I’m not American so the concept of a college loan is very alien to me. In my country we either pay for college tuition up front, apply for financial aid if our grades are high enough and your family is needy enough, or you don’t go at all. And In some public universities, tuition is either wholly or partially government subsidized.
I’ve heard of Americans complaining how they’ve got thousands of dollars in college debt and in some cases they take your whole adult life to pay off. So why are college loans even a thing in the US and what happens when you’re not able to pay it off?
In: 9
I went to college in the early 90’s. I did not qualify for any free money (scholarships, grants). I wanted to stay where I grew up (Los Angeles area), so my choices were (in 90s dollars):
Community college (about $50 per class)
State colleges (subsidized by government): $600 per quarter (1800-2400 per year)
More prestigious state colleges (like UCLA vs. Cal State LA): $3000 per semester (6000 per year)
Private colleges (like USC, Pepperdine, Stanford) – $8000-$12000 per semester (16k – 24k per year).
Student loans existed back then too, but I knew I didn’t want that hanging over my head. I didn’t have anyone to tell me what to do, so I just did what I thought was right in my head and didn’t take out loans. I went to the cheaper state college I could afford at $1800 per year (plus the cost of books. Books cost as much as the tuition)
If I had to do it all over again I would have gone to community college first. It looks the same on your record and you actually get to take the classes you want to take.
Since it has been 30 years since I’ve been to college, the one I attended for $1800 per year is now about $7000 per year, but the private colleges are $50k per year or more.
People have been convinced that a more expensive college leads to a better paying career, so the price difference resolves itself with future income. For 99.999 (repeating of course)% of people, this isn’t the case. A degree is a degree at any job.
As a result, people take out these loans which are extremely easy to get, and nearly impossible to get out of. They are easy to get because they are government backed. And the “banks” that loan them are partially government, partially private. And bankruptcy rules have been made so that you cannot get out of student loans via bankruptcy (unless you can show that you are disabled).
This also causes tuition to increase very fast. If it’s super easy to get loans, and students are willing to take out the loans, universities can raise their prices, and the same number of students will attend, with bigger loans.
If you can’t pay off the loans, since they are government-backed, they will just take your money from your paycheck.
Latest Answers