Saturday, September 11, 2010

$170,000 Student Loan Debt Ends Engagement

From the NY Times:

"Nobody likes unpleasant surprises, but when Allison Brooke Eastman’s fiancé found out four months ago just how high her student loan debt was, he had a particularly strong reaction: he broke off the engagement within three days.

Ms. Eastman said she had told him early on in their relationship that she had over $100,000 of debt. But, she said, even she didn’t know what the true balance was; like a car buyer who focuses on only the monthly payment, she wrote 12 checks a year for about $1,100 each, the minimum possible. She didn’t focus on the bottom line, she said, because it was so profoundly depressing.

But as the couple got closer to their wedding day, she took out all the paperwork and it became clear that her total debt was actually about $170,000. “He accused me of lying,” said Ms. Eastman, 31, a San Francisco X-ray technician and part-time photographer who had run up much of the balance studying for a bachelor’s degree in photography. “But if I was lying, I was lying to myself, not to him. I didn’t really want to know the full amount.”

At a time when even people with no graduate degrees, like Ms. Eastman, often end up six figures in the hole and people getting married for the second time have loads of debt from their earlier lives, it should come as no surprise that debt can bust up engagements. Even when couples disclose their debt in detail, it poses a series of challenges."

18 Comments:

At 9/11/2010 10:05 PM, Blogger bob wright said...

OK, I'm clueless.

How does a person accumulate $170,000 of debt studying to be a photographer?

At $25,000/yr, a BS would only cost $100,000.

I could see it if she got a medical or law degree.

Then to add insult to injury, she's only a part-time photographer!

 
At 9/11/2010 10:16 PM, Blogger PeakTrader said...

From the article: True love in the land of opportunity?

Kerrie Tidwell...A third-year student at the Medical College of Georgia and an aspiring emergency room doctor, she doesn’t worry so much about her ability to pay back her loans.

Ms. Tidwell, 26, is involved in a serious relationship with Stefan Kogler...Ms. Tidwell feels no guilt about the $250,000 in debt she will probably run up...“I didn’t acquire it because I go out and shop a lot,” she said. “It’s because I’m doing something that I’ll love for the rest of my life.”

My comment: She'll probably also run up over $50,000 in (free) grants and scholarships.

 
At 9/12/2010 8:34 AM, Blogger juandos said...

Well as usual this New York Times story is flawed with its lack of information...

Ms. Eastman is living in Frisco a very expensive place to live on an x-ray tech's money, so what part of that $100K+ debt is going towards living expenses?

Does anyone want their x-ray tech to have this sort of attitude: "I didn’t really want to know the full amount"?

Another missing component is where is Ms. Eastman getting her degree from?

A big name university where the prices are higher or could she have gone to a community college to acquire the desired degree in photography?

Again from the story: "Even when couples disclose their debt in detail, it poses a series of challenges"...

Is Ron Lieber refering to the fact that said disclosure shows a track record of poor life choices that make the fiancé seriously reconsider what he's getting into in this particular case?

"If one person brings a huge debt to a relationship, who is ultimately responsible for making good on the obligation?"

Well that's an inordinately silly question especially in the state of California where community property also means shared debt...

"To Europeans, who often pay little or nothing toward their university studies, the idea of going deeply into debt to get educated is, well, foreign"...

Ahhh, socialism meet capitalism...

Well I'd be loath to hire Mr. Kolger to design something I'd live in and I'd fear for my life if I ended up in Ms. Tidwell's ER...

Again from the story: "Legally, it is likely that any leftover debt that Ms. Tidwell brought to a marriage would remain hers alone after a divorce"...

Couldn't that also depend on the whimsy of the judge overseeing the divorce?

All in all though an entertaining but almost useless waste of column inches in the New York Times...

 
At 9/12/2010 9:38 AM, Blogger Janette said...

Ow!
First Juandos- a judge has no recourse over a debt before marriage. It is the debtor's alone- just as an inheritance is the receiver's alone until it is mingled with family funds.
Second- she is a mess! That is an outrageous amount of debt. I blame the universities though. I think they are WAY out of hand. Unfortunately, fewer people are choosing to go- because the costs are so great. They are pricing themselves out of the middle class market.

 
At 9/12/2010 9:43 AM, Blogger juandos said...

"First Juandos- a judge has no recourse over a debt before marriage. It is the debtor's alone- just as an inheritance is the receiver's alone until it is mingled with family funds"...

