Reader Mailbag: Some Homemade Gifts

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. RRSP question
2. Inadequate income for student loans
3. Emergency fund question
4. Taxes or other uses?
5. Sales over the weekend
6. Multiple student loan payments
7. Cars with leg room
8. Good items on credit report
9. Personal finance in the U.S.
10. Overspending family and holiday politeness

As December dawns, Sarah and I are looking over and checking a fairly long Christmas list as usual, filled with siblings and nieces and nephews.

Much like last year, we’re looking for homemade gift options for some of the people. Unlike last year, though, Sarah is back at work full time, limiting the time we have for making such gifts.

What are our solutions? One weekend, we’re planning on making some homemade foods, like salsa. These make great small gifts for siblings and others. We’re also going to assemble a few sentimental gifts for a few people.

Q1: RRSP question
We are a couple in our 50’s and hold $150.000 mortgage (we remortgaged to pay off a debt from our business that we no longer own) and hold no other debts. We have one cell phone, basic cable, 2 car insurances with regular house hold bills. My husband changed careers and we will not see the financial gains for awhile. I bring in $2000.00 a month and that barely covers our monthly bills.( 400.00 short per month) We have had to cash in some of our RRSP’s to exist. I am cashing 5000.00 now and when that runs out I’ll cash another 5000.00. My husband has started into the real-estate business. So the cash is unpredictable and at the beginning there are fees to pay out. My question to you is Should I continue to cash in RRsp’s and put them in different accounts like a tax-free account.

– Linda

For those unaware, RRSP stands for Registered Retirement Savings Plan, which is much like a Roth IRA for Canadians. Essentially, Linda and her husband are withdrawing $5,000 at a time from their RRSP in order to make ends meet.

As for your specific question, you seem to be in a situation that’s going to be financially unstable for a while. Often, when a person starts out in the real estate business, they don’t see a large income at first. It tends to grow as one’s reputation and contacts grow.

You’re essentially robbing your retirement savings to make a go of this business, and it’s really hard to tell if it will pay off in the way that you want it to. It has a lot to do with the state of the real estate market where you live, your husband’s ability to build contacts, and so on. Many real estate people in my area start off doing it part-time until they have a strong network of contacts enabling them to move into the business full time – and some of them are never able to make that transition.

Obviously, if it’s a choice between going under and using your retirement savings, you should use them, but your focus should be on cutting every possible expense for the time being. I’d even cut the basic cable and use over-the-air signals for a while, and spend that extra time you would have been watching television instead building your husband’s business. You have a lot of ways that you can contribute, such as writing notes to contacts and so on. Your future is tied to the success of this business, and it’s in these early days where the sacrifices are needed to build a foundation.

Q2: Inadequate income for student loans
My situation is this: I owe about $120,000 in federal and private (mostly private) loans. I make $44,000/year (but live in NYC with high costs of living, even though I do live in a much cheaper part of town and live *very* minimally). For the past 4 years after graduating I’ve only been paying interest on the private loans and the federal loans have been deferred. I don’t anticipate ever having a career that pays $100k a year etc. and imagine my salary cap as I grow in my job to be around $65,000. Even if I achieve that I do not feel like this is a debt that can ever be realistically re-paid due to things like compound interest etc.

So essentially should I just stop paying (the private loans – I would pay my federal ones as I know the penalties for not doing that are nasty)? I’m currently spending $400+ a month on them and that’s *interest only*. I know that these loans cannot be discharged in bankruptcy (although I do wonder if since I’m in such an extreme position I might be able to rid myself of some of them) – but I almost feel like if I defaulted and they garnished my wages based on the laws of the state I live in that would actually be less of a monthly commitment! I posited this thought to the loan officer who called me one month when I couldn’t make a payment and asked him what to do about it. His response was to try the lottery. Hopefully you have some better advice.
– Roger

That “try the lottery” advice is actually pretty insulting. If I ran such a company, I’d fire that loan officer because he’s doing nothing to help the bottom line of the business he’s working for and is actively damaging relationships with clients.

The first thing you should do is directly contact each of the organizations that hold your student loans and discuss your situation with them. Many student loan programs have need-based deferrments, reduced rates, and loan forgiveness programs for people who are in careers with lower earnings potential. I don’t know exactly what your career is, but I do know that it’s in a fairly low earning path, with means it’s at least reasoable that you’re eligible for something like this. You must make it clear when you contact them that your earnings potential is making you look at defaulting because you simply can’t pay the bills and feed yourself at the same time.

The next thing you should look at is loan consolidation. Do you have any options for consolidation that would reduce your monthly payment load? It sounds like you have multiple public and private loans, so it would stand to reason that you’re a candidate for some form of consolidation, and rates are certainly in your favor right now.

A final important thing to remember: you are far from alone here. Many people struggle with what seems like overwhelming student loans. The lenders have a vested interest in having plans for working with people in your situation.

Q3: Emergency fund question
You’re supposed to have 6 months living expenses in a emergency fund, which for me would be about $9,000. I currently have $1,800 saved with plans to save $100/month or more until I reach that amount. This seems like alot of money for me to just have sitting there ‘in case of emergency,’ even just the smaller amount I have now. I also save regularly for retirement, travel, a current goal (right now a digital SLR camera), etc. I have student loan debt and no other debt (including no mortgage/car payment). I rent and take the bus. I have no children and my husband works full time (ie, is not dependent on me for more than my share of the expenses). Do I really need $9,000 sitting in the bank? How do I decide? Can I invest the money? Where? I’d like to put it in stocks because of the higher returns, but that seems to defeat the purpose of an ‘emergency’ fund if I could lose my investment.

– Chloe

I usually encourage people to have two months of living expenses in the bank for each dependent they claim on their taxes. In your case, you and your husband should have four months of shared living expenses in the bank, which would be somewhere around $6,000, apparently.

The reason for that isn’t just for the small expenses you mention. It’s also to help with things like unexpected job losses, unexpected loss of income due to a major injury or illness, and things like that.

When you live paycheck-to-paycheck, things like a dehabilitating injury or an untimely pink slip can cause financial apocalypse. An emergency fund is protection against that, enabling you to keep living your life while you transition through those hard times. A fund with four months of living expenses means that you can be jobless for at least four months (probably much longer), which can be huge if you’re suddenly fired.

Q4: Taxes or other uses?
I earn about $50,000/yr through my work and a side gig and minimized my withholding last year in order to use the extra cash to get out of debt (I’ve paid off $8000 in credit cards so far) so I’ve paid very little on my 2011 income tax so far. I can contribute to a 403(b) at work, but no matching. I foresee an end of the year surplus of $5000, which I could either use to finish off my credit card debt ($5000 more) or make an extra payment on my mortgage (900) & student loan (300), and contribute to the 403(b) (3800, the rest of the $5000) or give to charity in order to reduce my taxes. Before April of 2012, I will have another $5000 surplus which I could contribute to an IRA for 2011, or save to pay my taxes, or again, finish off my credit card debt.

