Tuesday, July 22, 2014

Borrowers using student loans for cash, not a degree

Compiled by Michael De Groote, Deseret News National Edition

Published: Tue, March 11 6:35 p.m. MDT

 Some borrowers are not using student loans for education as much as they are using them for easy cash.

Some borrowers are not using student loans for education as much as they are using them for easy cash.

(Hemera Technologies, Getty Images)

Student loan debt can be a burden that hangs onto people for years — but sometimes those loans were not even used for schooling. According to Josh Mitchell at the Wall Street Journal, many people are taking out student loans to get money they have no intention of using to get an education. "But borrowing thousands in low-rate student loans — which cover tuition, textbooks and a vague category known as living expenses, a figure determined by each individual school — also can be easier than getting a bank loan," Mitchell writes. "The government performs no credit checks for most student loans."

One example Mitchell gives is of Capella Education Co., which found that in institutions in Minnesota, "between a quarter and three-quarters of loans taken out by students were for non-education expenses. At one of Capella's master's programs, the typical graduate left with about $30,200 in student debt even though tuition, fees and book costs totaled roughly $18,800."

The National Center for Policy Analysis pulled this fact out of the Wall Street Journal article: "The Education Department reported that at eight colleges with online programs, more than 42,000 students who received no class credits received an average of $5,285 in loans."

So what are college students wasting their money on? Nancy Anderson at Forbes says students are spending too much on cars ("Sell your car or don't bring it to school," Anderson says), housing, school supplies, food and socializing.

Will Coldwell at The Guardian says students who get loans on the other side of the pond are not much better. "Heard the one about the student who took just a day to spend his £1,000 loan? Went out the moment it appeared in his bank account and bought a £999 Apple computer. Although such shameless profligacy is rare, each term's 'loan day' is accompanied by a certain degree of frivolous spending by most students: a holiday booking, say, or at least a big night out."

Penelope Trunk in an interview with Business Insider goes so far as to just say "85 percent of college students are wasting their time and money on getting a degree."

And sometimes that money is not even being wasted on a degree.

EMAIL: mdegroote@deseretnews.com Twitter: @degroote Facebook: facebook.com/madegroote

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1. freedomingood
provo, Utah,
March 11, 2014

Students buying computers and living expenses! I'm outraged! sacasim off.

And you are supposing that a car is not necessary in the USA for a graduate student? A 30 year old that is probably married and may have kids?

The facst ARE that you have to be a student to get the loan, they check that. And your availability of loans depends on the cost of tuition and living expenses. Contrary to popular belief, you do have to be living to go to college so living expenses are not out of line. Whoops. Sacasim off again.

2. RedShirt
USS Enterprise, UT,
March 12, 2014

To "freedomingood" why should student loans pay for living expenses? In most cases if a student WORKS a part time job while going to school, they can pay their living expenses. This assumes they don't waste money and have some roommates.

3. caf
Bountiful, UT,
March 13, 2014

Students who take out loans for their education have to pay them back. They are not forgiven in most cases. What a student feels is needed while attending college is their own business. Yes, they could work to pay for schooling. My daughter was a full-time student (often taking 16 or more credit hours), she worked part-time, had scholarship money for good grades, and student loans. After paying for a shared room and college expenses, she had about 30 to 50 dollars left each month for food. She still doesn't own a car. This article made me laugh. What kind of fancy car can a graduate student get with a student loan when they have room and board to think about?! Yes, some are not as wise with their funds as they could be but they must pay it back in sickness and health. The cost of living has gone up dramatically. Those students living solely on loans and a part-time job still qualify for the poverty tax bracket. This article is based in an alter-reality. The researchers seem to be trapped in another time period.

4. Winglish
Lehi, UT,
March 13, 2014

I once used a student loan to pay for the birth of my firstborn child. She is worth every penny. I was young and while I did work and did have insurance, the plan my employer offered did not include maternity coverage. You have to do what you have to do sometimes. I paid the loan in full within the first few years of employment in my career.

5. OlderGreg
USA, CA,
March 13, 2014

Ooooh, those horrible Capella students -- living on $11,400 as they did year's worth of graduate studies.