Student loans run amok

Don’t know if any of you caught this, but yesterday the New York Times wrote an article about private student loans and culinary schools. These passages jumped out at me:

[W]ould-be top chefs face a challenge that most lawyers, engineers or nurses do not: few jobs in their chosen field pay enough for them to retire their student loans. As a result, as many as 11 percent of graduates at some culinary schools are defaulting on federal student loans. The national average for all students last year was roughly half that, at 5.1 percent.

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Many of the schools offer two-year programs where the total tuition and supply costs can reach $48,000. Only a slice of that is covered by low-interest federal loans. For example, the most that students in two-year programs can currently borrow in federal loans is $14,125.

So many of them seek money from banks that are usually recommended by the school. The terms on some of these private loans can quickly get a young person with little borrowing experience into financial trouble.

Mr. Park said that when he and his mother met with a financial-aid counselor at the school, they were told that his payments on his private loan, from Sallie Mae, would be about $250 a month. But his first bill after graduation was for more than twice that, said his mother, Elise McClain, an English professor in Florida. They twice requested payment deferments while he looked for a job but when they began repaying the loan, both his principal and his monthly payment had risen again. The balance is now $46,198.88 at just over 16 percent interest.

The private student loan industry is practically begging for regulation. The fact that some of them are charging 16% interest on tuition towards a career that pays so little is totally insane. I’m all for making money, but certainly not on the backs of students at 10-16% interest...