The student debt crisis

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.

About Joanne


  1. Michael E. Lopez says:

    As with many other things, I am of two minds on this topic.

    On the one hand, I agree with Joanne. That’s a LOT of money to go squandering it on fluffy impractical humanities.


    When I was in high school, college was the great escape. It was the way to make your life better. Get a degree, and all would be better. When you’re growing up relatively poor, that sort of escapism is readily believed — and not just by students but by their working class parents who don’t actually understand what is left unspoken in such fantasies.

    So you go to college. And you don’t care how you finance it, either. You put whole years of tuition on credit cards if you have to, just to get to the shiny pot of gold at the end of the rainbow.

    If no one — not your parents, not your counselors, not your professors — stops to tell you “Hey hang on a second!” and what you *have* been told is “get a college degree from the best school you can at all costs”, well… that’s what you’re going to do.

    Kids do what they are told. (Not always what they are told by their parents, mind you… perhaps what they are told by the media or their friends. But they do what they are told.)

    From a certain point of view, what is happening is this: We — the responsible adults — are telling young adults to take out these loans and get a degree, and then sneering at them when they were too naive not to realize that we weren’t telling them the whole truth.

    A lot of well-off, educated middle class Americans really do not understand the absolutely shocking practical ignorance of the lower classes in this country. Bright kids get put on the college prep track, but no one in their lives knows the first damn thing about building a successful career and a successful financial life. Instead, they rely on their friends (whom they often meet at college) and their friends’ families to try to grab some life lessons here and there. (N.B. – I have no idea if the article’s chief protagonist is from a poor background or not. I don’t think it really matters, though.)

    So I’m sympathetic. I really am.

    But, at the end of the day, she should just buck up and pay it back.

  2. GoogleMaster says:

    $22/hr is more than 20% higher than the median income for a female aged 25 or higher with a bachelor’s degree (2008 figures). Not bad for a “fuzzy studies” major.
    “do-over”. Huh.
    Doesn’t want to spend the rest of her life paying for what she got to enjoy already. You’re right, this does sound an awful lot like the people who took on more house than they could afford, rode the values up, refinanced to take Other People’s Money out of the house, and now want to walk away and not pay it back.

  3. GoogleMaster says:

    Oh cry me a river. “Cortney could move someplace cheaper than her current home city of San Francisco…” She certainly could, but she seems to be living in a fantasyland where debts just magically pile up. It’s easy to see why she wasn’t a math major.

  4. Cardinal Fang says:

    NYU absolutely should encourage its students to take a second look at their borrowing. Before a private student loan can be issued, the college has to sign off that the borrower is actually a student there. Some colleges take the opportunity to have a quick talk with the student and her parents, trying to introduce them to the reality that if one borrows money, one eventually has to pay it back.

    On the other hand, Cortney (who is called “middle-class” in the article) is a grownup who signed a contract promising to pay back her loan. Suck it up, kid. You agreed to pay the money back, so start paying.

  5. tim-10-ber says:

    But…the same should be true of the homeowners that took out loans they knew they could not afford — suck it up and pay it off…

    My question is where are the adults/financial counselors in this picture for student loans? We know government high schools rarely teach financial literacy. We know government schools rarely have real college counselors and we know ALL colleges what money regardless of the student’s ability to pay back the loans…

    Why wasn’t she encouraged to go to a less expensive state school? Yep, this debt is very hard to get out of…doubt the government will do any better with administering student loans…there are other good options for a liberal arts degree that are cheaper…students need to be aware of them and counseled to them when appropriate…

    Just the two cents worth from a parent with two in college…

  6. Charles R. Williams says:

    What matters is what you know, what you can do, who you know, how hard you will work and your reputation. Now where does a BA come into play? It’s hard to say what the degree means anymore. Religious/women’s studies and $100k in debt!

    The sad thing is that these people look forward to years of debt slavery since student loans cannot be discharged in bankruptcy. Not only can’t the loans be discharged, the government uses all its powers to collect the loans.

    These are loans that simply shouldn’t be made and absent the government guarantee and strong-arm collection methods would not be made.

  7. Cardinal Fang says:

    “These are loans that simply shouldn’t be made and absent the government guarantee and strong-arm collection methods would not be made.”

    Shouldn’t be made? Absolutely. Wouldn’t be made without the government guarantees? Maybe; a lot of bad mortgage loans were made, and those aren’t guaranteed.

  8. Richard Aubrey says:

    Generalizing here:
    Strikes me that the degrees giving you a useful skill need to be taught (hard sciences, engineering, health fields), while the humanities and fuzzies generally can be approached by self study in spare time.
    And any prof could draft up a syllabus and give it away, or sell it.
    Or you could take an occasional course at a local school when you had time and money.
    You ask, as I did, what was she thinking? In the aggregate, what were they thinking?
    Answer. They weren’t.
    But, as another poster says, they had a lot of help at it.

  9. What did this indebted soul get from 4 years’ worth of tuition that she could not have obtained from $100 dollars of second-hand books, one year’s worth of independent reading, and $3000 in alcohol-fueled discussions in a local bar?

    Schools teach, test, and certify. In an unsubsidized, competitive market in education services none of these functions would cost anything near what colleges charge for Math, humanities, and social science degrees.

  10. I don’t really understand what she (and her mother) thought the end result would be–was she thinking of divinity school? I don’t think the feds forgive student loan debt for ministers in under-served areas.

