I found this article (link here) to be very interesting because as seniors who are about to graduate and have to start planning to repay any student loans we have taken out over the past four years. In this article the author points out several factors of how families know too little about student loan debt. Although people do not regret going to college, the student debt that they occur is a real issue that most students and their families have not considered.
A couple things the article points out is having open talks with children about how much is saved up for them to go to college and get them thinking about personal finance. Another idea suggested is counseling "why not require a separate counseling session for private loan borrowers, who may not immediately grasp the distinctions between that kind of debt and any loans that come directly from the government?" It also goes on to come up with the idea to create a course to determine overall loan projections, post-graduate check-ups to understand the loans, and finally understanding loans that have daily interest.
What are your thoughts? What do you think is the best course of action to help with students understanding student loans? Should they introduce a course or is there another possibility?
This is something that is certainly poignant for the upcoming seniors graduating with debt. I'm not sure if this is what the article means, but there is already "pre-enrollment and exit counselling" mandated before accepting and using student loans. These inform you of the impact and interest of the loans and how they need to be repaid to make sure the borrower understands before they take it. I think that more could be done from an institutional standpoint however it would be difficult to encapsulate how they work. Maybe a subset of an accounting or personal finance course would be appropriate.
ReplyDeleteI am shocked that students and families do not research all the hidden costs of loaning. I did find the example of a 16 year old from the 80's figuring out the costs due to interest rate interesting. I think the current generations should be taught such skills by a course similar to Taylor's suggestion.
ReplyDeleteI agree with Taylor's suggestion. I also think this is something that should be taught and engrained at the end of high school, sooner than students' first year. Things like student loans or how to pay taxes... necessary life skills that students will need to know or do for themselves. There is a lot of value behind knowing these facts shared in the article. Student loan debt is a huge problem in the US compared to other countries, and it places a lot of stress on families, students and the economy at large. I also think the cost to get a higher education is crazy, and only deepens the wealth distribution we are learning about in Piketty's book.
ReplyDeleteI agree with Taylor that a course to educate students on personal finance would be valuable. I think the advice the writer gives for parents to be open with their kids about what they can afford to contribute is definitely a good idea. It's important to start the "saving for college" conversation early so kids can plan accordingly. However, as the author says many parents who did not go to college themselves are not knowledgable on the subject of student loans.
ReplyDeleteI too agree with Taylor's suggestion. Moreover, I think personal finance in general should be part of the high school curricula. Simply understanding how to calculate a loan's compound interest and amortization would greatly aid people at large, and help them see how compound interest can financially eviscerate you. Albert Einstein once called compound interest the greatest force in the universe, and clearly it's something you want working for you rather than against.
ReplyDeleteI definitely agree with the suggestions above such as a course on personal finance and conversations with children about the cost of college and student loans. I also think that if institutions are making an effort to help students understand loans, there needs to be some effort on the part of the loan makers to help make student loans somewhat easier for the general public to understand. There is of course more to understanding student loans than just the loan's interest rate.
ReplyDeleteI am also in agreement with many of the above comments. I think these courses should be offered through high schools starting as early as sophomore year. This would allow any student/family considering taking out loans for college a substantial amount of time to take in the information about loans and the many costs associated with them. This would also give time for parents, students, or other family members to ask questions and gain a better understanding as to what a loan entails.
ReplyDeleteIn addition to an educational course for students and possibly even parents, I believe that loans should be more of something that a student should accept as opposed to having to deny it. When students are given financial aid packages there are grants, scholarships, and loans incorporated into it. Among things like scholarships, which don't have to be paid back, loans can sneak in and start spiraling students into debt without them realizing it. I think the most important thing is to raise awareness of all the detailed aspects of student loans.
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ReplyDeleteI agree with the Shelby, it seems like this problem affects far too many people for there not to be more awareness. As I, and many of you may end up in graduate school these questions and concerns are still very relevant and scary if not researched and figured out ahead of time. I think these types of questions should absolutely be addressed in high school and throughout college.
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ReplyDeleteI think that the above comments are very much important and the generated ideas should somehow be incorporated in our school system (i.e., high-school). Aside from parents and students learning more about the different types of loans and how it all work, I think it is utterly important that the lenders should make the paying back the loan process easier for students. Meaning, I think students should receive more time to get themselves situated (i.e., secure a job). Also, I think students should be given more than six months to find a job and to figure out how they will be paying for their student loan. For example, I think lenders should give student at least a year to find a job and what not before the interest rate on their loan begins to accumulate in interest.
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