I was asked to consider the idea of the Student Loan Forgiveness Act of 2012 further by Energ8t, in my  first post on the subject.  The idea of further consideration has been on my mind since their comment, but the actual ACT of further consideration was not a reality until now.  Type in “Student Loan Forgiveness Act of 2012” into Google and you’ll have a plethora of results, posted within the last few hours to days.  This subject is all over the news!  Why?  Because in the minds of some people, the Student Loan bubble will burst soon, and it portends disaster on the economic front… again.

What I’m reading about in many of the articles is that people/students agreed to terms of PRIVATE student loans at inflated interest rates.  There are some who got a degree but due to various reasons, their chosen career didn’t pan out.  Some people agreed to these loans and went to schools that lied about their accreditation in the chosen programs, leaving these students with a completely worthless degree.  Some of these students went to accredited schools (private schools), racking up hundreds of thousands of dollars in student loan debt for traditionally low-paying careers (teaching, social workers, etc) and are now buried under a mountain of debt.  I will give you an example from the Huffington Post’s article on this subject:

Rider is a teacher at an elementary school in the Brightmoor neighborhood of Detroit. She said 30 percent of her income goes to paying her student loans, and she still owes nearly $100,000 after five years of payments, which she makes on time each month.

The “forgiveness” plan proposed states that after 120 payments (even if those “payments” are $0 due to deferment), the balance of the loans can be forgiven in the “10/10 Loan Repayment Plan”.  If you chose a career where you were serving the public, such as teaching, first responder, etc., you could have “forgiveness” happen in 5 years or 60 payments.  I have a problem with that; there have been many articles in the last ten years that half of new teachers quit within 5 years.  There are other articles out there that say it takes at least 5 years for someone to become a good teacher.  So, say that someone becomes a teacher and after 6 years of dealing with low-pay and their students’ “helicopter parents“, they decide that they’re getting out of teaching?  They’ve deferred their student loans because of those low payments and then had their loans forgiven at the 5 year mark because they went into teaching.  Do they get off scot-free?

The other points of the plan are to cap Federal Student Loan interest rates at 3.4% and refinancing Private Student Loans.  Energ8t had sent a link to the Senate hearing about the Student Loan Forgiveness Act, and while there are some very good examples of dirty deeds on behalf of various colleges and banks (such as a college in Kentucky saying it was accredited but wasn’t – giving students worthless degrees), the overwhelming cry I heard was that people didn’t perform due diligence on their loan options or their schools.

The video of the Senate hearings had Mrs. Danielle Jokela stating that she’s buried in debt with a degree she can’t use because nobody told her the terms of her loan.  I’m sorry?  Nobody told you the terms of your loan?  I’ve always been told that before I sign a legal document, I should read it, ask any questions and if I’m good with the terms THEN I sign the document.  If you think that someone should spoon-feed you terms of legal documents you’re just asking for trouble.

So where does that leave me?  I think that schools who have been caught falsifying financial records and lying about accreditation ought to be disciplined and those students who were given a snow job should be refunded completely.  Everyone else?  Sorry Charlies.  No one made you go to school at a private college where you spend $25,000 per year on tuition when you could have gone to a state school for a lot less.  No one made you sign loan papers you didn’t read.  When you agree to something, hold up your end of the deal.

Life is hard.  It’s harder if you’re stupid.

Update:  June 30th, 2013:  I was approached via email by a researcher and writer for a website providing information on not-for-profit colleges.  She’s asked that I post an article she’s written and would like your comments.  Here you go: http://www.onlinecolleges.org/is-out-of-state-tuition-going-out-the-door/