours. Every week. That’s not counting the time spent on the bus, in transit to and from class (I don’t live on campus.) And, lucky for me I don’t have any labs this semester; those are “1 credit-hour” classes that, in fact, meet for 4-5 hours every week, usually.

      I could take less credits and graduate in a much longer time, of course, but going under 12 hours means I’m no longer a “full-time” student, and therefore no longer eligible for grants and scholarships, which would just make school all the more expensive for me.

      Working your way through school made sense in the world where you could pay your tuition at a state university by emptying out a couch, or on the capital gains from your aunt’s birthday Savings Bonds. My parents continue to freak out at the notion of how expensive a college education at a state university has become, and I’m in my senior year. Tuitions are rising at four times the rate of wages. Ruminate on that notion before you tell someone to “get a job.” Would your part-time job have paid your bills if your tuition had been four times as high, and you’d had half the time to work? I doubt it.

      • partofme says:

        1) Nobody who actually belongs in college has to spend 3 hours studying for every hour in class. It’s a rule of thumb to make stupid and lazy students think that they’d do better if they could just stop playing Madden for 9 hours every day.

        2) You could take “fewer” credits. Credits are numerable. Maybe if you could write English correctly, you’d be a good enough of a student to (a) not need to spend 3 hours studying for every hour in class and (b) find the right combination of jobs and scholarships to make your way through college without insane levels of loans.

        • crashfrog says:

          Nobody who actually belongs in college has to spend 3 hours studying for every hour in class

          Yeah, that’s actually not what I said at all. Maybe you need to spend a little less time falsely claiming that I can’t write English and a little more time learning to read English.

          Just a thought. Also, the “fewer” vs. “less” thing? Strunk and White’s suggestion, not a rule of grammar.

    • mythago says:

      Setting aside the other good points that have been made, I did go to school (in the ’80s) with people who did this. Funny, but their grades weren’t quite as good as the kids whose parents paid the full load. Something about having time to sleep, I think.

    • Fletchb says:

      Well at first I worked full time and went to school full time and it was a bit much for me. The second I switched to part time, they wanted me to start repaying the loan (So regardless of what you may read, they do not always wait for you to graduate to start repayment). The other problem with the subsidized loans deals with the fact they will not give you control of the money *you* are borrowing but rather let the school control everything. What a headache! Some semesters I would pay the bill myself yet the school would refund my money and use some of my loan money without asking or even telling me they had done this. Other times, when I was expecting them to use the loan money they actually refused it and the only way I found out was due to the note from student loans letting me know. I then had to pay out of my own pocket at the last minute as the bone heads at the school FA office did not bother to tell me.
      Got tired of their meddling so I just starting paying it myself on my credit card. Sure enough Capital one who I had been using for years without a single problem decided to jack my rate from 6.99% fixed to 17.9% Variable. I have them almost paid off and will close the account when I do just out of principle. My other private lenders have not given me any problems but I will still be in debt for years. Those of you just starting out, just be sure and read all the fine print and watch the F/A people like hawks as they do not have your best interest in mind!.

  15. padarjohn says:

    Would be a lot more interesting if it didn’t butcher the English language so badly.

  16. SlayerGhede says:

    hahaha, like the typical dropout note.

  17. Dapper Dan says:

    I worked at GRC around 2000-2001 and we had everyone we talked to refinance through consolidated loans (which was some goverment education program) and we would get big bonuses.

    Every month there was a party on the 1st floor because we had the bext month ever.

  18. mac-phisto says:

    what really grinds my gears is that the bankruptcy protection is not only on the loan itself, but also on any fees or interest levied against the loan. personally, i don’t think people should be able to bankrupt student loan debt. but uncle sam also shouldn’t be protecting interest payments.

    furthermore, when i went to school, an UNSUBSIDIZED stafford loan was ~4%. FIXED. & now it’s at 2.75%. FIXED. today, they’re at 6.8%. where do they get off charging almost 7% for a loan with virtually no risk. & the private loans are even higher – 10-12% or more!

    i say keep the no default provision, but strip the interest rate down to the 91-day t-bill plus a small margin. allow private companies to seek protection under the no default provision, but ONLY if the interest rate on the loan is less than or equal to the corresponding stafford rate. & stop protecting their interest & fees. protect the principal only.

