People with $1M in student loan debt up 7x in 5 years

[Exterous]

Paywall but basically it starts with the increase in tuition, especially among orthadontists

Due to escalating tuition and easy credit, the U.S. has 101 people who owe at least $1 million in federal student loans, according to the Education Department. Five years ago, 14 people owed that much.

More could join that group. While the typical student borrower owes $17,000, the number of those who owe at least $100,000 has risen to around 2.5 million, nearly 6% of the borrowing pool, Education Department data show.

Dental school is the costliest higher-education program in the U.S. Private nonprofit schools during the 2015-2016 school year charged an average of $71,820 a year, the Urban Institute found. The USC program now costs $91,000 a year, and $137,000 when living expenses are included.

By Mr. Meru’s second year, the interest rate on new student loans jumped to 6.8%, and USC raised its tuition by 6%. By the end of that school year, he had taken out a total of $115,000 in loans, which also covered a summer semester. Interest rates were roughly triple what he had planned for.

The article succeeded in building mild sympathy for Mr. Meru but then that fell off a cliff

The USC education helped Mr. Meru earn $225,000 last year working for a corporate practice in Draper, Utah, 20 minutes from Salt Lake City. That compares with a $158,000 median income for dentists, according to the Labor Department.

Mr. Meru and his wife moved to a one-bedroom apartment in Los Angeles with a monthly rent of $1,550. When Mrs. Meru became pregnant in 2010, the couple paid $1,800 for a two-bedroom.

One luxury was buying a used Mercedes-Benz, which carried a monthly payment of $390

After finishing the orthodontics residency in 2012, Mr. Meru used a government option known as forbearance, which allows borrowers to postpone payments.

The couple bought a home in Draper in 2012, using a $400,000 mortgage that Mrs. Meru took out in her name.

Mr. Meru then entered into a government-sponsored repayment plan based on income. He agreed to monthly payments at 10% of his discretionary income, defined as adjusted gross income minus 150% of the poverty level. Any balance remaining after 25 years is forgiven, effectively covered by taxpayers. The forgiven amount is then taxed as ordinary income.

The government repayment plan affords the Meru family a comfortable life. Their home is on a mountain with panoramic views of the snow-capped peaks surrounding Salt Lake City. They take vacations, including a recent trip to Havana. He drives a used Tesla.

https://www.wsj.com/articles/mike-m...d-that-happen-1527252975?ns=prod/accounts-wsj

It will be interesting to see how much longer people will be interested in forgiving massive loans for situations like this and whether that comes back on the borrower or the institution charging so much. The Educase publications are starting to show more stories of struggling small liberal arts schools and colleges

 

[Bitek]

I imagine part of the driver for this is that the market will bear the cost as the profession is so highly paid.

IMO, the real problem we need to tackle is bringing down healthcare costs.

 

[zinfamous]

Holy shitburgers: I knew dentistry was expensive to get into, but didn't know it was because of tuition....I thought dentists were supposed to be med-school ~drop-outs and/or those that simply wanted a quick path to the payday.

Historically, anyway, aren't the expenses for getting into dentistry primarily tied to started your practice, because you are largely on the hook for equipping everything yourself?

 

[zinfamous]

I imagine part of the driver for this is that the market will bear the cost as the profession is so highly paid.

IMO, the real problem we need to tackle is bringing down healthcare costs.

I think Dentistry is also one of those practices where, while certainly very legit for many reasons and for many practicing dentists, there remains a high, high percentage of charlatans out there that will upcharge you and recommend procedures that are both highly unnecessary for you and also extremely dangerous for your health. The market demands high prices for this stuff because there is a decades-long marketing dragon that has convinced people that they need a "white smile!" and "perfect straight teeth!" for various reasons, but the only reason for that is pure vanity. That is a bit of a side issue for the legitimacy of the practice, but I'd wager it is the first major campaign anywhere which long predates "the need for rubber boobs" as a popular and effective marketing side gimmick that upsells, and in some ways discredits, its specific practice.

