Friday, November 04, 2011

Yet another illustration of why the Federal Government is in trouble: student loan edition

And, no, this is not a political post; it is a sad, but true, family story.

My sister (I call her Betty on this blog because that is not her real name) has had some tough times, none of which are immediately relevant to this discussion. It will suffice to say that she has emerged from bankruptcy and divorce with a responsible job (she is a high school teacher). Her oldest child, a daughter, is now in college.

My niece is a bright girl and could have been an engineer. Engineers, particularly female engineers, are in great demand in America, but engineering jobs, though well-paying, come and go according to the state of the the economy and opportunities are not evenly distributed over the landscape. My niece has been shaped by her environment and her childhood experience; she is therefore cautious about reaching too far and has decided to be a nurse instead. Nurses, she is sure, will always find work wherever they are. I think she's right. But I still wish she'd tried engineering.

Anyway, my sister has had to apply for a loan to finance her daughter's tuition.

The U.S. government, you may know, has taken over the student loan business. Student loans should be the safest loans for taxpayers to make; they must be repaid in almost all circumstances. Student loans can not even be discharged in bankruptcy. But loans to students are insufficient to cover the costs of college.

Parents of college students know too well that when we fill out our FAFSA forms, the government calculates an amount, based on all the financial data supplied, that a parent should be able to contribute. I have found, in general, that this amount is always about three times more than I think I can contribute.

Betty's experience, apparently, has been similar. But the government, having grossly overestimated what Betty is capable of "contributing," is willing to give her a loan for the amount that she can't pony up on her own. Isn't that nice? And isn't that insane? If you have to take out a loan, then you really couldn't "contribute" the calculated amount, could you? (I take the time to spell out the obvious in case someone from the federal government should chance upon this post and attempt to read it.)

I don't know if Betty's credit history figures into it -- for reasons I will come to in a moment, I doubt it -- but the government, in its impenetrable bureaucratic majesty, was unwilling to give Betty a loan (over and above the grants and loans it will give to my niece) unless she could get someone to "endorse" her loan.

You've already guessed who she asked.

I've skimmed through all the verbal sludge on the site and it appears that, basically, Betty had asked me to be a guarantor of the loan; that is, were Betty to stop paying, the government could come after me. (Why the government chooses to call that an "endorsement" instead using the perfectly understandable, traditional word "guarantee" is beyond me.)

I warned my sister that I didn't think I could possibly qualify. I co-signed a loan for Older Daughter's car some years ago without too much trouble -- but I wasn't two months behind in my home mortgage or a month behind in my office rent or carrying $30,000 in credit card debt then.

I am now. (Those parental "contributions" really add up over time.)

I wouldn't loan me 75 cents to buy a newspaper.

I explained all this to Betty. With family, you have to level. But she asked me to please try anyway.

So I did.

This morning.

The site expressly warns that it will run a credit check. This is done during that ominous pause after you've approved said check while the government computer queries all the computers on Wall Street to see how your finances really are. I was sure that any rational computer would have a hearty electronic belly laugh as it spit my proposed "endorsement" back on my screen. Though humiliated, I would have thereby discharged my familial duty without further jeopardizing my (increasingly dim) future.

But a computer is only as rational as its programming. And this was a government computer, programmed (I guess) by government employees.

The darn thing accepted my endorsement.

Thinking my credit is any good is absolutely crazy. I emailed my sister this morning after this experience advising that the computer could only have accepted my endorsement because it is so sure that Betty will be able to pay back the loan. Because, obviously, I could never. If the government really thinks otherwise, it is no wonder the government is in such trouble.

1 comment:

bekahjane said...

ha! me and you both curm.

hey -- on a different note, WISH you would weigh in on the Mississippi Initiative 26 thing. Need perspective from your perspective, of course.