    • partofme says:

      This is actually a fantastic solution, to one part of the problem. Higher interest rates are supposed to account for increased risk. If risk = 0, then how can you justify a high rate? However, it doesn’t take care of the skyrocketing tuition problem (or the fact that somehow, universities are still going broke under the careful watch of very very highly paid executives).

      • mac-phisto says:

        well, i have an answer for that as well, but it’s sure to be met with a lot of resistance. federal aid to schools would be dispensed based on a school’s efficiency in providing education to its students. the more a school spends on educational programming (this would have a very narrow definition, btw) in relation to other expense areas (administration, construction, sports programs, etc.), the more aid they would receive.

        student aid would be dispensed based on that ratio as well. qualification would still be need-based, but aid would be available in larger amounts to students choosing to go to schools with a higher efficiency rating. this would encourage students to attend these schools, which would in turn encourage schools to become more efficient in their spending.

        i’m not sure if i’m explaining that very well, so to give an example: two students, all other things being equal, choose to attend two different schools. student A chooses to study at a school that has an “A ” efficiency rating. student B chooses to study at a school that has an “F” efficiency rating. student A would qualify for 100% of the federal loan limits whereas student B would only qualify for 60%. student B could be awarded as much as 100% of the limits if s/he chose to attend a different school with a better efficiency rating, but if his/her heart is set on “university of hookers & blow”, then s/he’ll have to pony up more money from another source.

        sorry for the book. :)

        • partofme says:

          I get what you’re saying. It keys on a critical issue: the fact that much of the increase in tuition in the past 10-20 years has been due to increased administrative costs rather than education costs. While it looks like it could be a decent mechanism, I’m not really sold on it being the best mechanism. You can always find qualifying things to spend ridiculous amounts of money on, but if you’re not finding the right combination of equipment and professors who can explain things well, you’re going to fail. It’s a similar problem to what plagues putting a measure on research efforts…. it’s simply really hard to formulate an objective measure of what knowledge is being discovered or passed on.

          • mac-phisto says:

            yeah, i can see that. perhaps the answer is to provide an affordable alternative – that was the goal behind establishing state university systems & community colleges. unfortunately, many of these have become unaffordable for the average student as well (not so much CCs, but definitely many state U systems). maybe it’s time to re-evaluate administration’s dedication to the core mission of these institutions & either rein them in or set them free from the public dole.

  19. Commenter24 says:

    As a taxpayer I fully expect the government to collect on the loans that it guarantees. If a borrower doesn’t pay SLM and the govt. has to pick up his tab I would be furious is the govt. just ate the payout and let the borrower skate away.

    • mossy says:

      I agree. If you want to be able to default on a loan the government is backing you’re saying you think the taxpayer should be on the hook. No thanks.

  20. Guppy06 says:

    “Addition” instead of “addiction,” “it’s” instead of “its,” the use of “LOL,” the implication that all college drop-outs can be as rich as Bill Gates, and the credibility given to Gates’ futurist speculation (who really hasn’t had a great track record in that department) all take away from this presentation, in my opinion.

    Besides, it’s not about the lectures, it’s about the degree and the accreditation behind it. As interesting and informative as they may be, you can’t put “I watched some random guy’s YouTube videos on this once” on your resume and expect to get anywhere.

    • magus_melchior says:

      (Speaking as a dropout…) It’s also the hard work of doing research and understanding the concepts well enough to apply them in the lab or at work. There are some things you simply cannot learn by watching a TED or Fora lecture, as high-quality the content may be.

      If it really were as simple as Gates described, all university courses would be in the seminar format, and graded Pass/No-pass based on attendance alone. As with many things Bill says, it’s simply not realistic.

  21. aen says:

    Fascinating breakdown.

    I went to a community college for two years to be able to seamlessly transfer to UVA. I knew I’d save a ton of money also. I figured I would probably have to get loans while in UVA, but it turns out that they have a program that essentially grants me my full tuition because my EFC is too low.

    I took out the max Federal subsidized loans and put those in a high-interest checking account where it won’t get touched until I graduate when I’ll pay them back in full. Is that stealing from taxpayers?

    • Puppies n Money says:

      Interest Checking accounts usually offer very small returns. If you know your graduation date you know when the loans come due… you could earn more on the money in a long-term CD.