How would you handle this situation to make the most of my extra money to improve my finances?
– Linda

First and foremost, make absolutely sure that you’re going to be able to cover your tax bills in April. If you find yourself in a situation where you’re facing a big tax bill without the means to pay it, you can be in a world of IRS hurt.

Assuming, though, that you have taxes taken care of, I would put the extra money toward my high interest debt first and foremost, where high interest debt means anything above about 8% interest. In your case, this would be the credit card debt, most likely.

If you’re only giving to charity as a tax reduction, it’s not really a good return on investment. Most people only get about 25% of the amount they donate back in the form of a tax reduction, so if you donate $4,000, it would only cut your tax bill by $1,000. Charity is a great thing, but the tax benefits are really just a perk.

Q5: Sales over the weekend
Did you indulge in any Black Friday sales? Are you going to pick up anything on Cyber Monday?

– Lucy

Sarah and I did a little bit of Black Friday shopping, but only online. There were a few specific Christmas gifts that we looked specifically for at some of the big online sales. We found exactly two of the items we were looking for on discount, so we bought exactly two items. I also spent a total of about $7 on Steam on computer games.

I anticipate similar spending levels today. I’m not planning on buying anything that wasn’t already an intended Christmas gift. I have one item that I’m looking for as a gift for Sarah, but aside from that, we’ll probably just browse a few sites together this evening after the kids are in bed to see if we find anything matching our lists.

It’s not a surprise if you’ve been reading this site for a while that I’m not really into the sake of spending money for the sake of “sales” or “bargains.” If you can get an item you were already intending to buy at a steep discount, that’s great, but it’s a rare occurrence when the things I would already buy match up with Black Friday sales.

Q6: Multiple student loan payments
I’m a 23 year old grad relatively recently graduated out of college. I accumulated about $25,000 in total loans (all subsidized), and payment time has finally kicked in. The total monthly minimum I’m looking at is about $275, with my intention being to reach $400 per month whenever I can.

The thing that I find annoying is dealing with five separate payments coming out at varying times of the month. Do you think it would be prudent, and worth the credit score hit, to consolidate my loans for the sole sake of making one payment? I’d plan to pay the same $300-400 a month, but would just like to worry about making one transaction.

The only downside I see to is that because I use direct deposit from one of the lending house, they’re giving me a 2% interest rate reduction on the two loans I owe them ($11,000, 5.5% interest rate, $100 monthly minimum payment).

How would you advise I approach this?
– Mark

There’s no reason not to investigate what kind of rates you would get with consolidation. You can certainly call around and get some rate quotes before you make such a move.

I’m going to guess that with some shopping around, you can find a rate that’s lower than that 5.5% that might also reward you for direct deposit payments while also providing the easier depositing that you want.

One way to start shopping around is to check out the organizations you already have loans with and see what they offer for consolidation.

Q7: Cars with leg room
We are looking for a new car. My teenage son is almost 6′ 6″ and I was wondering if you know of a sedan or SUV (we are going to be looking for one with good gas mileage), that has a lot of leg room in the back seat. He has his own truck and drives back and forth to college but we still need room for him in our vehicle sometimes.

– Chris

I’ve got a lot of experience in jamming myself into cars that are smaller than my frame will allow. My height is “top-heavy,” which means that I can wear pretty ordinary length pants but my shirts pretty much must be tall shirts. This means that I do okay for leg room in most cars, but my head often bumps the ceiling.

This means that cars like my wife’s Toyota Prius actually works okay for me provided I ride in the passenger or driver seat, but there are many SUVs and vans that are pretty awful to ride in because of my head bumping the ceiling.

Given that body proportions vary so much, my honest suggestion would be to just go test out a lot of vehicles at a large dealership so that you have an idea what works well for him. Once you have some models you’re sure about, use that information to shop around before buying.

Q8: Good items on credit report
I’m 30 years old and just a few months into my first full-time 9-to-5 job (previously I have been doing freelance writing or photography to supplement part-time work while taking care of family responsibilities). I have a bit of a checkered financial history, mostly due to a couple of credit cards being charged off after my house was nearly destroyed in Hurricane Ivan in 2004 and I missed a couple of payments. I’ve worked with the collection agencies that purchased those debts and this month I will be debt-free. Even though I know that if I had ignored the debts, they would nearly all be off my credit report by now, I feel good about having repaid my legitimate debts.

Here’s the problem. My only “in good standing” item on my credit report is a store credit card that I never used, and that has been inactive since the store (Bombay Company) closed a few years ago. I found out today that this item will leave my credit report in June 2013. Because I have avoided opening any new lines of credit, once this is no longer reported I’m worried about how bleak my credit will be.

Now here’s my question. How can I add more “good” items to my credit report? I checked with Orchard Bank and the card I qualified for was a secured card. I’ve never really felt like secured credit cards were a good idea (since I don’t intend to use it) but is it worth opening one just to have another line of credit on my report? Can you suggest any alternatives?
– Bonnie

The only reason to get a secured credit card is to raise your credit score. I truly look at them as though you’re loaning money to a bank at 0% interest in order to raise your credit score. Very rarely will you find a secured card that makes sense for a person to use for actual purchases because the interest rates are usually really high on them and they rarely have any sort of good rewards programs.

Now, is that worth it? If your credit score without that secured card is really low, it probably is. A decent credit score helps with your insurance rates and also helps with the interest rates you’ll get on things like car loans and the like.

You may want to see if you’re eligible for an unsecured card of some form. If you do have a positive history with the one card on your report, it might not quite be as bad as you’re thinking. Use the secured card as a “last resort.”

Q9: Personal finance in the U.S.
I have been a follower of your site on and off for a few years, more of a casual reader than anything purely on the basis that many articles did not apply to me, being from the UK and having no debt to clear. Now however, I am reading every post you make as I am moving very shortly to live in the States. A lot of things are very different; by this I mean the basic way financial intuitions run, the way mortgages work, the way banks and investments work… the ‘basics’ on my financial education here in the UK will not apply. This will be very strange for me – here in the UK I’m very well financially educated, working as a personal tax accountant. So I feel I will not enjoy suddenly floundering! I was wondering if you had any general advice for me, and if there was a particular book or blog or any such that you could recommend to me… sort of an ‘American Finance for Dummies’ but for people who do want a little more than just passing knowledge?

– Delores

In terms of basic principles – pay off your debts, spend less than you earn, etc. – most economies work pretty much the same. In terms of your day-to-day actions, you’re not really going to be doing much differently in the U.S. than in the U.K. A standard Personal Finance for Dummies book written for a U.S. audience will actually answer surprisingly few of the questions you come across. They also tend to focus on the principles.

