Dear Sallie MaeJust when you thought Sallie Mae was tough, some universities are now showing who’s tougher. Bloomberg and other news sources are reporting that George Washington University, Temple University, Yale University and the University of Pennsylvania have all filed lawsuits against students who defaulted on their Perkins loan repayments.

Unlike its loan counterparts, Stafford or direct federal student loans, which are distributed by the government, Perkins loans are administered by the colleges themselves. According to the Bloomberg report, during the 2011 fiscal year the Perkins defaults have skyrocketed to $964 million.

“If you borrow to go to school, it may not be just the government that ends up coming after you if you can’t pay,” said Deanne Loonin, an attorney with the National Consumer Law Center, a nonprofit advocacy group in Boston. “We offer credit very easily.” If the student doesn’t benefit financially from the education, “the government or the school comes after them very aggressively.”

Although President Barack Obama has proposed to remake the Perkins loan program by rewarding institutions that rein in tuition and produce good student outcomes, this is not doing much for students currently stuck in Perkins Loan hell. Under  Obama’s proposal not only would the loans be serviced through the Department of Education, instead of individual colleges, the pot for Perkins loans would increase to $8.5 billion from about $1 billion.

When you’re only given a 9 month grace period to pay back a loan, it doesn’t make it easy on students. In this economy trying to find a job isn’t the easiest thing to do.  Aaron Graff is one student Bloomberg cites as an example:

Aaron Graff, a farmer’s son from Denver, graduated from George Washington in 2010 with the help of $62,500 in scholarships over two years, according to his financial-aid award letters. He defaulted on $4,000 in Perkins loans. Graff, 30, said he hasn’t been able to find a full-time job. He earns $800 a month from teaching high-school equivalency courses and restores basements for extra money. He said he is trying to pay off other student loans first because they were co-signed by his parents.

“I live on the bare minimum,” he said. “It’s not like I’m defaulting on my student loans to live the lavish life. I’m defaulting on my loans because I really don’t have it.”

Maybe there should be a student-loan bailout soon?

 

  • justanotheropinion

    Many companies require all new hires to have degrees because it looks good. Took me a few years to get my company to change the policy. After all, a degree to work in the mail room or an admn. position is so not necessary. Not to mention the fact that there were several ppl with advanced degrees that were struggling in lower end positions which contradicted their arguement. Unfortunately, this is the new normal. A bachelors degree is now what the HS diploma once was. Without it, basic employment will be a struggle for any of us.

    Having said that, I do believe that if you take out loans, you are responsible to pay them back. I do not believe that school loans should be forgiven (after all, you received the product – a degree). However, I do think that the rules should be more flexible in the repayment area. If your income is $1k/mo., just because the loan docs say your payment should be $700, I don’t think that’s reasonable. If I were the lender, I’d rather you pay something than nothing. That may mean you end up paying for the rest of your life, but you have to honor your obligations.

    Lastly, as a country, we need to stop pushing college as the end all be all for everyone. College isn’t for everyone. There is nothing wrong with going to a trade school. Don’t knock your kid if they have a passion for cars and wants to be a mechanic. Don’t knock your kid if they want to be a plumber, electrician, medical tech, vet tech or hair dresser. They are all necessary jobs in our society. There is NO SHAME in doing an honest days work, whatever that job may be. Also, employers should be encouraged to hire folks that have a desire to work (and have shown the willingness and responsibility to be a solid employee) and INVEST in them by providing on the job training as well as outside training thru a CC and/or tech school. 60mins. did a piece on just this last year. The participating employers said they were skeptical at first, but it has paid off. They have skilled employees who feel vested in the company because of the opportunity they were given.

    Lastly, some common sense and counseling needs to come into play. If you want to become an engineer and the avg. earning potential for that position is $80k/yr., then $100k of debt doesn’t seem too unrealistic. But if you have no idea what you really want to do or your desired field of employment has an avg. yearly salary of $40k, you have no business being $100+k in debt. That just makes no fiscal or common sense.

  • Pingback: 04 have you defaulted on a student loan? |

  • Crystal

    I agree with some of what you said. I just tend to think that only a few wasted their loan money. There are those who were not able to pay for school without a loan, were responsible made good grades, and can’t find a job and are still struggling with student loans.

  • Magnolia

    LOL!!! It’s funny because it’s true… My friend’s and I joke about this all the time but we’re secretly serious…

  • naduck

    I am currently working to be a nurse. I have loans and will try my best to get into the program and get a job afterwards. That said, I am not feeling personally guilty about it if I don’t make it in this economy. Why should I feel ashamed or guilty?

    Think about it: if I invest in the stock of a company and that company becomes the next Coca Cola or Facebook then I will make big bucks on it. And that is all good. However, if that company goes under then I lose all that money. Even if I could call a collection agency, I have probably lost my money, haven’t I? But I made that deal of my own volition – I chose to invest that money. Investments are always a gamble – that is why long term savings involve blue chip stock options as it helps assuage the danger of the more volatile stocks.

    People are volatile stocks and banks, schools, and the federal government are playing in a stock market when they invest in us, the students, with loans. Now many of us will succeed and pay our loans back and everybody wins then. But sometimes, the investment falls through (bad economy, poor choice of investment, and so on) and when it does, the investor loses money. It is really that simple. So why should I feel guilty? Do business owners I invest into feel guilty when their stocks go down?

    So, to all the students, relax guys and gals. Collections can’t do anything to you except hit your credit score. During the depression people were starving to death so if that is the worst you deal with, you are lucky. These rich old dee bags inundated us for years about how important it was for us to go to college and then stole all the money and wrecked the economy and now blame us for taking out student loans. Gimme a break!

    As for those angry at the youth who hold my sentiment, grow up. That is capitalism, friends. What are you gonna do, throw me in jail? I will just cost you 45 to 60 grand a year more! Gonna cut off my hand? Enjoy paying me social security for my injury and thanks for the handicapped spot! Garnish my wages? Good luck getting blood out of that stone! You made a bad investment. I was promised a better job from going to school and, if I don’t get it, why should I feel bad about not being able to pay back my loan? Suck it up and move along.That’s what grown ups do.

More in education, student loans
Close