  22. yurei avalon says:

    And my family wonders why i’m so reluctant to go to school :( I told them if they wanted to help pay, then by all means, but I’m not about to go take out tens of thousands of dollars in debt at the moment. Bad enough I had to finance a car. I mean, sure I can come up with the money for a community college degree in a few years, but then what do I do about my bachelor’s at a real school?

    • Robofish says:

      I’ve been contemplating going back to school, but currently I can’t afford it and do not want to put myself in debt to do so

  23. holden190 says:

    “Defaulting students *is* a money machine.”

    Grammar, Grammar, Grammar…..

    • Cavinicus says:

      The act of defaulting students is singular, so this could technically be correct. I’ll agree, however, that the overall piece is sorely lacking in proper grammar.

  24. zandar says:

    this info-graphic simplification does not include economic hardship deferments, which is a legit way for grads who can’t afford to pay to put it off until they can, thus avoiding default.

    • Traveshamockery says:

      All that does is slow the bleed. Sure, it might help in the short term, but the “juice” is still running – interest is accumulating.

  25. qbubbles says:

    Yeah. I’ve got a job with the federal government. Not only are they paying half my repayment bill, but if I stick around for 10 years, it’s forgiven.

    I call that a win.

  26. Beeker26 says:

    Like everything else in our world, the game is changing. The days of graduating high school and running off to a big university 3 months later are gone if you can’t outright pay for it.

    The bottom line is this: the student loan program is a giant trap. Avoid it at all costs. If that means you have to work full-time and go to school part time, then so be it. If it means you have to work 2 jobs over the summer, then so be it. If it means living at home and going to community college for 2 years, then so be it. If it means putting off college for a few years till you’ve saved up enough money, then so be it. If you can’t find a way to pay for college without student loans *then you don’t go to college until you can*. Yeah, it sucks to be without a degree and have no money, but it sucks more to have one and still have no money.

    Student loans aren’t free money. And with the cost of tuition skyrocketing while entry level jobs are non-existent or are paying 20K a year taking one is going to bite you on the ass unless you have a REALLY good plan.

    Just don’t do it.

    • Framling says:

      I would argue that, since tuition costs are rising at four times the rate of wage inflation, you should be working 4 jobs over the summer, not 2.

  27. Gort42 says:

    They forgot the part where college tuitions rise so much that it is virtually impossible for any non-rich student to pay for college, even with part time work. This is the most despicable part to me.

    In 1985, I was able to (just barely) pay most of my way through school by working around 20 hours a week. The tuition at my alma matar is now four times what it was, while pay for the sort of work I did then has gone up buy about 50%. In 1987, I graduated mostly debt free. If I were in school now, with the same parents, same jobs, going for the same degree at the same school, I’d likely graduate up to my eyeballs in debt.

  28. Loias supports harsher punishments against corporations says:

    Very appropriately, I just watched the International.

    “Control the debt…and you control everything.”

  29. iblamehistory says:

    What is there to say about Income Based Repayment as well as Public Service Loan Forgiveness?

    They don’t apply to private loans, but I’m curious as to what others have to say about the programs.

    • Thyme for an edit button says:

      I am hoping to find work in the public sector or non-profit sector.

      Last I checked, the federal government does not have a mechanism in place to track when you are making qualifying payments from qualifying employment for public service loan forgiveness. People thinking of this should keep meticulous employment and payment records.

      • iblamehistory says:

        Yeah, I’m getting my master’s in social work, so finding qualifying employment should only be as difficult as finding employment itself. But I was rather concerned when I read that the guidelines were basically “Well, since the first qualifying payments couldn’t have been made earlier than 2007, we have until 2017 to figure out how we’ll do it before we need to have anything figured out. Check back later.”

        I’ll have about $90k in student debt, but it is ALL going to be federal loans. Loan forgiveness or not, there’s Income Based Repayment, so when I inevitably can’t find work next year it shouldn’t be the end of the world (husband works, just doesn’t make much).

  30. adolfhitler420 says:

    Student loans are a double edged sword. You need to be careful and analyze all your options before getting one and make sure your degree will be worth it in the long run. The fact that many protections that other loan recipients have are not available for student loans is sad and should be corrected. They also enable colleges to raise prices because the students can always takes loans to cover the price raise.