Honestly, the source I would use the most for this would be Wikipedia. I would start with entries related to the areas that concern you the most, such as income taxes. One good entry to start with would be “Banking in the United States.”

Another good tactic is to simply ask entry-level employees of institutions you intend to use. Bank tellers and the like are often good sources in terms of how things functionally work, which you can then supplement with ideas and theory from other sources.

Q10: Overspending family and holiday politeness
I’m writing for some advice on dealing with my financially irresponsible mother and grandmother. I am 25, living in NYC on my own. All of my school loans (~24K) and credit card debt (~5K) are in my name – I haven’t taken any money from my mom (who raised myself and my 2 brothers alone, with minimal financial help from my father) since I was about 17 years old. I saw what a struggle money caused in my house growing up – it was a main cause of my parents divorce – and I’ve always worked to be as independent and responsible as possible. That, of course, is not without incident so I’m actively paying down a bit of credit card debt that I accrued while in my early 20s and trying finding a job/figuring out the whole ‘financially responsible’ thing. I’ve since managed to make quite a dent in my debt despite my high cost of living. I contribute to a 401K with a 5% employer match and I also maintain a personal savings account.

I’m writing because my mother and grandmother are compulsive over spenders. They are both in a fair amount of credit card debt but they still shop compulsively (nearly every Saturday is spent at the local mall, Kohl’s, Target or flea market, etc.) My grandmother spends so much money that my 85 year old grandfather still works two jobs to make ends meet for the two of them. He also works to lend additional funds to my mother as she is also in debt and has no savings to speak of.

That in and of itself has serious implications for me as I am sure that I will be charged with caring for my mother in retirement as she has nothing. However, I’m wondering if you might be able to advise me on how to politely decline presents and shopping trips with my grandmother and mother. When I visit (usually about twice a year), all they want to do is shop. I’m not a big fan of shopping ingeneral however, when I do purchase things I do so with a “quality over quantity” mindset – I pick out one classic, high quality piece and I save up to buy it. My mother & grandmother just buy anything that is on sale, favoring low quality department stores – usually falling into the trap of “it was on sale, so i bought 3 of them!” My mother even took a part-time job at a local department store for the employee discount.

They don’t seem to have any interest in chatting with me and discussing my life, accomplishments, plans, etc. They want to go to the mall and buy things. This makes me feel incredibly uncomfortable as I know that they are not financially in a position to spend the kind of money that they do. Additionally, it hurts my feelings because I work my butt off to make my life what I want it to be – I’ve worked my way up the corporate ladder quickly and I have a budding romance that is quickly maturing in to something that could very well result in marriage, yet they make no effort to inquire or be a part of my life. I feel that their wanting to shop for me is more for themselves than for me. They push clothes and things on me that are not my style and then guilt trip me when I try to politely decline. They tell me that i have become a snob. I don’t try to deny that or defend myself because I don’t want them to know what I really think about their financial promiscuity – I just let them think that I’ve become a total snob.

With Christmas coming up, I’ve asked all my family members to get my gift cards to Target so I can purchase a television (I haven’t had one for 4 years to save money). My mother is now insisting that she can buy me a TV for Christmas [...] with her employee discount. When I tried to make up excuses why I didn’t want that, she acting like I had just refused her the chance to meet her new grandchild or something ridiculous like that. How do I politely approach this situation without hurting anyone’s feelings but also not accepting gifts that I’m not comfortable accepting?
– Margaret

My reaction would be to just accept the gift and move on with life.

You have to remember that you cannot change the behavior of others. People have to find within themselves cause for change. External forces rarely can do anything at all to cause someone to change, unless it’s to simply trigger something that’s already inside of them.

You’re growing and maturing and finding yourself on a different path than many of your family members. Your values are different at this point. The choice is really up to you: are you willing to set aside some of those values differences to maintain a relationship or not?

In some ways, I’m in the same boat as you. I know that many of my extended family members find our situation confounding. We’re both college educated and earn a good income, but we do things like make homemade Christmas gifts (when other family members just buy all kinds of random things) and buy our vehicles used off of Craigslist. There are values clashes.

At the end of the day, though, I’m okay with that. I know a gift from them is still a gift from the heart, even if it’s not a match for the things that I value. It’s a show of affection and an attempt to maintain a connection.

In your shoes, I would just suggest that you roll with it. Bond with your family where you can, and tread lightly in the areas where you can’t.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. lurker carl says:

    Q2 – The loan companies have zero vested interest to work with folks and their student loans. Defaulting on student loans means your salary is garnished, reduced government benefits, no tax refunds and legal troubles. Those loans will haunt you until principle and accrued interest are paid, deferring payment is compounding interest working against you.

    Lesson to learn, don’t pay more for an education than it is worth in the job market.

  2. Adam P says:

    I know it’s terribly unhelpful to the question writer, but I totally agree with Lurker Carl. I have to question whether one is smart enough to get into a university in the first place when they take out 6 figure student loans to get a job that salary plateaus in the mid 60s.

    I have seen the general rule of thumb to never borrow more than you will earn in your first year of your “real job” when you graduate. In this case the question writer should have borrowed no more than $44k.

    I graduated in 2001 with $24k or so, and that was scary stuff even on a $70k income.

  3. For what it’s worth, the RRSP for Canadains is not akin ot the ROTH IRA, in that taxes are paid on money when it is withdrawn from the RRSP.
    In Canada there is what is called a Tax Fee Savings Account (TFSA) that is more like the ROTH IRA in that taxes are paid on the money contributed, but no tax is paid on the money earned and/or withdrawn from the TFSA. The TFSA has a yearly contribution limit of $5000 CDN.

  4. Kevin says:

    “For those unaware, RRSP stands for Registered Retirement Savings Plan, which is much like a Roth IRA for Canadians.”

    As Tyler pointed out, this is wrong. An RRSP is more like a 401(k). You get to deduct your contributions from your income and defer the taxes until you withdraw the money during retirement.

    The Tax Free Savings Account is much closer to a Roth IRA (actually, much better).

  5. Adam P says:

    Yeah Roth IRA you pay tax if you withdraw the earnings (as opposed to the principle which is tax free); with a TFSA you can withdraw earnings or principle and pay no tax.

    RRSPs are more like traditional IRAs.

    Trent’s tax knowledge is lacking in more than one country now :)

    But to the question writer, I hope for you and your husband’s sake that the real estate bubble doesn’t burst in Canada the way it has in the US.

  6. Tom says:

    So essentially should I just stop paying (the private loans – I would pay my federal ones as I know the penalties for not doing that are nasty)?
    I believe this is false, the penalties are the same. If anything, federal student loans are much easier to receive forbearance and deferment on than private loans, and typically carry much less in interest.
    I think consolidation and asking for the IBR plan is the best way to go (Although, I don’t recall, but I think you can’t consolidate private loans with public loans). Then attack all costs of living and income options. Do you have a roommate? Could your low-paying career translate to freelance work as a second income?
    Roger, your situation sounds like you’re kind of screwed, but as a grown-up with full time work, you really shouldn’t purposefully default and hope that works out better that way. I don’t know NY state laws, but my guess is it likely will not. I wouldn’t want to risk relying on a friendly bankruptcy ruling either. suck it up and start working to pay it off.

