Wednesday, June 02, 2010

Whose Fault Is a Student's $97k of Debt?

According to the story, not the borrower's.

Like many middle-class families, Cortney Munna and her mother began the college selection process with a grim determination. They would do whatever they could to get Cortney into the best possible college, and they maintained a blind faith that the investment would be worth it.

Today, however, Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt from her four years in college, and affording the full monthly payments would be a struggle. For much of the time since her 2005 graduation, she's been enrolled in night school, which allows her to defer loan payments.

OK, so this woman went to a college she couldn't afford and got a bunch of loans. Whose fault is it that she amassed the debt? Why, the college, of course.
It is utterly depressing that there are so many people like her facing decades of payments, limited capacity to buy a home and a debt burden that can repel potential life partners. For starters, it's a shared failure of parenting and loan underwriting.

But perhaps the biggest share lies with colleges and universities because they have the most knowledge of the financial aid process. And I would argue that they had an obligation to counsel students like Ms. Munna, who got in too far over their heads.

Sorry, Charlie. The biggest share of the blame goes to...the student who decided to go to a college she couldn't affod. Yes, yes, big pricey college can mean a great job from the get-go, but there are plenty of people with B.A.'s from less prestigious state colleges who have managed to live just fine.

I can identify with the student, but not at the undergraduate level. I went to a low-cost state school and lived at home during college, minimizing the costs. Unlike most of my friends, I graduted debt-free, having paid my own way through college by working. My parents were big believers in living within your means and borrowing only what you could afford to pay back.

But when I decided to go to law school, I took out student loans. Lots of them. And I had two kids in school and decided that I didn't really want an au pair raising them. But that left me with a gigantic student loan to repay and no way out of the debt except to die (which I wasn't planning on doing any time soon). I made a lot of the foolish choices this young woman is likely to make, such as deferment on top of deferment.

At some point, you gotta say, "STOP!" and realize you have to repay the debt. It may be slow and painful, but it must be done. Like this woman, I borrowed the money and didn't worry about how to repay it. But unlike this woman, I recognize that the problem isn't the school or the bank or the credit card. The problem was me. And the problem is her.

As most people reading this know, I'm a huge Dave Ramsey fan. But to be honest, had I remained a huge fan of my father, I would never have needed Dave Ramsey to lead me back to the same financial strategies my parents spent my formative years trying to teach me. The problem was, like so many in my generation, I accepted easy credit as a way of life and didn't want to miss out on the "fun" of spending more than I earned.

I didn't start out that way, mind you; as I said, I was debt-free at the end of college and lived a fairly miserly life throughout my 20's. But after a divorce, remarriage and the death of my mother, I really wasn't too concerned about the debt, and it took me nearly 15 years to realize that about 90% of the stress in my life (and that of my husband) was related to bills and paying them. My husband makes damn good money, but you wouldn't have known that a year ago. We've been slowly digging our way out for about 6-9 months now and things are getting better.

But being a grownup and living well below your earnings is tough, even for a middle-aged mom like me. I guess what I'm saying is that this young woman needs to knuckle down and make the hard choices now, while she's young and single, rather than waiting until she's 40-something with a spouse, kids and a mortgage to support. Those money lessons are painful, but everybody has to learn them eventually, and blaming everybody but yourself for your stupid money decisions only delays you discovering the truth about debt.