This is the article I’m talking about: “Student Debt Crisis Ensnares Parents” Wall Street Journal, October 14, 2021
This story is about how Baylor University students need to borrow so much money to attend Baylor that their parents end up taking out Parent Plus loans to cover what their kids’ student loans can’t. These loans have no cap and no eligibility requirements, so anyone can borrow as much money as they need.
And, surprise! Parents are having a hard time paying these loans off. The article singles out Baylor as having the worst repayment rate for these loans.
Baylor has sought to transform its BRAND into a nationally recognized high ranking university, and has a 1.8 billion dollar endowment as a result. Despite this endowment, Baylor offers less financial aid to students than other schools— 2/3 of what they need, vs most of it.
It’s described as an “aspirational private college”. Translation: the prestige doesn’t match the price tag.
“The loans have been a boon for aspirational private colleges, allowing them to charge nearly as much as top-tier schools but not provide the same level of financial help.”
University president Linda Livingstone: “We were letting students in who couldn’t afford to pay.” Baylor’s solution? “Now we take into account their ability to pay when offering admission.” WOW. This is so wrong. The solution should not be to only offer admission to the wealthy. The solution should be let’s make this education more affordable.
Takeaways:
-Universities are businesses, with the goal of making money, not educating. They can charge more for tuition, and make more money, because of student loans, and if those loans don’t cover it, parents can borrow unlimited amounts of money to pay for their child’s dream school. The university doesn’t care who can afford it because they get paid either way— they get the loan money and if the borrower defaults, the taxpayer picks up the bill while the borrower goes bankrupt.
Our society has bought in to the belief that going to the right university is a dream come true that will make or break a child’s future, and what parent wouldn’t want to give their child the best future possible? The emotional desire to make their children’s dreams come true has parents by the balls. So they take out ungodly amounts of student loans to make it happen, regardless of the financial consequences to themselves and their retirement.
Speaking of consequences—When it comes to student loans, there are no consequences. The whole entire thing is based on, “borrow now, ask questions never”. The party line is “this is good debt”. And the borrower is an 18 year old with an immature frontal lobe and a dream. Who the hell ever stops to read the promissory note or the borrowing rules? I know I never did. The borrowers do not understand the terms of the loans they are taking out. The lenders do. This is a problem.
-Parent Plus loans are shit loans— they’re not eligible for IBR or loan forgiveness, and there’s no cap or borrower eligibility— that means they’ll loan any amount of money to any borrower, regardless of that borrower’s ability to pay. The interest rates are near double those of student loans (6.28% vs 3.73%) and these loans have origination fees 4x that of student loans.
-Do not take out Parent Plus loans. Find another way.
-Never put college before retirement. Less than 25% of Baylor parents are paying these loans off. So that means taxpayers are paying these loans off. Meanwhile, the parents who borrowed are drowning in debt.
-In summary, even when it comes to education, it’s all still about money. The goal of a university is to make money, as much money as possible, and if that money comes from high tuition that can only be paid for by student and parent loans, then so be it. Honey badger don’t care where the money comes from, as long as they get paid.
And the real rub? Says Ashley Massey, a 2009 Baylor grad who’s father had his wages garnished to pay off the Parent Plus loans, “I honestly haven’t found anybody that cares where I went to school.”
