Business major doesn't understand money.

[Popeye the Sailor]

Spot the issues in this story. How many can you find.

http://www.post-gazette.com/pg/09210/986936-298.stm

Student loans puts college graduate into deep financial hole

Student loans were a fact of life for Marjorie Dillon and she was OK with that -- even though she didn't keep close track of how much she borrowed or completely understand the agreements. She and many of her former classmates at Robert Morris University in Moon relied on loans to pay tuition and expenses.

Ms. Dillon, 26, of Coraopolis, was the first in her family to attend a four-year university and loans were the only way to finance the business administration degree that would be her passport to a better life.
ABOUT STUDENT LOANS:

Stafford loans: These are government guaranteed, fixed-rate student loans. Repayment begins 180 days after graduating or leaving school. Loan amounts are limited to $3,500 for first-year students. Stafford loans can be either subsidized or unsubsidized. Interest on subsidized student loans is paid by the federal government while a student is in school and for up to six months after graduating or leaving school. Unsubsidized Stafford loans are available to any student regardless of need. The government does not pay interest on those loans, however.

Perkins loans: These are need-based student loans offered through the U.S. Department of Education. The currently carry a fixed interest rate of 5 percent for the duration of the 10-year repayment period. Perkins loans have a 9-month grace period, so that borrowers begin repayment in the 10th month after graduating, falling below half-time status or leaving college.

Parents Plus loans: Parents can borrow money at a fixed rate, up to 100 percent of the education costs, minus any aid the child receives. No collateral is necessary for the loans and repayment begins 60 days after the loan is dispersed.

Private student loans: Banks, lending companies and other private entities issue these loans in the student's name or in the name of a parent or sponsor, usually with a co-signer. These loans usually have variable interest rates and higher borrowing limits.

But six months after graduating with her bachelor's degree, Ms. Dillon is making $7.25 an hour plus tips serving beer at a bowling alley, working 25 to 30 hours a week. She's nearly $120,000 in debt, behind on her bills and, despite her best efforts, cannot find a better job. Her 80-year-old grandmother co-signed for the loans and could lose her house in North Fayette if the debts are not repaid.

"Honestly, I wouldn't have gone to school if I knew I would be in debt the rest of my life," Ms. Dillon said. "I won't be able to ever own anything. If you look at my credit report, it's (loaded) with Sallie Mae loans."

The financial crisis she is facing provides a snapshot of the worrisome outlook confronting many college graduates who find themselves juggling a mountain of student loans and other forms of debt in the early stages of their working lives.

Her case might be considered a worst-case scenario. The average cumulative debt for four-year college graduates has reached $22,656, according to Finaid.org, a leading Web site for financial aid information.

Some relief is on the way thanks to a new federal student loan repayment plan that will set monthly payments based on how much borrowers make and the size of their families instead of how much they owe. In some cases, graduates will make no monthly payments if their income falls below a certain level. And after 25 years of payments, any remaining balance is cancelled.

But the reduced income repayment program is only available for federal student loans under Stafford, Grad Plus and federal consolidated loan programs.

Ten of Ms. Dillon's loans totalling $108,639 were private signature student loans through the SLM Corporation -- commonly known as Sallie Mae -- which cannot be consolidated, forgiven, deferred or erased in bankruptcy. Two of her loans, totalling $9,000, are federal government loans.

Even if the variable interest rates stay frozen or never go up during the 25-year life of the loans -- which is unlikely -- her monthly payments on the $117,600 borrowed will climb to more than $1,100 and she will end up repaying at least $270,000.

For hardship reasons, Ms. Dillon has been allowed to pay only the interest for the first two years, which amounts to $670 a month.

Beyond illustrating the perils of student loan debt, Ms. Dillon's story also shows the consequences of a lack of financial planning, missing federal aid application deadlines and not meeting academic requirements for federal programs.

Officials at Robert Morris were willing to discuss Ms. Dillon's case only after she signed a consent form allowing the institution to release her education records to the Post-Gazette.
"In this case, the student frequently came into the financial aid office after school had begun and in some cases on the date bills were due and asked what her financing options were," said Mike Frantz, vice president of enrollment at Robert Morris.

