Student Loan Mess
This is a really interesting situation here, definitely worth reading:
I would be interested in knowing people's takes here. I mean I do not place the blame on the student here, really at all. At 17 she doesn't know a whole lot of what she may or may not be able to afford. Further, she is just doing what she has been conditioned to do. To try to get into the "best" school. Her mom certainly screwed up here, if for anything else by subscribing to the thought that it is all about the school and the more expensive the better. With the father passing away, maybe the mom didn't know a whole lot about finance. Who knows? It irks me that we have this mentality in this country that the only good education is an expensive one from a name that is "known." Honestly it drives me insane that this notion is so widespread. I am a big believer in the education is what you make of it. I know plenty of people who went to community colleges and the like and have done wonderfully. They took the education seriously, got out of it what they wanted and have enjoyed the benefits. I also know plenty of folks who never went to college and have succeeded as well.
So we know that the mom screwed up. She was suckered by that false notion that is is all about the school no matter what. The bank (Citi in this case...suprised?) should have never given the loan in the first place and the university could most certainly have done a better job as they are the ones ultimately getting paid. But do the university and the bank just rely on the fact that this is a "student loan" and that it ultimately is "government protected" as far as their interests go? An excerpt:
But what was Citi thinking, handing over $40,000 to an undergraduate who had already amassed debt well into the five figures? This was, in effect, a "no doc" or at least a "low doc" subprime mortgage loan.
A Citi spokesman declined to comment, even though Ms. Munna was willing to sign a waiver giving Citi permission to talk about her loans. Perhaps the bank worried that once it approved one loan, cutting her off would have led her to drop out or transfer and have trouble paying back the loan.
Today, someone like Ms. Munna might not qualify for the $40,000 she borrowed. But as the economy rebounds, there is little doubt that plenty of lenders will step forward to roll the dice on desperate students, especially because the students generally can't get rid of the debt in bankruptcy court.
I suppose ultimately I am for personal responsibility in this matter and the parents need to know the limits. I have two young kids with 529s and we will know the limits when it comes time for them to choose. But man, this is absurd. It sounds like universities will accept the argument that they are not in the business of financial counseling. Just enrolling students. Who cares if the students cannot ultimately afford it. And the banks? Well we know about them already. This is getting way out of hand.