  7. David says:

    Small point: the amount you borrow on a loan is called the “principal”. “Principles” are what you hope the person who lends you the money has, usually in vain.

  8. Tom says:

    Q6 – First of all, if all your loans are truly subsidized as in you have FFEL Loans, you either have a wrong interest rate or your lending house is lying to you about a 2% reduction. Your subsidized loan should be a 6.8% rate, prior to any discounts.
    Consolidation does not provide a better interest rate as Trent seems to be implying here. You don’t get to shop around for refinancing like home mortgages. Trent needs to get his facts straight here, it’s not the first time he’s made this implication.
    The government will blend your rates together and round up to the closest 0.125 percent. Your blended rate could fall at a multiple of 0.125 and there would be no rounding. Then there is one statement, one payment. You can call the loan consolidation people and get a quote over the phone for your new payments.
    One thing to consider, if you do have different rates, is that you can put your extra money towards the highest interest rate first, getting the most bang for your buck.

  9. blossomteacher says:

    As to the car question…I highly recommend the Scion XB. I have a 2006 model, and it seats even our tallest friends quite comfortably. Our salesman was 6’7″, and could adjust the seat to drive it, and fit in the back seat with no problems. I do not know if the newer models are as roomy inside, but I would certainly give them a look!

  10. Chaddogg says:

    Q6: Keep in mind — if you’d just like to have your payments taken out on days that are convenient to you, call your lenders. If they’re getting direct deposit/bill pay, they probably don’t have a huge vested interest in what day they bill your account for your payment. You may be able to get all of them to agree to change the payment date without having to consolidate (although as noted above, it might be good for you to do so).

    My student loan/mortgage lenders have always been willing to adjust/change my direct deposit/bill pay dates, to accomodate different pay dates at different jobs, for instance….

  11. Jackowick says:

    @#1 responders: Look, Trent is just giving a general example so US readers can understand the situation. Stop being such ostentatious knowitalls. If you read his answer, it’s actually more about how to avoid pulling money from retirement in the short term.

    #2 I love Lurker Carl. Many people nowadays are starting to question the “getting a degree for the sake of a degree” mentality. Many will disagree, but hindsight being 20/20, I would have done community college for 2 years prior to a 4 year for my general business degree (I do work in business, but my current job is based more on the experiences I had from my first post-college job, which was very generic but I excelled). But if you did pay heavily for a degree, remember that no one is going to fight for you, or go out of their way to help you. It is all on you to lead your negotiations with the various agencies involved. Don’t defer payment, make it a hard goal to throw every single dime possible at that loan. Suck it up.

  12. valleycat1 says:

    Q10 – If I were in your shoes, I’d consider telling mom & grandma that I enjoy spending time with them, and give them a couple of non-shopping alternatives. Then, if they still want to spend the time shopping, let them know up front that I’ll go with them only if they refrain from buying for me or trying to make me buy things. Let them know ahead of time that if they revert, I’ll (politely & rationally) decline the item and go wait for them someplace neutral (food court, coffee shop, the car). Then follow through. If they argue, I’d just restate my position using the good old broken-record ploy – same words, same facts, no trying to counter their arguments. If they buy anyway, it’s your call whether to return the items or haul them home.

  13. jim says:

    Q2 Roger : How about you move out of NYC to live somewhere that isn’t ridiculously expensive? If you can live somewhere cheap and still make a reasonable income then you could end up with much more disposable income to put towards your debt.

    Lurker Carl is right, those loans will haunt you for life if you don’t pay em. You said “I do wonder if since I’m in such an extreme position I might be able to rid myself of some of them” No, absolutely not. You won’t discharge them in bankruptcy and the banks won’t help you out much at all. About all the banks are likely to do is let you kick the can down the road some so interest compounds and you owe even more later. Unfortunately with private loans theres going to be little relief for you. Thats the nature of your situation. Consolidation might help by giving you a longer repayment term and lower monthly payments. I doubt consolidation will lower your rates since the banks have little reason to lower your interest. I seriously doubt banks are going to just forgive your debt simply cause you have little income. You can’t escape that debt and the banks know it. If you stop paying then the interest will just compound and pile up so in a decade or so you’ll owe em $200k instead of $120k. The banks won’t stop trying to get their money and you won’t be able to get free of that debt till you pay it.

    Q3 : I have to again disagree with Trents advice of basing the size of your emergency fund directly proportional to the # of people in your household. I think 6 months is a good target and that really shouldn’t vary whether you have 1,2 or 6 kids.

    Q6 Mark : Consolidating your subsidized loans will NOT change your total interest rate. When you consolidate federal loans they just average out the interest rates using a weighted average. So for example if you have two loans for $10,000 one with 4% and the other at 6% then you consolidate you’d have one loan for $20,000 at 5%.

    That 2% savings on the $11,000 loan is $220 in interest per year. Surely this is worth dealing with a little hassle.
    Why not just set up auto payment for the loans?? If you’re worrying about not having the cash in the bank then put an extra buffer of cash in that account so that you have enough to always cover a months worth of payments.

    Q9 Delores : For the basics check out ‘Personal Finance for Dummies’ or similar titles from Eric Tyson.

  14. Des says:

    Q2 – This may sound harsh, but you need to get serious about this debt, and the sooner the better. As others have pointed out, these won’t go away until you pay them, and letting them go to court for garnishment will only add massive fees and interest to the mix. You need to move to a lower cost of living area first. I’m sure you have reasons for wanting to live in NYC, and you can move back later, but for now you cannot afford it. 44k is not enough to warrant staying in NYC. I highly suggest reading Jacob Fiskers Early Retirement Extreme blog and book, not because I think you are hoping to retire early, but because that is the extreme-frugal level you need to be living at for the next few years until you pay this down to a more reasonable level.

    Or, if that sounds unpalatable, you could find a job that pays six-figures. You have options, just not easy pleasant ones.

  15. Rebecca says:

    Q2-Unfortunately, you’ve learned a harsh lesson. My friend’s son has $180,000 in student loans just from law school. He passed the bar, but was offered a per diem job at $100 per day in New York City. His loan payments are $1300 a month. Do the math. I would never, ever want to be in his shoes.

    I think the best thing to do today is work, and take a few classes at a time and pay as you go if possible. It’s just not work taking out huge loans and taking the chance of not getting a good paying job at the end.

  16. Julia says:

    Q2: Start looking for a second, and then maybe a third job. As others have said, all you can do about student loans is pay them.