University records show she failed to complete the Free Application For Federal Student Aid (FAFSA) on time for the first three years she attended Robert Morris, starting in fall 2005. That meant she didn't qualify for federal student aid and state grant money through the Pennsylvania Higher Education Assistance Agency.

After the spring 2006 semester, Mr. Frantz said Ms. Dillon lost her eligibility for government aid because her grade point average fell below a 2.0. To make matters worse, she failed to pass at least two thirds of the academic credits she signed up for, another requirement for eligibility.

Ms. Dillon also borrowed more than the amount needed to take classes.

Mr. Frantz said she borrowed $43,290 in excess of the cost of tuition and fees to attend Robert Morris. Full-time undergraduate tuition for the 2009-10 academic year costs $19,950. That does not include room and board for resident students. Ms. Dillon was not a resident student.

"I can assure you she was told about the ramifications of borrowing," Mr. Frantz said. "She satisfied the entrance loan counseling requirements which the federal government requires to make sure they understand the implications."

Ms. Dillon's college debt has ignited an emotional family drama that which includes her grandmother and her disabled father who raised three children as a single dad. He lives with his mother and receives $598 a month in government benefits.

Ms. Dillon managed to make the first payment on her loans due July 3 but that meant other important bills went unpaid. Her electricity was cut off by Duquesne Light Co. for $612 in past due bills in late July. Her refrigerator and kitchen cabinets are essentially bare.

"I can't remember the last time I went grocery shopping," Ms. Dillon said. "No one should be in this position. No one should be this stressed out every single day."

Although she does not qualify for food stamps, she does receive government help for her 9-month-old daughter through the Women, Infants and Children (WIC) nutrition program. Every month, she gets 10 cans of baby formula worth $13 each and 15 four-ounce bottles of juice. A younger sister has moved in with Ms. Dillon to help care for her daughter since she has no way of paying for child care.

Financial adviser Paul Brahim of BPU Investment Management, Downtown, recently evaluated Ms. Dillon's income and expenses at the request of the Post-Gazette and concluded that she must take dramatic steps to get her budget under control.

He suggested she move in with her grandmother if possible to save $600 a month on rent and eliminate the $120-a-month cable and Internet bill.

She could erase the $329-a-month car payment by selling the vehicle and using public transportation. She also should try to renegotiate the interest rate on her credit cards to reduce those $300-a-month payments. Her $150-a-month cell phone plan could also be reduced, he said.

Ms. Dillon said she has learned a lot about how credit and interest works while looking for solutions to her dilemma.

She counts pennies to make her payments and crunches numbers all the time. She figures if she could get a job making $30,000 a year, that would give her about $900 every two weeks that would all go into the bottomless hole that is her student debt.

"I wanted to be better off than my dad," she said. "He struggled with us and I knew I needed to get an education to get a nice job, nice house and drive a nice car. Now one whole paycheck goes to Sallie Mae for the next 25 years of my life.

"You dangle a steak in front of a dog and he will eat it. Every student takes out extra for living expenses. We don't work. But I'll do what I have to to make it. Yes, it will be hard. I've only made one payment and it's already hard."

[GAAN]

wow

[rockaduc]

Are you kidding me!?!?!?!?! 

[Xiphias]

Wow....she needs to go get a MRS.

[Drjones]

Dumbass.  Go freaking cry in a river or something.  I paid for a full associates and a full BSME on my own by paying for what I could afford first washing pots and pans for the associate at a junior college then as a drafter/designer for the BSME and graduated without one single cent of debt.  She made her bed and now gets to sleep in it.


Edit.  Blame government all you want, but that person right there is the true reason why the economy is in the crapper.  Idiots living high off the hog on debt until they can't support it anymore then it all comes crashing down on them in one big pile of pig shit.

[il d00d]

Double U.  Tee.  Eff.

"Ten of Ms. Dillon's loans totalling $108,639 were private signature student loans through the SLM Corporation -- commonly known as Sallie Mae -- which cannot be consolidated, forgiven, deferred or erased in bankruptcy."

