We are a few short weeks away from the start of fall semester. Soon thousands of bright-eyed college kids will be starting on campus. With the economy currently in the doldrums, the numbers of graduate students are also on the rise. As the numbers rise, so too do the costs of matriculation. Higher demand, as my economics professors often repeated, means higher prices. How can students pay for that bloated tuition bill? The answer in most cases is to take on more debt. But before you sign that loan document, you may want to consider the fact that you could be signing up for a life sentence in a free range debtor’s prison.
Just last week, a federal appellate court ruled that an attorney turned painter with $350,000 in outstanding school loans couldn’t seek bankruptcy protection. Following a bankruptcy court’s ruling finding the loans were "shockingly immense" and discharging the debt, the loan companies appealed and a three judge appellate court panel reversed the bankruptcy court. The panel ruled that the 45 year old lawyer’s "young age, good health, number of degrees, marketable skills, and lack of substantial obligations to dependents or mental or physical impairments weigh[ed] in favor of not granting an undue hardship discharge." Instead, the court suggested that the man should have requested a plan that would have discharged the remaining balance of the debt after 25 years of continuous $629 payments.
The program suggested by the court was recently enacted by Congress in an attempt to give young attorneys a break on student loans in exchange for working in public interest legal jobs. Now the law students programs, not to mention similar so-called public interest programs for indebted college and graduate school students, are being touted by lawyers for loan companies as a reason to refuse discharge of student loan debt in bankruptcy proceedings. Hence, if you take out too many loans for school, you may be turning yourself into an indentured servant for one of the major student loan companies.
What can you do as a potential borrower? Here are a few tips. First, for you college graduates out there, think twice before returning to graduate school. I am of the firm belief that education is valuable in its own right, not just as a credential. That said, idealistic views of education won’t pay the student loan bills. Study up on the pros and cons of a master’s or doctorate program before you dedicate too much time and money to study feminine critiques of Nietzsche.
Second, minimize debt. Professors and counselors at the universities I attended often said that living like a professional in school leaves you living like a student after graduation. Suffer through the lean times and borrow as little as you can to get through school. No one is going to judge a university student for eating Ramen every night, but you’ll have a hard time throwing Ramen-themed dinner parties as a professional.
Third, pick a university that fits your budget. I know you studied really hard to get into Rice University and it’s hard to give up the dream, but the University of Houston has comparable programs in the same city and the employers that interest you recruit at both universities. Oh, and did I mention public university tuition typically costs tens of thousands less?
There are lots of other tips and tricks for reducing school debt, and anyone entering university or graduate school this fall should speak to someone knowledgeable about them. Making the right choices now will make all the difference.