 

[Exterous]

I imagine part of the driver for this is that the market will bear the cost as the profession is so highly paid.

IMO, the real problem we need to tackle is bringing down healthcare costs.

Its kind of a cycle really. Students are willing to take on a lot of debt because it pays well but it also has to pay well because they take on a lot of debt. Schools charge more because they can and everything continues to spiral up.

Holy shitburgers: I knew dentistry was expensive to get into, but didn't know it was because of tuition....I thought dentists were supposed to be med-school ~drop-outs and/or those that simply wanted a quick path to the payday.

Historically, anyway, aren't the expenses for getting into dentistry primarily tied to started your practice, because you are largely on the hook for equipping everything yourself?

Apparently while doctors often get paid for residencies many dentists do their residencies at universities that charge them tuition

 

[interchange]

That's pretty crazy, although even I am structuring my repayment to bank on public service forgiveness. The federal student loan system is big-time broken financially -- worse than social security although smaller in total $. I might be in favor of free education simply because of transparency of the taxpayer drain that universities take up.

 

[child of wonder]

No sympathy for stupid people who take out stupidly high student loans because they stupidly want to attend a stupidly expensive private university.

What really irks me is the bailouts -- oops, I mean "restructuring" -- covered by taxpayers to get them out of the mess they put themselves into.

 

[UglyCasanova]

No sympathy for stupid people who take out stupidly high student loans because they stupidly want to attend a stupidly expensive private university.

What really irks me is the bailouts -- oops, I mean "restructuring" -- covered by taxpayers to get them out of the mess they put themselves into.

Agreed.

 

[pmv]

I wonder how much of the huge sums of money involved in the whole business, on both sides of the equation, costs and profits, are a concequence of our sugar-rich diets? Or is the 'real money' in cosmetic dentistry (which is, I suppose down to the tiresome human instinct for status-competition)?

With so many of these modern human problems one wishes there was a magic bullet that could solve the problem of prevention rather than treatment (kind-of the same way I feel about immigration and refugees, in a way).

 

[JSt0rm]

compound interest is a bitch. Im surprised how high the interest rates are on student loans. Its debt that can never be removed so why is the interest rate so high? Under the current model it should be very safe bet.

 

[interchange]

compound interest is a bitch. Im surprised how high the interest rates are on student loans. Its debt that can never be removed so why is the interest rate so high? Under the current model it should be very safe bet.

Undergraduate student loan interest has been stupidly low in recent history, with some landing below 2.5% at times, not to mention subsized interest for a large portion while in school. It is really dumb to promise an 18-year-old with no credit hundreds of thousands of dollars in loans with a sticker price of 2.5%. Many schools took big advantage of the guaranteed access to loans to cover cost of attendance by spending more cash and jacking up cost of attendance significantly. Especially with the age of school ranking outlets, they easily hiked their rankings by spending money in the right places without improving actual quality of education.

In reality, the number of people who are paying back their loans with realistic hope of clearing them on schedule is really low. We haven't begun to feel the impact of those who will get forgiveness from years of inability to pay. It's going to hit hard, and we keep building the bubble.

 

[Exterous]

Undergraduate student loan interest has been stupidly low in recent history

Not really - not when compared to what you would expect based on the economic conditions. The lowest variable interest rate was 2.77% in 2004-05. But then they jumped and then hovered around 6-7% while the Fed rate dropped to zero during the Recession. Unsubsidized rates continued at 6.8% and PLUS loans were 8% well into 2013 despite it being a complete mismatch with the economy. Much like the IRS 7520 rate the government does a terrible job matching interest rates to what would be reasonable given the current economic conditions.

 

[Darwin333]

No sympathy for stupid people who take out stupidly high student loans because they stupidly want to attend a stupidly expensive private university.

