Hey College Students – Here’s Your Wake Up Call

A recent story from the New York Times comparing the student loan industry to the pre-collapse subprime mortgage market has raised quite a few feathers. A follow up article said there were over 600 comments in response to the story about a young woman who is struggling to pay off her $97,000 in student loans that she racked up in order to get a liberal arts degree at NYU.

Courtney Munna, the feature of the story borrowed all the money she could under federal loan programs, got grants and did work study to pay for her schooling. Even all those funds were not enough to cover the $50,000 annual tuition, so she had her mother co-sign two different Sallie Mae loans to the tune of $20,000. When Sallie Mae turned them down for a third loan because of mom’s credit history, Courtney turned to her own bank, Citibank for another $40,000. And all the while, she was working toward her bachelor’s degree in women’s and religious studies.

Does anyone see anything wrong with this picture? Yes NYC is a great school, but why didn’t Courtney, her mom, the financial aid office, or Citibank consider her earning potential before going through with the ginormous loans?

“All I could see was college, and a good college and how proud I was of her,” says her mom Cathryn in the NY Times article. “All we needed to do was get this education and get the good job. This is the thing that eats away at me, the naivete on my part.”

College is expensive, no doubt about that. And according to a study from the College Board, 10 percent of graduates in 2007-08 with student loans had borrowed more than $40,000. That means 90 percent of graduates borrowed LESS than that. For example, the median debt for a bachelor’s degree student at private, non-profit schools was $22, 380. Paid back over 20 years at 6 percent, that works out to be about $160 a month, extremely do-able on almost any salary, compared with Ms. Munna’s $700 a month payments on her take-home pay of $2300.

The blame could lie anywhere for these horrendous student debt loads, but I hope this story will be a wake-up call for any parents and students out there thinking they need to do whatever it takes to get into the best school. Getting into certain prestigious schools is only important for a select few professions. Smaller name schools and state schools can give you a great education for a fraction of the cost and once you start your career (as long as it isn’t in one of those few fields) no one will care where you got your degree as long as you got it! Think hard about whether sizeable student debt is necessary for your career goals.