    Also, as some have said, consider moving to a less expensive area. This may be tough for you, but desperate times call for desperate measures.

    Even if you end up commuting to reduce your living costs, I can’t help but wonder if there might be a situation where it’s worth it. You may have to spend 2 hours a day on a train, but if you can reduce your expenses enough to make some headway on those loans then you can think of that commute as a second job.

  17. Todd says:

    Q10-I know many people will disagree, but I believe that you have to emotionally disengage from financially inept relatives, even if(especially if?) they’re your parents. It’s easier to do it sooner rather than later.

    I held out hope until the third time they asked to borrow $1,000 (which is a big chunk of my savings). I said no and then suffered for months as the entire extended family said, “You would let your own mother go hungry while you have money in the bank?”

    I will always buy my mother groceries if she is actually hungry, but to see money go to pay off credit cards that just get charged up again? This was incredibly painful and I can see where it’s headed, so I just had to disengage emotionally. What do you do if someone is headed toward a poverty-stricken old age and won’t stop shopping or seek help?

  18. Laura in Seattle says:

    Q2 – Do not stop making your payments. You need to do two things.

    1) Request/apply for an “income-based repayment” (IBR) plan. This limits the amount of your monthly payment based on your income. Many people will point out that this payment structure usually means you are only paying interest and fees for the first few years. This is correct, which is why you also need to:

    2) Ask your lender or lenders how you can make a principal-only payment. This is a payment that is paid entirely toward your principal owed on a loan, NOT to interest or fees. Most lenders do not offer this as a payment option online. But if you call or contact their customer service reps and ask specifically about it, they will offer you a way to do it. Usually you have to send a paper check or money order to a different address or different processing center from the one you use for your regular payments. The IBR plan should lower your monthly payment to a rate you can afford. If you can spare any money above and beyond that amount, even if it’s $10 a month, use that to make a principal-only payment. Every dollar you pay directly toward the principal decreases the dollar amount of interest you’ll be charged in the next cycle. This is the only way to make certain your principal goes down while you are on the IBR plan.

  19. Jane says:

    I definitely feel sympathy for those newly graduated students who have taken on so much education debt. I graduated in 1999 with about $15,000 in debt. That was manageable. I can’t even imagine what it would feel like to have such a burden on your shoulders. I know a subset of the Occupy Wall Street movement focuses on student loan debt and even calls for it to be forgiven. But that is just not going to happen. Unlike even a house that can go into foreclose, there is no asset that the bank can auction off. Plus, how would you hold people responsible if it could be dispensed in bankruptcy? Wouldn’t many just take it out knowing they could declare bankruptcy upon graduation?

    Unfortunately, this generation is stuck with the debt. The hope is that in the future we can make it so that students can’t borrow that much. Or lower the cost of an education so that middle class families can actually afford it.

  20. Todd says:

    Small businesses fail all the time and are forced to declare bankruptcy. We all foot the bill in the name of encouraging people to take the risk of starting small businesses. Some succeed and pay off in terms of job creation and tax revenue. Some fail.

    Why should student loans be any different? Some will succeed and pay off for society; others will fail, and we should absorb the cost of them at least trying to get an education.

    Public K-12 education seems to pay off for many. (Yes, there are still many good public schools out there.) For those who drop out, we as a society pay the cost and say, “well, at least we gave them a chance.” Why shouldn’t college be included in that philosophy of public education?

  21. jim says:

    Todd, Colleges are heavily subsidized by government funds, students with financial need are heavily subsidized by government financial aid and subsidized student loans are subsidized by government. Government student loans already have the income based repayment system to help out those in need.

    If private student loans were subject to bankruptcy then private lenders would charge much higher rates or simply not offer the loans.

    I get your point, but on the other hand I don’t see a easy solution. Making college free for everyone would be extremely expensive and our nation is already running massive deficits. People do already get tons of aid for college. The people with the real debt problems invariably went to expensive private schools and piled up an excessive amount of private loans. Only so much the government can do there.

  22. Wes says:

    Todd,

    Jane touched on one of the differences between small businesses (well, her example was for houses, but the idea is the same) and student loans: assets. You default on a business, there are usually some assets laying around to soften the blow for the creditor (and these are often considered before the loan is written). If you can’t find a job, the creditors can’t really take your education back.

    Also, college is included in the philosophy of public education. I went to a state school for free (save for room, board, books, etc) and only had to keep a 3.0 (a VERY low hurdle). Not all states are as generous, but most subsidize higher education to some degree. The problem is that it costs a lot more to provide higher education than it does to provide basic education. In a world of limited resources, states have to make tough decisions. Further, state subsidies for unprofitable degrees (mostly liberal arts–I’m not saying it’s not important, just pointing out the reality that it isn’t necessarily an wise investment) may actually be part of the problem. Demand for college grads has not kept up with the ever increasing (and heavily subsidized) supply, so we end up with poor kids like Roger who overinvested in their education.

  23. Wes says:

    Jim’s post came while I was typing mine, sorry for the redundancy.

  24. Johanna says:

    “If private student loans were subject to bankruptcy then private lenders would charge much higher rates or simply not offer the loans.”

    Are you saying that would be a bad thing? I think maybe private lenders could use an incentive to put some thought into whether they were lending to people who would be likely to repay.

    If you say “you made your bed, now you have to lie in it” to people like Roger, why not say the same to the lenders? And the lenders, unlike Roger, were not 18-year-old kids at the time.

  25. Ryan says:

    Roger should note that you usually can’t consolidate private and federal loans together. He’ll most likely still have at least 2 payments to make per month.

  26. Wes says:

    Johanna,

    I generally agree with your sentiments (that is, I believe it is sometimes appropriate to allow people to go bankrupt), but we have to consider people’s expectations when the loan was made before changing the rules.

    Student loan lenders had bankruptcy law on their side when they wrote the loans, and took that into consideration when they paid Roger’s tuition. The bed they made did not foreseeably involve default.

    Roger, on the other hand, understood (or should have understood, or someone who should have understood signed for him) that there were no gaurantees that he would land a nice enoug job to pay back his loans. His bed, then, did foreseeably involve his current situation.

    So, allowing current graduates to default on their loans would be inequitable. But as a general policy matter, I agree that it would be prudent to let lenders have more skin in the game. However, this would have some negative consequences, such as higher interest rates, which would be further exagerated by the fact that there is no collateral for a student loan. This would be a pretty big barrier to higher education and, for better or worse, limit it to those who have the means to pay for college as they go.

  27. Bonnie says:

    Q10 – I disagree w/ Trent about the “just take the gift and move on”. If it were a trivial amount of $, that would make sense, but given that your mother wants to buy you a TV that she can’t afford even with the employee discount, I would absolutely stand firm and refuse the gift. Explain to her why you’re managing your money the way that you are and how important it is for you to stay out of debt and how you don’t want her to go into debt for a gift for you. The truth is, her poor money management is a huge burden on you as you’re the one who’s going to have to take care of her eventually. Your mom and grandmother are trying to fill some void in their lives w/ their shopping and you should avoid at all costs getting sucked into their neuroses.