  31. Michaela says:

    I knew that student loans could be a shady business, so I decided to avoid them at all costs. Instead, I worked my butt off in high school so a university would pay for my education.

    No loans. No payments from my parents. Good grades and hard work paid for my tuition, housing, food, and other fees at a university.

  32. Thyme for an edit button says:

    I worked during undergrad and graduated with very little debt. I went to a University of California school 10 years ago and could not have done the same today because the tuition and fees have gone up so much.

    Just graduated from law school with a lot of debt. Unemployed. Loans coming due in November. Scared, but working hard on job search.

  33. Consumeristing says:

    Student loan wouldn’t be to out of control if colleges controlled THE PRICE OF TUITION. Going to college has gone up way faster than inflation, faster than real estate. Going after student loans would do nothing since the main cause of the problem is runaway cost of college education.

  34. Robearbobo says:

    This looks like one of those spam infographics used to direct traffic to a questionable education related website.

  35. Warren - aka The Piddler on the Roof says:

    Wow. Considering the number of typos and grammatical errors in that flowchart I’m guessing the creator never went to college, and possibly never had any student loans to pay back.

    Oh, the irony…

  36. vicarp says:

    When did school loans creep up to such a high interest rate? Mine is like 3%

  37. JollyJumjuck says:

    I got into an elevator at work and this man followed in after me. I pushed ‘1’ and he just stood there…I said, “Hi, where you going?” He said, “Phoenix.” So, I pushed ‘Phoenix’. A few seconds later, the doors opened, two tumbleweeds blew in…we were in downtown Phoenix. I looked at him and said, “You know, you’re the kind of guy I want to hang around with.” We got into his car and drove out to his shack in the desert. Then the phone rang. He said, “You get it.” I picked it up and said, “Hello?”…The other side said, “Is this Steven Wright?” I said, “Yes…” The guy said, “Hi, I’m Mr. Jones, the student loan director from your bank…It seems you have missed your last 17 payments, and the university you attended said that they received none of the $17,000 we loaned you. We would just like to know what happened to the money.” I said, “Mr. Jones, I’ll give it to you straight. I gave all of the money to my friend Slick, and with it he built a nuclear weapon…and I would appreciate it if you never called me again.”
    – Steven Wright

  38. eys says:

    I feel compelled to point out that student loans are a good way to build up credit history. I’m not saying you should take out $100k in loans or anything, but they do help with getting an auto loan, mortgage, etc down the line. A part of what goes into credit scores is the length of time you’ve had an account, and student loans are generally taken out by younger people. Student loans are easy to get if you’re a student and have little/no credit history. Certainly much better than getting sucked into the credit cards that are pushed so hard on college kids.

  39. NHpurple says:

    A conversation with a parent of a HS school senior….”soAnd so is going to Ithaca to be a dietician, she’s really smart”. The response in my head…”no, she’s really stupid, she could have gone to the instate university and saved $100,000 over four years”. And I know that smart girl’s parents don’t have that $100,000, hope they enjoy paying off the load for a job that starts off at under 35,000/year. Go community or go state, unless you are uber smart or uber rich, it’s just dumb to have that loan.

  40. what says:

    School loans are like a marriage….til death do us part.

    • Katrine says:

      Try even after death. My sister passed away over three years ago with about 20K in student loans, and we still periodically get “pay up now or else” notices from Sallie Mae. I’ve faxed and mailed them umpteen death certificates, and all will be well for about six months, until the next go-round.

  41. scottcaps22 says:

    Out of state veterinary college tuition is probably one of the worst offenders when it comes to tuition increases. In one year alone my tuition rose $4k. It costs $46k a year for me to go to University of Minnesota, and it’s not too much better anywhere else and in many states worse. The kicker is that med school costs half as much, and when you get out as a vet you get paid half as much as a doctor.

  42. Dede says:

    It is ridiculous!!! Why are student loans not forgiven especially when there has been such a roblem getting jobs in the recession yet people were able to get forgiven for their home loans or rack up credit card debt with little consequence. I am not sure I will ever be able to use my degree for what was promised…what a scam student loans are. I struggle still to just pay my bills having gone to school as a single parent with the promise of a better life from school, now I have to keep deferring!!! Please help us struggling new grads out here the economy is very challenging and the fields we studied are oblivious. I studied non profit work and then the whole of the fundraising for non profits tanked w the recession. Please give graduates a break, let us build the economy again.

