Borrowers Using Student Loans For Cash, Not A Degree
by Michael De Groote
March 11, 2014
Source: Deseret News
Student loan debt can be a burden that hangs onto people for years — but sometimes those loans were not even used for schooling. According to Josh Mitchell at the Wall Street Journal, many people are taking out student loans to get money they have no intention of using to get an education. "But borrowing thousands in low-rate student loans — which cover tuition, textbooks and a vague category known as living expenses, a figure determined by each individual school — also can be easier than getting a bank loan," Mitchell writes. "The government performs no credit checks for most student loans."
One example Mitchell gives is of Capella Education Co., which found that in institutions in Minnesota, "between a quarter and three-quarters of loans taken out by students were for non-education expenses. At one of Capella's master's programs, the typical graduate left with about $30,200 in student debt even though tuition, fees and book costs totaled roughly $18,800."
The National Center for Policy Analysis pulled this fact out of the Wall Street Journal article: "The Education Department reported that at eight colleges with online programs, more than 42,000 students who received no class credits received an average of $5,285 in loans."
So what are college students wasting their money on? Nancy Anderson at Forbes says students are spending too much on cars ("Sell your car or don't bring it to school," Anderson says), housing, school supplies, food and socializing.
Will Coldwell at The Guardian says students who get loans on the other side of the pond are not much better. "Heard the one about the student who took just a day to spend his £1,000 loan? Went out the moment it appeared in his bank account and bought a £999 Apple computer. Although such shameless profligacy is rare, each term's 'loan day' is accompanied by a certain degree of frivolous spending by most students: a holiday booking, say, or at least a big night out."
Penelope Trunk in an interview with Business Insider goes so far as to just say "85 percent of college students are wasting their time and money on getting a degree."
And sometimes that money is not even being wasted on a degree.