Seems the guy in the story was actually quite smart about it. He is making good money, living a great lifestyle, $400K house but I guess he does have to settle for a used Tesla and a used Benze for now. Oh yeah and he likely won't have to pay back all of the money he borrowed.

As far as the people who truly make poor decisions, what the hell do we think is going to happen when we allow kids, who probably couldn't get a credit card with more than a $500 line of credit, to borrow a virtually unlimited amount of money that they don't have to start paying back for many years? The biggest reason, imho, that college costs have skyrocketed so much is because of the above limitless supply of "free" money. If there was a limit to how much they could borrow the costs would have to come down.

 

[Darwin333]

That's pretty crazy, although even I am structuring my repayment to bank on public service forgiveness. The federal student loan system is big-time broken financially -- worse than social security although smaller in total $. I might be in favor of free education simply because of transparency of the taxpayer drain that universities take up.

Social security isn't really broken, with a few tweaks it will continue to be self-funding long into the future. Off topic, I just had to point that out.

 

[sportage]

A student need not attend some expensive high end college to rack up massive student debt. One could attend any low end no name college and still end up owing thousands. And paying on loans for years after.
The problem is, people once again vote against their best interest.
Hilary would have brought student loans back to manageable and offered very affordable education.
And Bernie would have given US government funded college.
You'd have thought parents would have fully supported this and supported those candidates who's goal was to make college affordable for everyone.
But no.....
Hilary lost, Bernie lacked the punch, and the Donald Trump republicans won.
So rejoice. You prevented email and server scandal from entering the Whitehouse at the expense of ensuring never ending massive college debt for you and your kid.
Hope it was well worth it kiddies, moms, pops.
You got your schmuck in the Whitehouse, or... just maybe you're the real schmuck here.
A little too late to cry about it now. You screwed up. Again!

 

[Mai72]

I'm waiting for this student loan mess to tank the economy. IMO, it's going to be 2007 all over again. Colleges are going to have to adjust to a changing future or they'll be out of business. College IS a business. Let's not fool ourselves. And, this is the issue. I had read that certain colleges were using young good looking women to recruit guys onto their campus. They'd show the guys around campus and entice the men to sign up and attend the school. Why? Because we have hot women! That's low.

At least, $1.3T in college loan debt and many grads are not able to pay back their loans. It's stupid. I tell young people all the time to rethink college. As I've stated before, take out the top paying jobs that require a college degree and the average salary of a college grad drops. That would be doctor, engineer, computer science, lawyer, dentist and a few other highly skilled professions. I've met many people who are college grads and they aren't even using their degree. What was the point of going? 4 years wasted and thousands flushed down the toilet. I've also met people who no college degree, and/or have dropped out of college and are very successful They make more in one month than what most people make in a year. If you have the hustle and drive you can do very well in America today.

I know many here are going to disagree with me, but I firmly stand by my statement.

 

[TheVrolok]

That's pretty crazy, although even I am structuring my repayment to bank on public service forgiveness. The federal student loan system is big-time broken financially -- worse than social security although smaller in total $. I might be in favor of free education simply because of transparency of the taxpayer drain that universities take up.

Same here. Both my wife and I are banking on PSLF, otherwise, our financial future will be drastically different. I pretend (like to think?) we're reasonable users of the process, but the system at large is certainly destined for failure.

 

[fskimospy]

While I think the student loan system is bullshit it’s important to keep in mind that this ‘7x increase’ is like 80 people out of a country of 350,000,000

 

[UglyCasanova]

A student need not attend some expensive high end college to rack up massive student debt. One could attend any low end no name college and still end up owing thousands. And paying on loans for years after.
The problem is, people once again vote against their best interest.
Hilary would have brought student loans back to manageable and offered very affordable education.
And Bernie would have given US government funded college.
You'd have thought parents would have fully supported this and supported those candidates who's goal was to make college affordable for everyone.
But no.....
Hilary lost, Bernie lacked the punch, and the Donald Trump republicans won.
So rejoice. You prevented email and server scandal from entering the Whitehouse at the expense of ensuring never ending massive college debt for you and your kid.
Hope it was well worth it kiddies, moms, pops.
You got your schmuck in the Whitehouse, or... just maybe you're the real schmuck here.
A little too late to cry about it now. You screwed up. Again!