  43. bjcolby15 says:

    I paid off my college loans – and I’m glad for it. I had the very rare “when are you going to pay for this month?” call and the check was in the mail the same day. I lived at home until they got paid off; there were also plenty of times when my bank account was pretty lean. That final check you write is the sweetest thing you’ll ever experience.

    One was from MEFA (four year college from ’90 to ’94) and was $225 per month. I paid that from 1995 to 2005 and the interest rate was 8%; the whole shebang was forgiven in March 2005. The one I had from Sallie Mae (one semester of graduate school in ’94 – long story short, it was a very bad decision) was $100 per month at an interest rate of 8.50%. I paid that from 1996 to March 2008.

  44. thesupreme1 says:

    If you’re talking about a University, which college, praytell, would be considered affordable? The state school I went to is considered one of the cheapest in the nation, and the tuition is now around $9,000 a year (not including books, fees, room/board, of course). If you work full time at a $9 an hour job (which is probably good for not having a college degree), that’s half of your pre-tax income, leaving you with about $9000 a year to actually live on. Half or so of that will go to rent.

    ———

    9000 a year? Wow. I must be lucky, my tuition is going to be 3500 my room and board and books will total 10k( if I sell books back).

    I don’t have to pay a cent of it either. Federal aid+scholarships total more then my costs so I have extra money in my bank account for school expenses. Summer/winter breaks when I move back home I have a job averaging $10 after taxes.

    Never thought I’d say this but I love Kansas. FHSU FTW!

  45. hypodad says:

    Great article. Contains the same advice I’ve been giving my college student son. Don’t borrow, especially as an undergrad. Wisdom I learned the hard way by making all the the mistakes mentioned above.

  46. BuddyisaDog says:

    I am wondering where they got that 8.8% interest rate from. I graduated in 2004 with $30,000 in student loans and my interest rate is was 3.5% over 20 years. Signing up for an auto-pay feature lowered that by .25% and 3 years of on-time payments lowered it another full percentage point. Today I only pay about $20 per month in interest on a payment of about $130 per month.

    My student loan is not what they describe, mine is very affordable.

  47. enneract says:

    I love the completely worthless ‘helpful advice’ bit at the bottom.

    Save – thanks, I wasn’t doing that, and it is useful to me now.

    Aid – this might work for the minorities, but five years experience trying to find merit-based grants as a caucasian male has led to some interesting experiences. On average, for every 100 merit-based scholarships available, 50 will be for specific minorities, 30 will be for women, 15 will be for very specific educational programs, and 5 will be for everybody.

    Work – this is also very helpful. I did not know that I could get use my income from my full time, menial job (which is essentially all that is available for those without a college degree) for things other than giving me a place to live, or buying food.

    Frugal – Again, this is very helpful – most grants and scholarships are never concerned about financial need, and pay you the full amount regardless of how much your tuition costs, so you are able to stash that money for later university attendance.

    Wait – Probably the only real advice here, give up. College is for the rich, and your ignorant plebeian kind are not wanted.

  48. taskey says:

    Wow, so glad im not studying in the US. I’m looking forward to a 6 year degree without needing to pay a cent until i start making some actual money. No reason why the US cant adopt a similar system.

    http://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia

  49. trencherman says:

    It really would have sucked to be in debt for my liberal arts undergraduate degree–but I had a scholarship, and graduated with no debt. On the other hand, I did take out student loans for my graduate degree, and this degree DID result in a financially good outcome–so the loans were absolutely worth it.

    I feel so sorry for those kids who owe +200K for their art history degree.

  50. nacoran says:

    They can, as best as I can figure, not garnish Social Security payments below a certain level. SSI is below that level, but SSD isn’t. It can still accrue interest though, so if you get better they will get you. The process to discharge a loan for disability is a joke. All the reasons in the graphic illustrate why they won’t do that. The requirement for discharge is a disability that will persist and prevent employment and will not improve until death, so if you are on disability and hope to get better, don’t bother. By then your loans will be so big that only China will lend you money.

