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Tag Archives: Student Loans

Student Loans: Should I borrow the money? What is a Parent Plus Loan?

As I approach my 19th year in the practice of law, I often ponder the risks of assuming large student loans. I took the risk, and I successfully repaid my student debt. Others have not been so lucky.

I signed my first student loan promissory note on September 6, 1985. I finished undergraduate studies with a loan debt of $11,000. My total borrowings topped out at just short of $60,000.00 in 1993 following law school. It was a surreal number to me. I found it depressing. If I recall correctly, the payments were over $750 monthly, and started in January,1994. I struggled at first as my first job as a lawyer did not pay very much. I bumped along, scraping, scrimping, and saving (and keeping my old car running) for just about two years, until 1995 when I was able to “consolidate” to a payment of some $450 monthly plus an “unconsolidatable” loan that I paid $60 monthly on the side of for a total of about $510 monthly. This was a princely sum for a 27-year-old with an old, dying car and no outside family help.

Essentially, I paid my last student loan payment in July 2010. Some sixteen and one-half years later.

I have always been a bit entrepreneurial, In 1996, I was able to start my own law practice. From its inception, it has always done pretty well. Others have not been so lucky. Many of my friends have struggled with student loan payments.

How would my road be different today if I was a graduating high school student?

I don’t know if I would have even gotten so far today as tuition is higher and some of the student loans I was able to take out are not as available. Many of the loans offered today are Parent Plus loans, in which the student loan lenders try to get the parents of a student to sign up for the student loan. I don’t know if my parents would have been so willing to sign student loan notes for me in the amount required to get through four years of private undergraduate education. Also, with tuition hikes, the $10,000 I borrowed to get through my undergraduate program may be equivalent to borrowing $30,000 today. Would my parents (both hardworking people with high-school educations ) have been willing to sign up for $30,000 (in today’s dollars) of parent-obligated “plus loans”?

I likely would have had to attend a less expensive school under today’s situation, other than the Whitworth College (a private Presbyterian affiliated college in Spokane, WA) that I attended. I greatly benefited from my time at Whitworth. I believe that my educational experience at some other school would not have had the same qualities that Whitworth provided me. I can safely say that under today’s situation, my trajectory would have be different now than the one I was able to take.

If you are a parent, and your child is extremely motivated and a high achiever, I would probably step up and sign up for an appropriate amount of Parent Plus student loans as a last resort. However, if your child is a bit unsure of his/her direction, I suggest that you avoid the Parent Plus loan option. In the case where your child is less focused or not a high achiever, you are better off taking out a home equity loan (if you have any home equity) to pay for their education rather than taking out Parent Plus loans. The reason I recommend this approach is because even if you end up in financial trouble, the home equity line of credit can potentially be discharged through bankruptcy should you lose your home, whereas the Parent Plus loan is less dischargeable in bankruptcy.

If you are a child and are considering asking your parents to sign up for a Parent Plus loan for your benefit, all I can say is that you better be “on target” with your education. If you’re reading this blog, there’s a very good chance that you are aiming pretty well.

Seriously, for a young person to make good on their promise to their parents in return for their financial support through a Parent Plus loan, you need to get in, get great grades, graduate, and get to work. Do not screw your parents financially by changing your major five times, and by partying while you bring home a string of C’s, D’s and the occasional F. You need to decide on your major (or at least your department) before you show up for the first day of college as a freshman, and you need to stick with it even if you decide you might “want to go in a different direction”. You do not have the right to ask your parents to obligate themselves unless you are giving 110%. If you are not achieving top honors (baring some sort of learning disability) while asking your parents to sign up for Parent Plus loans, you are insulting your parents. Parent Plus loans did not exist when I was in college, but during my first couple of years at school, my parents did pay for some of the tuition. My way of honoring their commitment was to graduate summa cum laude which means “highest honors”. I was 5th in GPA in my college graduating class and finished with a 3.91 Grade Point Average. I received one “B” grade in my freshman year and two in my senior year. Every other grade was an “A”.

For what it is worth, that is my story. If you are a parent and your child does not have a commensurate level of committment to educational and study dedication, then you have the right to say “no” to a Parent Plus loan when asked by your child.

If you are a child and you do not intend to excel and be at the top of your class and department, you have no right to ask your parents to so obligate themselves to a Parent Plus loan, unless of course your parents are so wealthy that the Plus Loan is of no financial consequence to their long-term economic position.

