Your Thoughts: Student Loan Mistakes – And How You Help

Several consumer media outlets examined the spectrum of student loan borrowing decisions this week. CNBC, quoting NASFAA President Justin Draeger, offered readers “7 Ways To Stop Student Loans From Ruining Your Life. ” Over at Forbes, writer Robert Farrington released his take on “The 3 Biggest Mistakes People Make With Student Loans,” including going to college without a plan and using debt refunds for extracurricular activities. 

Let us know what you consider the biggest borrowing mistakes and share the ways you help students to avoid them in the comments section below. 



Publication Date: 11/20/2014

Kimberly L | 11/20/2014 4:45:34 PM

Three cheers for Natalie!

Natalie S | 11/20/2014 1:27:33 PM

I grow increasingly weary of the loan crisis headlines. I sit and listen daily to perspective students and their parents listing reasons why they cannot pay for college, and, that this is their "dream" school and they will have to make it happen. Evidently, those dreams didn't begin when the children were born because no one has saved a nickle. They have, however, put all four of their children in private schools, purchased very nice vehicles for everyone, taken wonderful vacations, and paid for expensive sports camps. Now, they sit across from me bemoaning the fact that in order for Pookie's dream to come true he'll have to get a cosigner. Parents cannot possibly borrow because they have three more that will be in school. Evidently they only want the best for their children and are willing to pay for it but that only applies to K-12 and athletic gear. So in order to make the next four years of Pookie's life as wonderful as all of the ads have promised, and so his life won't be completely ruined by spending two years at a community college, he'll graduate with over $100,000 of federal and private loan debt. This "crisis" is, for the most part, lack of planning, a little too much carpe diem, and the inability of some parents to simply say "no".

Cynthia B | 11/20/2014 12:40:30 PM

Not to mention the FAFSA provides students with the maximum loan amount they can request. For Community Colleges, this is a huge challenge.

Heidi W | 11/20/2014 11:31:50 AM

I see this generation as a fantasy generation. We are surrounded by adult versions of Cinderella, Snow White and other princess stories as well as other super heroes. Higher education has taken its scene in the fantasy of growing up and living the happily ever after story. Students are under the spell of a college education with the belief no matter what the cost a degree will bring their financial happy ever after. There is very little realization that magic always comes with a price.
I also find the delayed consequences and the lack of credit worthy approval to be a huge mistake student loans have on our society. A student who is obtaining a 2 year degree for a career path that pays a national average of $18,000 to $22,000 per year may have borrowed $40,000 to do so. They are now faced with a $460 per month student loan payment based on the standard 10 year repayment plan. Their student loan debt to income ratio is around 29%. They probably accumulated $4000 in interest on their unsubsidized loans while they were in school. The student never bothered nor was it made an issue at how beneficial it would have been for their financial future if they had at least made the interest payments while in school. The outstanding interest was capitalized when they went into repayment unbeknownst to the borrower. If by some chance this student can remain on the 10 year repayment plan, make the only the minimum monthly payments every month, after 120 payments the student will have paid $55,000 back for the privilege of borrowing $40,000 to obtain a $20,000 a year career. This is just one common scenario that I see on a daily bases while counseling students on financial aid.
Paying for a higher education is an elephant in the room that nobody wants to talk about. Institutions are afraid that really taking this issue on will cause a decline in enrollment and a decline to their bottom line. For the government student loans provides one of the largest income streams for our nati

Kimberly L | 11/20/2014 11:25:22 AM

I had too many words in my initial post. Here is the balance of what I was trying to say. The one size fits all loan limits do not work across all college sectors. Trying to fix the three trillion dollar student loan debt with repayment plans and default prevention is basically closing the barn door AFTER the horse has run out.

Kimberly L | 11/20/2014 11:21:26 AM

I have been a financial aid advisor for over twenty years at three different colleges. It has been my experience of excessive student loan debt is a symptom of bigger problems. The first being failure to plan and research college and realistic financing options. Second, an unrealistic view of what financial aid should cover. Three, an unwillingness to modify lifestyle comforts in the name of going to a school the student and or parents can brag about attending. I have a friend who has one child who she sent to an expensive K-12 school. She and her husband did very little research and planning on college options and their finances. I conducted a 1.5 hour personal financial aid presentation for my friend, her husband and their daughter. They were bewildered that the statue of Liberty is not out front at every college in the union. They further lamented that the entire financial aid process was like trying to build a rocket. I asked follow up questions and learned they were only reading select "pieces" of financial aid information on college websites. I said to her, "The financial aid application process is basically an open book test about your daughter's family. If she cannot under stand that, then I ask is she suited for college?" Seriously. If one has a difficult time answering questions about themselves and their own family, it stands to reason that some of the more academic demanding classes may prove to be much to difficult. I feel that there should be a mandate that personal finance be taught beginning as early as eighth grade. Students need to understand banking, investments, researching financing options for college, cars, houses, etc., prior to attending college and or going out into the work force. I have encountered a few savvy students and parents who elect to attend a community college for two years, keep an older car, forgo vacations, etc. Community Colleges need to be able to reduce student loan borrowing. This one size fits all

Mary K | 11/20/2014 10:8:36 AM

Even though getting children to talk about the future is challenging, it is important to start that discussion as each school year rolls around so that, when a child is a high school junior, say, the thought of where and how he or she can make a living isn't a totally alien thought. He or she has had that seed planted long before junior year and the child has a few notions about what comes after school and how to accomplish that goal.

Michelle M | 11/20/2014 8:51:37 AM

Parents and high school sophomores and juniors should sit down together and have a frank look at family finances long before the first college applications go out and the FAFSA is filed. Look at the actual costs of attending college somewhere across the country that makes coming home frequently what books really cost, and what it will cost if the student can't stand the cafeteria food, and so eats off campus frequently. Consider if it is necessary to live in the dorm if you live within a half hour drive of campus. Look at taking general education courses at a local community college and getting a degree there that will transfer to a Bachelor's degree school down the road that you want a degree from. If you don't qualify for grants, use the college's payment plan option if finances allow. Don't borrow more than you absolutely need, many students borrow because the college offered them that much. For birthdays and holidays, ask those family members who normally give you gifts for cash to pay for books, supplies, and that computer you need. Look at the major you choose carefully, be sure it is in a field you can get a job in before you go to school 6 or 7 (or more) states away to study at "Famous Name University" for a field you can obtain a saleable degree in closer to home or at your local state college/university. Save your summer job earnings, and, yes, you should have a summer job, to defray expenses.

John G | 11/20/2014 8:33:17 AM

Students often put money ahead of education, trying to maintain or emulate a lifestyle they cannot afford. I try to get students to understand that these are not paychecks they are receiving each semester; these are loans that must be repaid, with interest. Sometimes I am successful and other times not so much.

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