  51. NickelMD says:

    One problem is that students see a price tag on school and they are willing to let the whole thing be paid for by loans. I finished undergrad and medical school with about 80k in debt. The reason was partially that I went to state schools, but also partially because I worked at least part time every single year. I also took three years off after undergrad to pay down some of my loans before I accrued more in medical school. If your schooling will cost $100,000 over 4 years, why not work summers and part time during the year, live on the cheap and owe 50k at the end instead of 100?

  52. technoluster says:

    “school tuition has risen at twice the rate of inflation and four times the rate of wage growth”
    This is the part that burns me the most. Our local university fought very hard against a proposed community college while they kept increasing the price of an hour’s education.

  53. crazydavythe1st says:

    I’m about to graduate, so I’m a little worried about this. I went in state, worked summers, and tried to keep things as “frugal” as possible. I’m going to owe about $60k for an electrical engineering degree, so I actually feel somewhat okay, but it is still worrying in this economy (and since I’m still looking for work).

    Also, as far as federal loans go – you may not be able to discharge the debt through bankruptcy, but there are some newer protections that aren’t mentioned that really help students. For example, with the new direct loans, you can choose to base your payments on a fixed percentage of your income. If I recall, you automatically have the debt discharged after twenty years if you weren’t able to pay it off completely. I think you can get it discharged after ten years if you go into public service or something like that. Also, Wells Fargo sold most of my loans to the government (which are deferred until I graduate), which allowed me to gain some of these newer protections on my older loans if I understand everything correctly.

  54. aleck says:

    I am glad the government made the loans non dischargeable. If they guarantee the loan, they should have the laws to enforce the repayment. I wish they did the same with mortgages.

    To a large extend the problem exists because a lot of college students are encouraged to do “soul searching” or “deciding what they want to do” while in college. So, we have people sitting in school for six years at $30,000 a year, majoring in “Women Studies” graduating and getting a job as a waiter.

    If you or your parents can drop $100,000 for pure “college experience”, fine. Otherwise, get a grip on the reality, figure out what you want, major in something marketable, get a job and pay off your debts. Or better yet, get good grades in high school and get a scholarship.

  55. ModernTenshi04 says:

    Student loan debt has definitely made me wary and loathsome of credit. My debt isn’t impossible for me to manage, but it’s a pain in the ass, especially since I just had to go to the private school. Sure they paid for 1/4 of my education with an academic scholarship, but that’s not much when the bill will total more than $80,000. I could have gone to the state college (in this case OSU, which is definitely a pretty high ranking state college), and paid half that. Even if I had to pay for it all myself, my student loan debt would be $20,000 less, and my loans even more manageable.

    I have a credit card, it’s completely paid off right now, and I plan to keep it that way for quite some time.

  56. mdovell says:

    The article is great although I would say it can be shortened into this:

    Demand is subsidized to make it easier to get..for the most part nearly anyone can get in (pending grades of couse but no one in their right mind with say a 1.0 in high school would bother going to college)

    Supply is NOT being increased. Instead of seeing new schools opening up we have current schools expanding.

    Academia is one of the last places fighting technology tooth and claw. What I mean by this is there is a tendency to look down on online schools (U of Phoenix comes to mind). This is odd given how much of academia is electronic. No one hand writes papers anymore..everything is in some electronic office format one way or another. Blackboard and Moogle are also used by schools. With books ebooks are going to eventually take over but it is going to take time. Kindle 3 is out now but I’m sure within another few years they are going to have to put books on ereaders…instead of having to physically buy a higher version it could be a smaller fee to update the version. It might be a good idea to mandate like some states have to release the ISBN’s of textbooks PRIOR to the first day of class. This can safe students time and money..just as textbook rentals can as well.

    The big 900 lbs gorilla in the room is what if employers buypass education? The vast majority of students go to school because they want a better job. Having said that what if some employers mearly pool their resources and define what exactly what they want their employees to have for requirements. Employees are more apt to want to get educated if they know there are more options. As it stands now employers training programs are basically invalid against each other. Sure there are some standards in an industry that look good (clean safety record) but this would have go further than that.

    • MomInTraining says:

      Some universities are fighting technology, but most schools do offer online classes. My university adds about 20 new online courses to the schedule every semester. Students can get a fully online Bachelor’s degree if they piece together the right online classes. I think that technology is still expensive though and other than convenience, is not cheaper, if done well, than traditional classes.

