Colleges behave in a similar way. College degrees are becoming more necessary, yet most people are priced out. So borrowing money to get the degree becomes more necessary as well. But here’s the other thing about college loans: They are predatory.
Some loans accrue interest as soon as you borrow the money, before graduation.
Some loans accrue interest regardless of whether a student earned a degree.
While the federal government has a reasonable maximum amount that a student can borrow, private banks can lend any amount of money. And some colleges intentionally either include private loans in their financial aid packages or reduce the amount student is awarded knowing the student will resort to a private loan.
Some colleges provide scholarships but add so many stipulations that the student agrees to attend and then doesn’t realize they didn’t actually get any scholarships. Then they can only get loans.
And if your folks sound a bit confused about why things have changed so much, they should be. In the early 2000s, the federal government allowed colleges to use private loans and PLUS loans as part of their financial aid offers. This meant that colleges did not have to meet the financial need of their students.
Also consider this: In order to help colleges with funding when students default, the federal government later allowed colleges to write off the tuition that students defaulted. Colleges then had implicit permission to put students in overwhelming debt because they would get paid anyway. And in some cases, the college was paid twice because the student did everything they could to keep up with payments.
Myth: It’s your fault that you borrowed too much money for college.
This Mythbuster is responding to how people talk about college loan forgiveness, namely when people blame the borrower for borrowing more money than they could afford to pay back. In short, they didn’t have a choice.
The college loan industry is an industry. They make money by lending money to students. Lending large amounts of money for college is what the system designed itself to do. This means that when students borrow money, they are doing what a mega-industry is designed to do. But that doesn’t mean students had a real choice.
Consider a food desert. A food desert is where access to fresh foods is limited either by poverty or systemic inequality. These are places where you can go for miles and not see a grocery store. Instead you’ll find fast food restaurants on every corner and at best a corner store that sells packaged foods. About 19 million people in the US live in a food desert. When you start looking at stats on diabetes and high cholesterol, you’ll find those numbers are just about the population in food deserts.
So you’re thinking: doesn’t this mean I shouldn’t go to college? Absolutely not!
While a lot of colleges and banks are predatory, a lot are not. You just need to know which is which.
