Like homeowners who can’t pay back their subprime mortgages, many college graduates have big loans and modest incomes. It’s a debt crisis, writes Ron Lieber in the New York Times.
The story’s focus is Cortney Munna, 26, who borrowed $97,000 to earn a degree in women’s and religious studies at New York University. Since her graduation in 2005, she’s taken night school classes to defer loan payments. Munna works for a San Francisco photographer. With a recent raise to $22 an hour, she takes home $2,300 a month and pays $750 in rent. Repaying her loans would take $700 a month. (That seems low, given her total debt.)
While admitting that Munna and her widowed mother were foolish to go so deeply into debt, Lieber blames NYU for enrolling students “without asking many questions about whether they could afford a $50,000 annual tuition bill.”
Then the colleges introduced the students to lenders who underwrote big loans without any idea of what the students might earn someday — just like the mortgage lenders who didn’t ask borrowers to verify their income.
Only 10 percent of 2008 grads owe $40,000 or more, according to the College Board’s Trends in Student Aid study. However, The Project on Student Debt estimates the number of graduates owing $40,000-plus has risen sharply since 1996. Under federal law, graduates can’t walk away from student loans by declaring bankruptcy.
Lieber suggests Munna look for a second job and start paying back her loans, instead of letting interest pile up. But the NYU grad is reluctant.
Ms. Munna understands this tough love, buck up, buckle-down advice. But she also badly wants to call a do-over on the last decade. “I don’t want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back,” she said. “It feels wrong to me.”
With her mother as co-signer, Munna borrowed nearly $100,000 with no thought to how she was going to pay the money back. Did she think that a degree in women’s and religious studies would guarantee her a lucrative job? Did she not understand that student loans have to be repaid? I have a hard time feeling sympathy.
But I do wonder student loan policy is encouraging more students to take on debts they’ll have a hard time repaying.
Update: A CalTech researcher says the human brain isn’t wired to deal with easy credit. We’re very good at wanting things but not so good at understanding the obligation to pay for them.