Clearly, stupidity large played a part in creating this financial sink hole.  But having been through the process, I wonder why institutions are willing to fork over these sums of money for a bachelor's degree - it's a shitty ROI in my opinion.  A bachelor's degree alone, unless it comes with some kind of professional pedigree like an engineering license, is not going to qualify anyone for a job that allows them to pay off the loan quickly.

I studied fine arts, so I know make the beast with two backs all about an undergraduate business degree.  But I doubt it is much more than prep school for an MBA program.  Expecting any 18-year-old who has probably never held down a full-time job, paid their own bills, or even done their own laundry to fully understand the financial ramifications of taking on a shit-ton of debt is probably delusional at best, exploitative at worst.  Most high school graduates bound for college are guided by the axiom "college = good, factory job = bad" and will take every step in pursuit of that, stupid or otherwise.

I am leaving out my personal responsibility rant here, but I think the points are implied.  So, getting back to my original point, if Sallie Mae is going to take the gamble that 100k worth of debt will result in a 150% return, it should be just that - a gamble.  And not one insured by a pound of flesh.

[cyrus buelton]

People are so make the beast with two backsing dumb when it comes to student loans.

I went to Butler University in Indianapolis, a private school that runs now around 38k a year.

So if you took loans, you are looking at 160k when you graduate.


I heard so many classmates/friends complain about how much in debt they were going to be when they graduated.


"Hey dumbass, why didn't you go to IU or Purdue and graduate with about 70k a year in debt instead of 160k?"

Answer: I didn't WANT to go to a state school; I wanted to go to a private school


people don't understand that you can't have everything you WANT.


and about 75% of these morons got degrees in english, PR/Advertising, or education.


Plenty of other schools in the state where you could have gotten an equally good education.

[Bun-bun]

She can't buy groceries, but she's paying $120/month for cable, and $150/month for her cell service?
This girl's a freakin' genius!

[Grampa]

I bet she runs for congress

[cyrus buelton]

I bet she runs for congress

[cyrus buelton]

She can't buy groceries, but she's paying $120/month for cable, and $150/month for her cell service?
This girl's a freakin' genius!

I hear shit like this at my work all the time from hourly processing employees.

They pregnant dog about never having money but yet.......

they have the latest mobile phones available
they go out to lunch EVERYDAY
etc.

[dropstharockalot]

People are so make the beast with two backsing dumb when it comes to student loans.

I went to Butler University in Indianapolis, a private school that runs now around 38k a year.

...

Shoulda joined me up the road at ol' Ball State University.  Tuition was $8.50 an hour, and you could smoke in classrooms...

But seriously folks...
Girlie's got a business degree, and the best she can do is swing a job slinging beer for $7.50 per hour?  I'd have suggested studying harder, maybe sucking it up and doing that unpaid internship with a company to gain experience and grow her network, then taking the low-man position upon graduation to get in the door and apply what she learned.


But who am I to talk - I just worked three jobs while in college, completed an unpaid internship while I was there, took the low-man position when I graduated, and then worked two jobs to make ends meet and support the lifesyle I desired... and my loans are current and managable, but WTF do I know?

[redxblack]

I picked my college by the tuition price. I went to the cheapest in-state school that surprisingly had the best education program in the state. I have minor student loan debt having been the sole wage-earner in my family, working full time and going to school full time. It's tough to pay the bills for a family of 3 making less than $7 hr. It took me 3.5 yrs to finish and in that time, my tuition doubled. It can be done, but it isn't easy.

That said, the reason institutions are willing to fork over any price for a BA/BS is the loans are guaranteed by the federal government and are impossible to shed. Unlike almost any other debt, you can't declare bankruptcy and get rid of the debt/restructure the debt. The institutions can use the federal government as a free collection service to garnish wages, confiscate income tax returns, etc. On top of that, there was a loophole where student loan providers could roll over loans and collect from the federal pot for a new loan, making payment perpetual. It was a really sweet deal.

[Cicero]

Two words

Junior college.   


This is the very reason economics and financial planning need more than one semester in high school. It should be required every year, just like English or Math (yes I realize now you only need two years of each.) Its obvious that kids dont get these lessons at home, or are just repeating the mistakes of their parents. 

[Grampa]

na..... 10 years of federal government service.... an it'll all be good.

I hear the tracking chip install is painless