Thank about it. Student loans are only for people ready to give a 110% effort towards being a student. There is a reason they are called student loans, and not called “play time, find myself loans.” Student loans are serious. If you take one out, you need to be serious about your career based on the education that you are buying with your student loan.

University of Phoenix – “for profit” school – criticized by Bill and Melinda Gates’ education advocacy group “The Education Trust” – U of Phoenix produces low graduation rates and leaves students saddled with huge student loans

The National Consumer Law Center’s 2006 publication "Student Loans" (see also the 2009 Supplement) pointed out that for-profit schools signed up many, graduated few, but left most all (graduated or not) saddled with substantial student debt which experienced much higher default rates than student loans originated by students attending non-profit public and non-profit private colleges and universities.

Consequently, it was no suprise to me when the NY Times reported on Wednesday, November 24, 2010, that the Education Trust (a non-profit research and advocacy group) which is a Bill and Melinda Gates Foundation funded organization, released a report entitled "Subrime Opportunity" which charges that such for-profit schools like the University of Phoenix deliver "little more than crippling debt" citing federal data taht suggests only 9 percent of the first-time, full time bachelor’s degree students at the Univeristy of Phoenix, the nation’s largest for-profit college, graduate within six years.

I quote from Tamar Lewin’s 11/24/2010, NY Times Article (page A18) "Report Finds Low Graduation RAtes at For-Profit Colleges": "…only 22 percent of the first-time, full-time bachelor’s degree students at for-profit collees over all graduate within six years, compared with 55 percent at public institutions and 65 percent at private non-profit colleges. Among Phoenix’s online students, only 5 percent graduated within six years, and at the campuses i Cleaveland and Wichita, Kansas, only 4 percent graduated within six years.[]…for-profit students graduate with so much more debt than community college students. Many either default on their loans, or struggle to make payments but find that their lives are taken over by debt. In a separate study also released Tuesday [11/23/10], the Pew Research Center reported that almost one-quarter of those who received bachelor’s degrees at for-profit schools in 2008 borrowed more than $40,000, comapred with 5 percent at public institutions and 14 percent at not-for-profit state colleges."

Interesting, Mr. Lewin points out that (as perhaps a sign of subtle protest) Melinda Gates resigned from the board of the Washington Post Company, which gets most of its revenues from its for-profit higher-education unit, Kaplan, Inc. http://www.nytimes.com/2010/11/24/education/24colleges.html?

325% more students in “for profit” colleges since 1998 – but many may be disappointed because of accreditation issues and confusion

[catagories: Washington Bankrutpcy attorney]

I have posted earlier on this blog about accreditation confusion, misrepresentation and problems regarding "for profit" colleges receiving accreditation by one of 70 "national" accreditation bodies. However, the better and more respectable schools such as the University of Washington, WSU, Eastern Washington University, Western Washington University, Cental Washington University, Community Colleges and private schools such as Whitworth, Whitman, Gonzaga, Seattle Pacific University, Seattle University and Pacific Lutheran University are accredited by more reputable "regional" accreditation bodies.

The primary benefit of "national" accreditation is that the for-profit schools can then be eligible to receive student loan monies that the students borrow.

Anyone considering enrollment at a "for profit" college/school MUST read the USA Today article written by Mary Beth Marklein, on September 12, 2010. USA Today’s website does not offer this particular article on-line so you will need to go to the library to read it, but it is well worth the trip, I assure you.

Enrollment at "for-profit" colleges is up some 325% between 1998 – 2008, from a mere 552,777 to 1,797,563. Most of these "for profit" schools are heavily dependent upon encouraging their students to sign up for student loans. These student loans (since 1977) have been nearly impossible to get rid of, even in bankruptcy.

Before you sign up for a "for profit" school, you need to become aware and fully informed…you can easily destroy your future. Please do yourself a favor and read the story of single-mother Chelsi Miller, of Utah, who is now $30,000 in debt with what she calls a worthless degree that was not appropriate to advance her career and educational goals.

Ms. Marklein’s article is excellent and will start you well on your journey to understanding the nearly incomprehensible universe of college accreditation. Ms. Marklein will also show you how the "for-profit" schools misrepresent and hoodwink students into believing the for-profit school "national" accreditation is as valid as a more highly regarded "regional" accreditation.

She will also teach you that even a "for-profit" school with some degree of "regional" accreditation is still suspect. Herein lies a trap!…. so please read the other things I have written about Ms. Marklein’s September 29, 2010 article.

IDEAS FOR ACTION: Considering more education? You MUST secure a copy of the Wednesday, September 12, 2010 USA Today paper containing Ms. Mary Beth Marklein’s detailed investigative article before you sign up for any schooling or student loans.