The cost of school doesn’t just magically go away just because the student isn’t paying for it. All the sudden we all are, and those costs will certainly go up as many more people would take advantage of the new opportunity. How was Bernie going to pay for it?

 

[fskimospy]

The cost of school doesn’t just magically go away just because the student isn’t paying for it. All the sudden we all are, and those costs will certainly go up as many more people would take advantage of the new opportunity. How was Bernie going to pay for it?

The smart move is to simply stop giving student loans for private universities and instead work towards returning public universities to low or zero tuition. As in other countries that doesn’t mean everyone goes, you still have to qualify.

Education is likely going to continue to increase in relative expense simply due to Cost Disease but there’s surely savings to be had.

 

[UglyCasanova]

Getting public tuition down to zero just means someone else pays for it though, how do you do that. You can’t convince the professors to lecture for free.

 

[child of wonder]

The biggest negative effect on tuition rates is the fact that it can no longer be excused in bankruptcy thanks to GW Bush and Co. back in the early 2000's. After that, the number of predatory "colleges" grew exponentially and standards for enrollment have dropped because every ass in a seat equals GUARANTEED TUITION, even if Uncle Sam has to garnish their wages to get it.

This ridiculous policy should be rolled back and the useless scam schools will fall away and those that are left will be forced to ensure that students are not only qualified to attend their school but also employable once they leave so as to avoid defaulting on the loans.

 

[Exterous]

This ridiculous policy should be rolled back and the useless scam schools will fall away and those that are left will be forced to ensure that students are not only qualified to attend their school but also employable once they leave so as to avoid defaulting on the loans.

It was put in place because people with long and expensive degrees were purposefully racking up loans and then declaring bankruptcy. In true government form the pendulum swung past 'reasonable' straight to irrational practices on the opposite side. Letting student loans be cleared whole sale in bankruptcy will just repeat a scenario of exploitative practices. A successful loan model needs shared responsibility between the student, school and loan institution.

 

[pmv]

It was put in place because people with long and expensive degrees were purposefully racking up loans and then declaring bankruptcy. In true government form the pendulum swung past 'reasonable' straight to irrational practices on the opposite side. Letting student loans be cleared whole sale in bankruptcy will just repeat a scenario of exploitative practices. A successful loan model needs shared responsibility between the student, school and loan institution.

Not quite sure why the bankrupcy get-out should only be available for certain classes of people, though. I do find it odd how the huge profits accruing to owners of capital are often justified with the claim that they are 'risk takers', but then we have quite forgiving bankrupcy laws (and limited liability corporations) to reduce those risks. Why does this moral hazard in relation to student loans not apply to business people as well?

I mean, if all those with huge student debts were organised as one single entity they could probably claim to be 'too big to be allowed to fail' and get a state bail-out like a bank (or motor company) would. Their problem seems to lie in all being isolated individuals.

 

[senseamp]

I am not sure he made a bad decision, it's just that he has different priorities. Google the guy, up, looks like he has lived a fun young life, snowboarding, traveling, and surfing. I don't think it's an bad trade off for him. Have a fantastic youth and get a great education that allows you to make $200K+ per year for life, in exchange for 10% of discretionary income for 25 years. He saved a lot more in cost of living and taxes by simply moving out of California than he has to pay for this loan. He might have less money when he retires, but maybe it's better to have the money when you are young and healthy and can enjoy it than when you are 65 with arthritis and aches.

https://mymedic.us/pages/dr-mike-meru
http://www.ltdoptics.com/mike-meru/
https://www.nspsurfboards.com/rider/mike-meru-2/