Truth-In-Lending Statement for Student Loans

Okay, it’s been some time since I’ve had student loans.  And I don’t recall if there was a Truth-in-Lending Statement when I made my loans (equivalent to the Truth-in-Lending Statement for purchasing a home).  If no such document exists, it should be mandated.

Today I read a story on which had link to an article in the Atlantic.  That article entitled “The 1% of the Student Debt Crisis: Owing $150,000 in Loans” by Jordan Weissmann, begins:

Meet Kelli Space.  She went to Northeastern University to get a degree in sociology.  And she graduated in $200,000 of student loan debt.  In the economy’s newest trillion-dollar crisis, she is the 1 percent.

Kelli is not the face of America’s student debt problem. Among the 37 million people in this country with student loans to pay off, the median balance is $12,800.  A whole 72 percent of borrowers have less than $25,000 left in debt, according to data from the Federal Reserve Bank of New York.

No, students like Kelli are the rarities, the white rhinos.  Only about 5 percent of borrowers owe more than $75,000.  The question is: How do they get there?

You can read the remainder of the article by clicking on the link below.

Kelli is not a doctor or a lawyer. One can expect students in those professions to amass such a heavy debt load.  But for a sociology degree?

Kelli surely would have benefited from a Truth-in-Lending Statement each semester or year that she took out a loan for her college education.  I envision such a statement informing the student of the interest rate (fixed or variable) and the monthly payment based on the amount borrowed.  Each semester or year the student borrows money for his/her education, the lender (whether through the federal government program or a private bank) will provide the student an updated Truth-in-Lending Statement.  Thus, after the 1st two years, if the student has accumulated a signficant amount of student loans and his/her monthly payment will be $500 (and that’s $500 before food, transportation and rent), the student should have a wake-up call and reassess his/her educational path [ideally, the student should understand the consequences of sizeable student loans before embarking on his/her educational track].

Students graduating from college in today’s economy either cannot find a job or are underemployed.  How can they begin to live their lives burdened with sizeable student loan debt?  A lot of these students are back home with mom and dad.  Parents, guidance counselors, teachers, etc. need to ensure students understand the consequences of taking out student loans, how they can no longer assume there will be a job with benefits and at a certain high paying salary upon graduation to cover the monthly student loan payments + food + transportation + housing + “eating out” + movies + iPhone  + iPad + vacation + cable + wedding & honeymoon + kids, etc.


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