Well Janette I'm loath to argue with you on that point but this is exactly what happened to my brother back in the eighties when he was living in San Leandro, Ca...

Hence it was the reason I used the word, 'whimsy'...

If you can shed any light on this particular situation I'd be more than happy to read about it...

Thanks...

 
At 9/12/2010 10:36 AM, Blogger morganovich said...

bob-

just FWIW, it's easy to run up $200k in debt as an undergrad if you are at a top school.

brown was $25k a year when i was there, but it's over $50k now. so are all the top private liberal arts schools. (and up 4.5% for 2011 vs 2010)

hell, my high school is $40k+ now.

clearly, the figures are very different at state school.

education is an investment. like any investment, it must be made proportional to expected return, especially if you are going to fund it with debt. if your neighborhood kids bought an 18 wheeler truck to do their "help you carry your groceries" business, you'd know it was insane. it's the wrong tool for the job and you'd never be able to pay it off with the cash flow.

arguments like "i will enjoy it for the rest of my life" are all well and good, but you could make the same argument about taking out a huge mortgage on the dream home you can't afford.

at the end of the day, fiscal reality will out. you can't run up $170k in debt and get a $60k job in one of the most expensive cities in the world (and i live in SF, so i know of what i speak) and expect to make that work.

at 5% interest, the interest alone would be 10-15% of an x-ray tech's gross salary. try to pay the principal off in 10 years and the figure triples. you're looking at $25k a year in debt payments. there are careers that can support that, but x ray tech is not one of them.

 
At 9/12/2010 11:11 AM, Blogger PeakTrader said...

In economics, there seems to be almost no difference in the quality of education between an expensive private school (MIT) and an inexpensive public school (CU-Boulder). I suspect, there's also little or no difference in quality between Harvard and the University of Montana.

Afterall, the professors in the economics departments at MIT and CU-Boulder had Ph.Ds, and many of them graduated from top schools. The only difference is many professors at MIT tend to have degrees from Princeton, Yale, Columbia, etc., while at CU-Boulder they tend to have degrees from Stanford, UC-Berkeley, University of Chicago, etc.

So, it seems, when tuition and fees become too high, demand for private expensive schools would fall before demand for public inexpensive schools, given the quality of education is not much different. Yet, that doesn't seem to be the case:

It's expensive, so it must be good
Sep 2nd 2009

Traditional economics would suggest that raising the price of an item (such as a college education) would reduce demand for it. But instead this study found that raising tuition — as well as instructional expenditures — actually improves the demand to attend liberal arts schools and schools in the bottom half of the top 50.

For example, for liberal arts colleges ranked 26th to 50th, a $1,000 increase in tuition and fees was associated with a 12.9-point increase in SAT scores and a 3.5 percent increase in the proportion of top freshmen admitted.

This is because such costs “serve as markers of institutional quality and prestige,” the authors write.

The authors write that price, in this case, is an indicator of quality. Maybe. Alternatively, education at a pricey institution could be a Veblen good, such that an increase in tuition makes the school more desirable as a status symbol.

There is another possibility as well. Price could be functioning as a filtering mechanism, designed to signal to applicants that only a certain kind of student will be able to attend. This could be narrowly construed as an effort at class segregation, but it might also be explainable in a networking sense.

Rich children have rich parents, and rich parents will tend to be able to open doors for family friends. By increasing tuition, schools increase the potential connectedness of the families of attending students. That's a real selling point, and a real reason why demand might increase.

 
At 9/12/2010 11:25 AM, Blogger Buddy R Pacifico said...

Whatever happened to the concept of a bride bringing a dowry to a marriage? I thought about this and realized my daughter will bring a dowry to marriage.

I paid for all of her tuition, books and most of living expenses while she attended an excellent in-state university. I was proud but relieved that she graduated on-time without dallying. She will bring to a marraige a very good education completely paid for -- but not paid off by her dad, yet.

 
At 9/12/2010 11:32 AM, Blogger Stephen M. Stillman said...

I wonder if he dumped her because she was dishonest, because she was stupid, or because he didn't want to be legally linked to that much debt. The combination of all 3 would definitely be an incentive to get out of the marriage.

 
At 9/12/2010 1:09 PM, Blogger Ron H. said...

Following the link in the NYT article describing Ms. Eastman as a part time photographer will take you to her web page, where she indicates she attended Brooks Institute of Photography.