  28. Johanna says:

    @Wes: I actually agree with you (how about that?) that it would not be fair to change the rules on the lenders after the loan has already been made. I was talking more about the general situation, where people seem to think that borrowers should be expected to foresee every possible consequence of their borrowing, but lenders can’t possibly be expected to cope with their loans being dischargeable in bankruptcy.

    I actually don’t think making student loans bankruptable would be the end of student loans as we know them, any more than, say, credit-card issuers are hindered by the possibility of discharging credit-card debt. Lenders can probably come up with some measure – maybe a combination of SAT scores, the college’s graduation rate, and the student’s major – that will let the make a good guess at how much any given student is going to be able to repay, so they can limit their lending to that amount.

    My guess is that if that happens, a lot of private colleges won’t be able to get away with charging sky-high tuition rates anymore, and they’ll come up with a way of offering an equally good education at a more reasonable price. But if I’m wrong, and if bankruptability of student loans means that people like Roger need to rethink their career plans or else not go to college…well, that’s exactly what people here are saying they need to do anyway. So what’s the problem?

  29. deRuiter says:

    Q1, Dear Linda, You’re committing financial suicide by dipping into your retirement. if you’re running a $400./ month shortfall, then you need to get a part time job wiatressing or scrubbing floors, and your husband the real estate mogul to be neds a part time job a couple of nights a week. Each of you ought to be able to easily earn $100./ week delivering pizzas or whatever, and you’d then be $400 AHEAD each month and could put that money back into your retirement. You are paying off credit cards from one failed business, and if your husband fails at his real estate selling career, you’re going to be in worse shape. There are a lot of people leaving real estate right now, because sales are down and you have to work harder to sell anything.
    Q2 Roger, The same advice is pertinent for you, get a part time job, increase your income and knock back those student loans. You can not ever buy a house, if you don’t start paying off those loans, and with employers looking at credit reports (to judge how responsible a job applicant is) seeing studfent loans unpaid is going to sabotage your future job hunts, ability to rent an apartment, insurance rates ((the company will not give you fire insurance because they think you will burn the place down to generate cash.)
    Why more people who are swimming in debt don’t get a second job is a mystery! I always had a side job while in school (2 at the same time, worked in cafeteria for discount meals and as a barmaid), and all the while I had a full time job I worked as a waitress on the side. If you are “just making ends meet” you and significant other both need a part time gig to knock back loans, fund retirement, develop a cushion. Having $150,000. in student loans and a $45,000. per year job is stupid, but it’s done now, so start working part time and devote all that money to paying off the loans.

  30. Kate says:

    Q10 – I, too, disagree w/ Trent about the “just take the gift and move on”. If the specter of eventually having to support said mother (and possibly grandparents) were not in the picture, then the situation might be viewed in the way that Trent’s advice suggests. It would be very difficult for me to enjoy a TV that was purchased with funds that were borrowed (which it is if the mom is tapping an 85 year old man for loans). Family and finances can be hard, hard, hard…whether the family in question has debt or money to burn.

  31. My comment is about the student loans, I am in just about the same condition but in 10 years I haven’t even been able to pay the interest. I’ve been deferring it all this time, and it scares me, but there is no way I can make even the ‘reduced for hardship’ payments. I’ve spent those years cutting down my other debt and learning to live frugally, but still have no real hope of coming up with that payment unless I do win the lottery (which I don’t play). I have had conversations with the loan holder and with other companies who help with this sort of thing and haven’t gotten any answers. My payment on the economic hardship plan would be $250, which is less than the interest, but still unreachable. With the amount that Roger owes it doesn’t sound like his payment could go much lower. I’ve even tried asking about some sort of settlement for lesser amount like the IRS does on back taxes, they just keep telling me about the economic hardship plan which they tell me after 25 years they’ll forgive the balance. So they want me to spend 25 years pay them $75,000(which is only interest) on a loan that was 15,000 and then they’ll ‘forgive’ the balance! Great idea. Trent I haven’t found the forgiveness for low income you mentioned, there were two or three jobs that qualified for forgiveness, I think military or school teacher, it was very specific and limited and as an artist with a crappy sales job I don’t qualify. I only have one loan, and Sallie Mae has offered no help with solving this problem, I’ve half jokingly thought I may have to fake my death to fix this, so if you have any other suggestions I’d love to hear it.

  32. Tom says:

    Sarbrina –
    I am really sad to hear your story. The solution for student loan debt is a lot easier said than done. It is very easy for us commenters to say go get a 2nd or 3rd job and get rid of all your creature comforts if your current income is deficient to your amount of debt.
    But that being said, that’s what needs to happen. You have to pay it off on some time plan, because barring death or major disability that will obviously inhibit your ability to earn money, you owe it back to SLM. There is no asset for them to repossess, so that is how it works.
    There is one more thing you can do: you can use your voice and tell your story to anyone who will hear you. I don’t just mean your congressman either. Maybe you have the opportunity to educate someone else thinking about higher education about how student loans work. I think a common theme to student loan issues is “I didn’t realize how this was going to work, that my options are limited, and so few consumer protections.”
    Thankfully, I can afford my loan payment, but I still remember the sticker shock from my first bill. I consider myself lucky to find steady employment immediately after graduating, but I wish I knew better at age 18 what I was getting myself into.

  33. Evita says:

    Q1 Linda : I feel for you. I am absolutely with Trent and deRuiter on this: only at the last resort should you cash your RRSP. The government will pay itself right away on the tax, meaning that $750 will disappear when you cash it, plus more when you do your yearly taxes. And you are not allowed to fund back this $5,000 when you have the money, your ceiling is permanently lowered at each withdrawal. The “tax-free account” allows you to pay no taxes on the interest or dividend generated in the account… peanuts compared to the tax repayment!
    How do I know ? I am Canadian, and twenty years ago, I did exactly like you did. I should have taken a line of credit instead. Both of you being in your fifties, you may not have the energy for a second job, but can you rent a room ? pare down your expenses a little more ? free-lance, babysit, whatever ?

  34. jim says:

    Me : ““If private student loans were subject to bankruptcy then private lenders would charge much higher rates or simply not offer the loans.”
    Johanna : “Are you saying that would be a bad thing? ”

    I think it would be a mix of good and bad.
    Higher interest rates wouldn’t really help borrowers in general. But not having private loans at all may or may not be good. Private loans aren’t inherently bad. It depends on what you do with em. Unfortunately it seems that they are abused more than not.

    Some families don’t qualify for subsidized loans due to their income level and still don’t have assets to spend. Their only option is private loans. If people use private loans prudently then they can help fund college and be a good thing.