      BTW, as far as books go, the Higher Education Opportunity Act requires all schools receiving federal financial aid to link the textbook information from the online course schedule. If your school is not doing so, they are in violation of provisions that went into effect on July 1. Learn more about what publishers and schools should be doing in relation to text books in this Dept. of Ed Dear Colleague Letter. http://ifap.ed.gov/dpcletters/GEN1009FinalTextbookGuidance.html

  57. MomInTraining says:

    I used to work at a student loan guarantee agency. I have some serious problems with the way the process is depicted in this diagram. First, the idea of using Sallie Mae as an example and saying that Sallie Mae will get paid if the loan defaults and then mentioning in footnote that the law has changed is misleading. The banks are now out of the federal student loan system. End of that story.

    I also know in the 270 days leading up to default, the borrower is contacted numerous times. There are so many options for student loans including deferments and forebearances. What other loans can be forgiven if you become disabled? Do you think your bank will forgive your car loan? So if you work with your lender during the pre-default period, you can work our an income-based repayment plan that can fit in your budget. No, you might not be able to buy your $45,000 vehicle, but you did take out loans that you do have to repay.

    Also, it is misleading to say that these loans even after default went to a collection agency. Most of them went to a guarantee agency like my former employer. There, and through all guarantee agencies, if you could make 10 payments in a 12 month period you could get out of default. The only time we used a collection agency was for borrowers who had been on the books for a long time or that we could not find.

    Also, schools do get tuition even if a student defaults, but they can lose their ability to offer federal financial aid if they have high default rates. And those levels are actually being lowered for schools, so they have incentive to keep students from defaulting.

    I got through a BA and an MA program and had my student loans paid off within a year after graduating. I didn’t pick the most expensive schools, lived cheaply while in school, didn’t pay for a sorority, worked during the summer and while in school, and got grants and scholarships. It can be done, but students have to be willing to work for it and make sacrifices. I think a lot of the problem is that students feel entitled to live like working professionals while they are in school. They want a smartphone, to drive a nice car, have a gym membership, live in a nice apartment, wear Abercrombie clothes, go on vacations, etc. Much of that gets financed via student loans.

    We also need to do a better job making sure that students get jobs when they get out of school and understand that if you get a degree in Philosophy, you will have a harder time getting a good job after graduation. We also need to push technical and trade schools. A BA is not necessary for every job and a certificate program in many cases is a more efficient way to get into the workforce.

  58. Al Swearengen says:

    The entire point of bankruptcy is to allow people a fresh start should they absolutely screw themselves financially. Yes, people should pay their debts if they could, but what good does it do the students and society to turn them into debt slaves for 30 years. What kind of risk taking dynamic society are we going to have if people cannot get rid of debts they acquired through taking a risk in education, the very risk that is pounded into their heads from the very moment they walk into kindergarten – you must go to college or you will be a failure. Yes, getting an education is a risk, just like the risk of starting a business, there is no guarantee of success. But why do we allow risky behavior in business to be written off, but we don’t allow risk in developing a better educated workforce to be written off?

  59. istheleftright says:

    Screw it. Just give a free education to people. Get off this money is your god train.

  60. Datruth says:

    So what, exactly, are people hoping for? A free ride through college? The ability to default on a whim because it’s easy, and hey, you’re young so what does it matter?

    How about joining the military and getting college paid for? How about everyone going to community colleges for the first two years since your final degree can always be at your vaunted “prestigious” university? Or even better, finish your degree at a state school vs. a private university. How about assessing what college is actually going to cost beforehand, so you don’t need to use the “but I didn’t know” mantra?

  61. budsmoker says:

    “How about everyone going to community colleges for the first two years since your final degree can always be at your vaunted ‘prestigious’ university?”

    I always laugh when I read this advice, because it’s a giveaway that someone doesn’t know what they’re talking about.

    First, prestigious universities tend not to accept transfers, especially from community colleges. The assumption is that the student wasn’t good enough to get into a “real” school.

    Second, the education at most community colleges is low-quality and not rigorous. “High school with ashtrays,” as the saying goes. This is because top students don’t go to community colleges.

    Third, if you do not disclose the community college on your resume, you’ve technically committed resume fraud, which can get you fired. (Of course, if you *do* disclose the community college, you’re probably not getting the job.)