For-profit colleges: WATCH OUT! says Wyoming Senator Michael Enzi, the Federal Government Accountability Office and many former students suing the schools … the article contains information about Kaplan, Everest, Corinthian, U of Phoenix and others

[catagories: Washington Bankrutpcy attorney]

Locally here in Western Washington, BCTI or "Business Consumer Training Institute" was our worst "bad-boy" local for-profit school. The school (now closed) was criticized for signing up underqualified students for classes that they had little hope of completing. The school would then encourage the enrollee to incur thousands of dollars in student loans to pay for the schooling. (Note that the student loans were not dischargeable in bankruptcy) The student would be unable to complete the courses (many courses of which were of dubious benefit and would not transfer to a regular state or private college or university like Tacoma Community College, U of W Tacoma or even University of Puget Sound) but were then forever saddled with piles of student loan debt. BCTI would leave its students worse off than before, or so it was alleged.

Mary Beth Marklein of USA Today reported on September 29, 2010 that "As for-profit colleges rise, students question value". USA Today did not offer a link to this article on its website, so you will need to go to the library to obtain a re-print. However, anyone considering a for-profit school MUST read this article! I insist!

The article leads off with the story of Chelsi Miller, a Utah resident and former student at Everest College.

Ms. Miller achieved an "Associates Degree" from Everest College, incurring $30,000 in student loan debt.

Fortunately, Ms. Miller (a single mother from a farm town) was thereafter admitted to the University of Utah to pursue a pre-med program, but delight turned to horror. She was devastated, shocked and dismayed to learn that she had to start all over again with her courses because the Everest College degree credits was worthless at the University of Utah! The University of Utah would not accept the Everest College credits, and she claims that after spending $30,000 in student loan money at Everest, she was left with an Everest associates degree that did nothing to advance her education and career goals. She relates that Everest (owned by Corinthian Colleges corporation) mislead her into believing her Everest College credits would transfer well to the University of Utah. Ms. Miller is suing, along with others.

Ms. Marklein reports that the for-profit colleges seem to mis-represent the nature of their "accreditation". They are accredited by a seemingly "wishy washy" organization called the Accredition Council for Independent Colleges and Schools. But the University of Utah and other REAL two and four year schools like the University of Washington, Western Washington University and WSU are accredited by much more stringent organizations unrelated to the "wishy washy" for-profit college accreditation entities.

Here is a quote directly from Ms. Marklein’s article and it is very worth reading:

"…Everest College is accredited by the Accrediting Council for Independent Colleges and Schools, one of the more than 70 organizationsrecognized by the Education Department. The problem:The organization is a national body. Historically, for-profit colleges have been accredited mostly by national groups, which traditionallyhave focused on short-termcollege programs in fields such as culinary arts, medical billing or business administration. In contrast, most non-profit, degree-granting public and private institutions are accredited by one of six regional bodies. (To complicate matters more, some professional associations accredit academic programs in fields such as pharmacy or nursing at both regionally and nationally accrdited institutions). ,…. most specialists in higher education agree that regional accreditation, which takes at least two years for a college to earn and must be renewed every 10 years, is considered the most rigorous and most prestigious."

This is tricky: just because a for-profit school DID obtain some measure of regional accreditation does not mean that other schools/universities are required to accept the transfer of credits from the for-profit college, and often the for-profit colleges seem to stretch the truth in promotional materials and presentations. Writes Ms. Marklein, "It’s up to institutions to decide whether to accept or deny transfer credits, but many use accreditation status as a (mere) guideline. The University of Utah, for example, requires students who want to transfer from nationally accredited schools such as Everest College to seek permissionfrom its faculty to get credit for courses already taken at a different institution."

"’Often those courses (from schools like Everest College) are found lacking in some way or another,’ says Suzane Wayment, associate director at the University of Utah. For example, she says, an algebra textbook used by a nationally accredited school may be for an introductory course, while the university (of Utah) requires that students complete a higher-level course." writes Ms. Marklein.

Ms. Marklein recounts the devil-may-care policy of many for profit colleges: "Many Rivera, spokesman for the Apollo Group, which owns the University of Phoenix, says ‘it is the student’s responsibility to confirm whether credits earned at the University of Phoenix will be accepted by another institution.’"