    On the other hand it seems many people get private student loans which shouldn’t be and we always only hear the horror stories. In that respect not having private student loans int he first place wouldn’t be bad. It would keep people like Roger getting far in over their heads in debt.

    I think private student loan lenders should have some more scrutiny, more regulation, more rules and I think that we should allow bankruptcy in some more situations. I’m not saying let anyone wipe out private loans but at least make it a bit easier for the people who are in really tough financial situations. I know there are hardship rules now but those hardly ever come into play.

    I’m not really sure how many private loan borrowers are borrowing money they ‘shouldn’t be versus how many borrowers are using them prudently. We tend to only hear the horror stories. I’m sure there are many people out there who have good experiences with private loans but it doesn’t make for interesting news.

    Overall I’d say that private student loans aren’t good. But they aren’t all bad.

  35. Jeremy says:

    Q4 — You are not “in for a world IRS hurt” if you can’t pay your tax bill on time. Google form “F9465″, installment agreement request. The IRS will automatically grant you up to 3 years to pay your taxes on a monthly plan if the amount owed is less than $10,000.

  36. AnnJo says:

    Could we please distinguish between “getting an education” and getting a college degree? At least half of the typical university’s course catalog consists of courses that a person of normal intelligence and some measure of diligence could learn independently, at virtually no cost. With the enormous resources of the internet now available, this is truly the best time in human history to be an autodidact.

    Not to mention that a significant amount of the coursework college students take and pay for consists of remedial work to make up for poor study habits (and occasionally, lousy schools) in high school.

    Sabrina Mantle above is an example of someone who would have been far better off NOT attending college. A college degree in art is likely of very little advantage for an art career, and if her degree was in something else but her career goal was art, the money invested/borrowed to obtain that degree was basically thrown away.

  37. Johanna says:

    “At least half of the typical university’s course catalog consists of courses that a person of normal intelligence and some measure of diligence could learn independently, at virtually no cost.”

    Which half did you have in mind?

  38. kristine says:

    Group critique of every project is an invaluable tool as an artist, and frankly- they way the most growth is achieved. That and exposure to the conversations, insights, and approaches to intellectual challenges by fellow learners cannot be replicated via self-teaching. Technical prowess and knowledge of art history is mere subset of being a great artist. A comment section, no matter how long or intelligent the comments, does not substitute for interactive conversation in a roomful of other artists.

    Frankly, I could not imagine an example where you could be more wrong- in person visual and tactile presence is required for a good artistic education. In-person scaffolding is essential. An art degree, at a good school, reflects an experience and an education that cannot be replicated at home. Most design firms require a college degree. And most painters never got into it for the money- they followed their passion only to find the industry bottoming out.

  39. kristine says:

    “Many student loan programs have need-based deferrments, reduced rates, and loan forgiveness programs for people who are in careers with lower earnings potential.” Many? Really? Care to back that up with a few links or examples? That there are many options for those in over their head is a myth. There are few, and they are highly restrictive.

    I’d love to see a post about the S&P downgrading the major banks today being given the near invisible treatment by the press. It is a huge headline in the rest of the world. It is a head in the sand to think it will not effect every one of us. BoA is worried about liquidity.

  40. AnnJo says:

    Johanna, for starters (based on my experiences in obtaining a double-major B.A. and two advanced degrees:

    Pretty much any course that is taught in a class of over 30-40 students and does not offer labs or Socratic method instruction.
    Any course you can pass without studying.
    Any course where you can ace the tests merely by studying the book. (That included at least 50% of even my professional school classes.)
    Any “independent studies” class that does not require a rigorous plan and a serious defense of the final product.
    Any course for which you can get credit for merely engaging in various forms of volunteerism, public service, activism, or the like. (I don’t doubt many Occupy participants are receiving college credit for their participation.)
    Any first or second year language class.
    Almost all lower level literature, history, economics, political science or social science class, and quite a number of upper-level courses in those fields.
    Almost all first year accounting and business courses.
    Many introductory science classes.
    Many if not most practicum and internship classes (granted that it might be harder to arrange such experiences without a college’s resources to assist)

    Undestand that I am not saying the educational experience might not be a better one for a dedicated student in the hands of a gifted teacher and/or in a lively seminar. On the other hand, even such experiences can sometimes be obtained much less expensively than at college. One of the richest educational experiences I’ve ever had was a course on Shakespeare offered through The Teaching Company. Cost about $79 IIRC.

    And self-guided learning of those courses would require dedicating considerable time and effort, just as obtaining a real education at college does.

    Kristine, I understand the points you are making and don’t entirely disagree. I’d just point out that in any large city, finding “a roomful of other artists” and the kind of learning you refer to doesn’t really require going to college.

    I confess I don’t know much about the employment market for artists; if design firms today put a higher value on a degree than on a winning portfolio, maybe they just want employees who will be cowed by massive student loan debt?

    But then, my original point was that there’s a difference between an education and a college degree. The latter is really no proof of the former, and the former is available without the latter, but it is true the degree may be a required credential in some settings.

  41. kristine says:

    I never said they value a degree more than a winning portfolio. There are enough degreed artists with winning portfolios that no-degree designers have a very small chance.

    And after reviewing many portfolios and hiring many designers, I can say that the better colleges turn out higher quality candidates, and better designers. There are exceptions,, of course, but a solid formal design education is always evident in the work.

  42. kristine says:

    And if you only want an education for your own fulfillment, and not to work in that field, it is a hobby, not a profession. If the education itself is the goal, that’s one thing. If a profession is the goal, then most people don’t even know, what or how much they don’t know, until they take classes, or enter the field unevenly prepared- if they can get that far.

    Design firms, like anyone else, want the kid who got the scholarship, and who is hungry and ambitious, and enthusiastic. Wages are driven by supply and demand, like anything else.

    My husband is a history professor, at a tier 2 school, and he spends the majority of the time in his one freshman class teaching critical thinking, getting the kids to use primary sources, and helping them to write coherently. These are not skills the kids will learn on their own, or with which they were properly prepared. In class they analyze and debate, and formulate theories on how/why events occurred from examining the evidence, not just reading and rehashing. I’m sorry, but it sounds like you have a chip on your shoulder about higher ed, maybe paid too much, and went to more than one crappy school. Thats’ just how it sounds. What you describe is a waste of time and money, but I am sure there are schools like that out there. I also have 2 advanced degrees, and never encountered the awful lack of substance and enrichment you describe. And I am a very demanding audience. I am sorry that you were so disappointed with your experience.

  43. AnnJo says:

    Kristine @39, Trent declared his “head in the sand” approach back in the middle of the 2008 financial crisis. I can’t imagine that view changing now. If you want posts on the eurozone situation, banking, liquidity and risk issues, try a blog called the shocked investor.