It seems obvious that neither this school or the school she attended to become an x-ray technician requires even the slightest exposure to economics classes.

Janette, you say you blame the universities, but for what? Do you blame them for her high level of debt, or for charging high prices?

Where is personal responsibility in all this? Surely you agree that a person can choose not to go to a school if they feel the price is too high, and a person should certainly understand what amount of debt they are willing to accept. Ms. Eastman bears full responsibility for her current condition.

It seems to me that schools have
NOT priced themselves out of the middle class market if it's so easy to borrow large amounts of money to attend.

 
At 9/12/2010 7:30 PM, Blogger QT said...

Surprise, surprise...a man who doesn't want to be the only adult in the relationship! Good call.

Bob,

Absolutely agree. $170k for a degree in photography and then to work only part-time? That one doesn't want to know what one owes is just incredible.

Juandos,

Agree with your take on judicial whimsy. Sounds like a coyote marriage...the kind you would chew your leg off to escape. Be interesting to interview the European in 10 years.

 
At 9/13/2010 8:24 AM, Blogger Randeg said...

Wow, there isn't love there, that much I'm sure. But actually I don't blame the fiance to break off the engagement because such a large student loan could be a sign of a deep-seated spending problem which may cause a marriage breakdown down the road. He might as well cut his loss early when there are no children involved.

Evelyn Guzman
http://www.debtchallenges.com (If you want to visit, just click but if it doesn’t work, copy and paste it onto your browser.)

 
At 9/13/2010 9:21 AM, Blogger juandos said...

"Agree with your take on judicial whimsy. Sounds like a coyote marriage...the kind you would chew your leg off to escape"...

Yeah QT, you pretty much nailed it...

Funny thing about 'mother-in-law' jokes, they do have sometimes have a basis in reality...

In my brother's case his now ex mother-in-law was a real pain especially when she would show up unannounced with luggage in hand after having a spat with the lovely bride's father...

It was weirder than a third rate drama at times...

 
At 9/13/2010 10:12 AM, Blogger morganovich said...

ron-

what's really worrying is this current congressional drive to regulate the for profit schools.

this seems to be based on the high default rates that their graduates have on student loans they got from the government. that is certainly what got the GAO interested.

this is the worrying aspect of inviting government money into an industry. because people made bad decisions, not the schools are going to be heavily regulated. rather than do the simple thing and stop making losing loans like any sane lender would, the feds decide to change a whole industry just so someone can keep his federal fiefdom alive.

nanny follows money, pure and simple. it's amazing how frequently laws "for our own good" are really for the good of the government.

 
At 9/13/2010 3:42 PM, Blogger bob wright said...

"Sounds like a coyote marriage...the kind you would chew your leg off to escape."

QT: That's a great line!

 
At 9/13/2010 4:27 PM, Blogger Ron H. said...

"Sounds like a coyote marriage...the kind you would chew your leg off to escape."

Lots of those, for sure. I suspect that more start like this one , due to blind lust, than clear thinking about finances.

 
At 9/23/2010 10:37 AM, Blogger Yoghurt said...

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http://123business-loan.ws43.com/applying-for-a-loan.html

 
At 2/19/2012 8:18 PM, Blogger chris b. said...

I unfortunately graduated from the same photography school with the same $170,000 in debt as the girl in this story...

The school is completely bogus... They actively recruit naive 18 year old children and sign them up for this debt before they even turn 21. You can't even walk into a bar but you can be in debt for life.
Their teachers and financial officers constantly reassure the children that they will make $100k per year when they finally graduate. The school even lost is accreditation in California over their practices.

At 14% interest and no way to make the payments you inevitably default. In 3 years since graduating the debt has gone from $170,000 to $300,000 and is still climbing. They currently charge $45,000 a year in interest and $15,000 per year in fees. I make less than $20k a year and am without hope.

There is now way to take bankruptcy and no right to income based repayment since they are all private loans.

I completely understand her situation and no matter how many times you admit that you were a stupid kid that took on more debt than you could handle, the joke is and will always be on you.

I will never own a home, a car, or anything of value that I don't pay for by cash. Going to college was the dumbest thing I ever did.

Go easy on this girl. People make mistakes. Thats why bankruptcy exists. You can default on a million dollar home, expunge gambling debt, even write off a yacht... but go to college too young to know when you are being preyed upon... and your screwed for life.

 

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