The Federal Government is concerned about Phoenix, Kaplan, Everest and others. The Federal Government Accountability Office suggests that "some nationally accredited colleges may be exploiting confusion about accreditation by omitting or glossing over details. The GAO report, for example, said a representative for the nationally accredited Kaplan College in Florida told an undercover government investigator who was pursuing an associate’s degree in criminal justice that the college was accredited by ‘the top accrediting agency – Harvard, the University of Florida they all use that accrediting agency.’ But that was not true."

Ms. Marklein relates that this past summer "..lawmakers grilled officials of regional and national accreditors during hearings about whether colleges found to engage in questionable practices – such as encouraging students to lie on their financial aid forms or pressuring students to sign legally binding contracts – should be allowed to keep their accreditation." Senator Michael Enzi, R-Wyoming, ranking member of the Senate’s education committee, as an active participant in the hearings.

Ms. Marklein relates the comments of the now devestated Chelsi Miller, the 26 year old single monther in Utah from the small farm town: "’I feel as if I had been sold a college experience from a used-car salesman….I received misleading guidance and answers that led me to sign my life away (with student loans) … I can’t speak to other colleges, but as far as Everest goes, they really have taken advantage of people that canot afford to be taken advantage of.’"

IDEAS FOR ACTION: Considering a return to school? If you hope to transfer credits from a for-profit school to some other school you must go to the school you hope to transfer to and obtain the specific written committment as to which precise "for-profit" school credits will be accorded full faith and credit as substituting for specific classes at your subsequent transferee school. Better yet, just avoid the "for profit" schools and try to get into a regionally accredited school and do all of your education at one school. Finally, my best advice is in this economy, you should do what you can to avoid large student loans at "for profit" schools, because since 1977, it has been exceedingly difficult to discharge student loans in any form of bankrutpcy filing.

“No Docs” Educational Loans

Has such over exuberance ever created a greater “quiet financial crisis” for graduates and their parents?  Washington Bankruptcy Attorney James H. MaGee blogs on story of New York University graduate and her mother, who tell a tale of woe in cautioning others against student loan debts. The story appeared in The New York Times on May 24, 2010, on the front page of the Business Section.

In 1977, Congress passed legislation to make student loans very difficult to discharge in bankruptcy. Should you be disabled or perhaps the sole caregiver for a disabled person or present with some other exigent circumstance, you may be a shoe-in for a discharge of your student loans, but for everyone lucky enough not to be permanently disabled, student loans represent an ongoing scourge of unrelenting problems.

I intend to blog more on student loans later, but for now, those considering substantial student lending to “educate” themselves into better economic circumstances should read the Saturday, May 29, 2010, New York Times Business Section article entitled “Placing the Blame as Students Are Buried in Debt” by Ron Lieber in the “Your Money” column. Twenty six year-old Courtney Munna attended one of the best schools money could buy, New York University, and achieved a degree in interdisciplinary religious and womens’ studies. However, since graduating in 2005, Ms. Munna has been unable to make any progress on her student loan debts of $97,000, and in an ironic twist, she cannot leave school. By no choice of her own, she must remain continually enrolled in various night school programs at various colleges and trade schools here and there (other than New York University) so as to qualify for “full time student” status, which keeps her loans in deferment and out of default. After a full day’s work, off to night school Ms. Munna must go, for hours of study in topics in which she has no interest.

Even worse, Ms. Munna’s limited income mother has co-signed for many of these loans, and should Ms. Munna default, her mother will be hounded for payments.

This May 29, 2010 New York Times article is valuable for providing a brief narrative summary of the types of student loans available, and exactly how harsh the repayment terms of some of these loans can be.

Do I discourage education? Well, no, but back in “my day” of college through law school of 1985-1993, some of these “new fangled” aggressive student loans were not available, so it was harder to get screwed over by a student loan.

Student loans have always been somewhat questionable to me. I remember that when I started college in September 1985, the rule was that the interest rate on the first student loan you acquired in the Guaranteed Student Loan program (now I believe called the Stafford Loan program) determined the interest rate of any and all subsequent GSL/Stafford loans, so given that interest rates were still somewhat high in 1985, I ended up with 8.5% (or perhaps it was 8.65%) student loans, which I suppose for the day was not too bad, but was far from generous.

Discouraging education is something I am loathe to do, but if you are going to “take the plunge” and are of limited means, I might suggest that you leave the philosophy major and underwater basket weaving degrees for the rich kids Get a degree in a field in demand, perhaps in conjunction with a double-major in Mandarin Chinese, and settle for a minor in the more enriching (but less employment-ready) areas of study. If you acquire large student loans, you are going to need something that is more or less certain to pay off economically. Happy studies!