  44. Johanna says:

    I’m a big fan of the Teaching Company DVDs, but college courses they are not. College courses, for example, have homework. If a Teaching Company DVD was one of your richest educational experiences, if you could ace all your classes just by reading the book, and if your experience is that “many” introductory science courses don’t have labs, then maybe you got all your degrees from the wrong school.

  45. AnnJo says:

    Kristine, I attended a top ranking university and don’t feel any resentment about it – as a matter of fact, I quite enjoyed my student years, but then my tuition payments back then were in the range of $80 to $140 per quarter, and I completed my education without any student loans.

    To give you an idea of how costs have changed, $100 when I was a junior in college translates in inflation-adjusted dollars to $555 today. But a quarter’s tuition at my former University today is not $555 but $3,449. Is an education at my old University 500% better than it was back then? To the contrary, it is far less demanding and the quality of the faculty available for undergraduate instruction is arguably considerably worse.

    The skills you describe your husband teaching are what I would consider remedial. A student who has completed a high school program with a pre-college orientation should not need the focus in his/her college history classes to be basic instruction in critical thinking, use of primary source materials and coherent writing, especially not at costs to themselves of such huge amounts (and to the taxpayers of probably twice that much).

    And there, indeed, is the source of my resentment – not of my own college education or its cost, but of the exhorbitant amounts of money that are being spent today to turn out what are all too often really poor quality results. The abysmal knowledge of history among college graduates has been well documented, and no wonder, if history professors are having to play catch-up for what students should have been required to learn before they were ever admitted to college.

    But the biggest problem is that far too many young people who are not really academically inclined are being made to feel they will be failures in life unless they go to college. Instead, they end up failed or at best marginally successful college students with really big student loans and four or five years of lost earning capacity. And in the meantime, they drive up demand for college spaces, allowing colleges to continue their dramatic rise in costs without needing to work seriously on quality.

  46. AnnJo says:

    Johanna, “homework” is what you make of it.

    Along with the Teaching Company’s tapes I read nine of Shakespeare’s plays that I wasn’t already well familiar with and re-read several more. I read a book written by the course lecturer (Shakespeare’s English Kings by Peter Sacco), Plutarch’s lives of Caesar, Antony, Brutus, Coriolanus and Pericles, the abridged version of Churchill’s History of the English Speaking Peoples (yeah, it goes on long after Shakespeare’s time but reading Churchill is hard to stop), and Harold Bloom’s Shakespeare, The Invention of the Human, as well as looking up probably dozens of historical, etymological and other references. Oh, and watched probably a dozen video performances of plays.

    I know that coursework would have required writing, and writing would have required a somewhat different confrontation with the material than I had, but even so, no college class in my experience was quite as intense.

    And I didn’t say I could ace ALL of my classes from reading the book. But back in my day, most of one’s grade came from tests that measured the degree to which one had absorbed and could work intelligently with the material, rather than attendance and class discussion.

    I didn’t say that many science classes don’t have labs, although as it happens, the ones I took in college didn’t as far as I can remember (geology, astronomy and physical anthropology).

  47. Kate says:

    This is so true: “But the biggest problem is that far too many young people who are not really academically inclined are being made to feel they will be failures in life unless they go to college. Instead, they end up failed or at best marginally successful college students with really big student loans and four or five years of lost earning capacity.”
    And that is a huge part of the perceived problem with our education system: we, as a society, expect for all of our students to go to college. College is not, and shouldn’t necessarily be for everyone.

  48. Johanna says:

    It’s trivially true that we don’t need, or even want, for absolutely everyone to get a college degree, but (1) we’re not really in danger of that happening, and (2) the mindset that some people just aren’t cut out for college can be really problematic, as shown by an article in the Washington Monthly (from about a year ago) called “College Dropout Factories.” Good-but-not-great students from poor or minority households are pushed (or financially constrained) toward substandard colleges, where they don’t get the support they need (think incompetent academic advisors) and end up dropping out in shockingly high numbers, and most people just look the other way, because hey, some people just aren’t cut out for college.

  49. AnnJo says:

    Johanna, the difference between what I called “not academically inclined” and what’s involved in the mindset you disapprove of – “some people just aren’t cut out for college” is huge. It’s the difference between lack of motivation or drive and lack of capacity.

    That being said, you won’t get any argument from me in defense of the adequacy of some parts of the educational establishment. For many students, it starts with their high school essentially lying to them about their degree of preparation. The Washington Monthly article you mentioned, for example, offers an example of a student who graduated from high school with a 3.6 GPA but scored well below the 50% percentile on the ACT. We further read that only some 31% of that high school’s students even meet state standards on their testing. What are the odds that the GPA this school awarded the student really reflected excellent mastery of a reasonably demanding curriculum? Slim to none.

  50. Johanna says:

    Motivation, capacity, whatever. I’m sure there are plenty of people who would look at Chicago State with its sub-freezing graduation rate and see a bunch of students who are “not acadmically inclined.”

    And if Nestor Curiel showed up at college not having mastered basic material because his high school didn’t teach it to him, it’s important to emphasize that that’s not his fault. (Although I know you didn’t say it was.)

  51. AnnJo says:

    Johanna, I doubt that ANYONE, much less plenty of people, would look at Chicago State and see anything other than a decades-long fraud on students and taxpayers, much like the school district from which Nestor Curiel graduated. Both are also government-run institutions that are being allowed to continue defrauding students and taxpayers without any serious accountability. No doubt both would argue that they lack the resources (governmentese for money) to do a better job, as if paying incompetents and frauds higher wages miraculously makes them competent and honest.

    I agree that Nestor Curiel is not really to blame for not having mastered basic materials when his high school both failed to teach him and lied to him about his achievement, thereby depriving him and his parents of the opportunity to go elsewhere or demand better. I wonder if you and I could possibly agree on whose fault it is?

  52. Johanna says:

    I bet we don’t agree on what the solution is, though.

  53. AnnJo says:

    Can we agree that rewarding fraud is NOT a solution?

    At least once every year or two, I find myself included in a class action lawsuit against a company in which I used to own stock, or a bank through which I financed something, or a business from which I bought something. Almost always, the claim arises over some alleged deficiency in disclosure from which the defendant is alleged to have derived some tiny benefit from each member of the class, amounting to a few million dollars in all, a fractional share of 1% of the defendant’s revenues. The directors and officers are always named defendants, and on the rare occasion when one of those lawsuits is based on some real wrongdoing, heads do (figuratively) roll, employees get laid off and/or lose substantial sums of money in their SOPs. There are consquences to even the most inconsequential failure of accountability.

    And yet Chicago State and the K-12 school district Mr. Curiel attended engage in a massive fraud amounting to probably well over half of their respective revenues and no one is sued, no one is fired, and in all likelihood, the organization doesn’t even see a cut in its budget.

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