    And why take night classes to defer it? She’ll never be able to live this cheaply again in her life, unless she marries some gazillionaire. Get a couple more room-mates and another job (like a waitress or bartender where she can get tips) and start paying the damn thing off.

    I do think NYU might have given her some guidance, and that she and her mother greatly over-estimated the market value of the NYU diploma (great for film, otherwise, B-).

    But the NYT got crankly letters from people in response to the 3 year degree piece, most citing how idyllic those 4 years of undergrad were.

    I don’t believe that undergrad is trade school (English major myself), but she sounds so whiny and entitled that’s it’s hard to feel much sympathy.

  11. We know government schools rarely have real college counselors

    We don’t know that at all. Nice generalization without evidence, though.

  12. Let’s say for a second that expensive schools did what the story suggests. Let’s say that they counseled middle-class students piling up debt to go somewhere else. If that were to happen, we’d suddenly start reading stories (probably from minorities) in which the reporter complains that elite schools are pushing away underprivileged students in favor of students from families with money.

    Can’t the woman just admit that she was an idiot to pile up this kind of debt for a degree that isn’t worth the paper it’s printed on, at least insofar as earning much money? The woman and her mother are responsible. Period.

  13. Mike,

    How do you know that Tim lacked evidence?

    While I would suppose that modern full-service high schools have abundant out-of-classroom staff with a wide variety of assignments, I have anecdotal evidence that schools have anti-college-counselors. One school, anyway. One year, I recommended to one of my sharper students, a junior who would turn 18 in the summer after graduation, that he take the GED, take the first two years of core requirements at a community college, and transfer. The young man’s parents asked the counselor about this and the counselor recommended against it.

    In the one-room schoolhouse, the teacher was school nurse, Math and History teacher, and career counselor. Rather like a homeschooling mom. The economist James Buchannan attributed his success, in part, to his education in a one-room schoolhouse, where the teacher dealt with the range of ages and abilities by putting all students on self-paced instruction.

  14. When I was an undergrad, I heard over and over again: “it doesn’t matter what you study, just which school your degree is from.”

    Stupidly, I bought into this and when I had to decide my course of study, I went the easy route and made psychology my major and biology my minor. Majoring in bio would’ve required a year of physics and a 2nd year of chemistry, neither of which I wanted to take. But I could minor in bio without them. I actually took more bio classes than psych classes but my degree is in the latter.

    I realized my mistake my final semester when I was job-hunting and saw that my classmates who were bio majors were way more successful than my classmates who were psych majors. But at that point, it was too late to do anything about it.

    If I had a “do-over”, I would not have been so lazy and would have gone with the more lucrative major. But at the time, I was naive and truly thought that it was enough to simply have any degree from an elite university.

  15. Mark Roulo says:

    When I was an undergrad, I heard over and over again: “it doesn’t matter what you study, just which school your degree is from.”

    When I was an undergrad (and I’ve not done any grad work), what I remember was that the school held orientation sessions telling us that pretty much all four year degrees paid the same amount upon graduation.

    My friends and I assumed (correctly) that the administration was lying to us. The ChemE’s made a lot more with a four year degree than the sociology majors. We never did figure out why, though.

    -Mark Roulo

  16. It’s instructive to separate college debt from high school debt accrued in college (aka remedial courses). There is a hidden cost of low-performing high schools being passed to the student/family.

  17. SuperSub says:

    Just as the mortgage debt crisis grew out of the government pushing lenders to make riskier loans that had little chance to be paid back under the dream that everyone should own a home… the same is occuring with the college loan industry with the dream that everyone needs a college degree.

    Easy home mortgages caused the prices of homes to skyrocket as they increased the number of buyers and the amount of money buyers could spend. Easy college loans do the same thing, and have been responsible for the boom in college growth over the past 20 years.

    If the college loan industry were better regulated to protect, not enable, ignorant customers and lenders were held directly responsible for bad loans they made, the danger would go away… and prices would drop for those who have the means and interest to go to college.

  18. This article (along with a couple of similar ones I’ve seen lately) looks like battlefield preparation for a push to forgive “extreme” student debt. This makes her plan of deferring loan payments look brilliant: all she has to do is wait for the “Student Debt Bailout” coming soon to a Congress near you.

    Just tell me it “can’t happen” or is “out of the question”. Anyone?

  19. 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.”

    What feels right to her is to dump the debt onto taxpayers

  20. hardlyb says:

    Here’s an idea. Dump half the debt on the university that accepted the student that couldn’t afford to go there. Do that across the board, and then I’d be willing to talk about having taxpayers take the other half.

  21. So as I read the article, after paying the rent AND her student loan, she still has $850 a month left over! Some hardship.

  22. The last person on earth I would hire is a Studies major. The only thing they are good at is feeling oppressed and entitled.

    What on earth was this idiot broad thinking? $100,000 for a fluff major?? She could have earned a masters from a good school in something useful for that kind of cash. I am sure she probably sucked down some financial aid on the way as well, aid that could have went to someone studying medicine, or engineering.

    Studying woman’s and religious studies is a HOBBY, not training for a vocation. Well, unless you are going to get a pHD and perpetuate the sham on the next set of rubes….

    I hope for higher education’s sake that she has to pay back every nickle. Colleges are not job training schools, true, but don’t expect that crap degree to open any doors for you either.


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