Portions of Student Loans are Increasingly Going Toward Non-College Expenses

Chunks of Student Loans are Increasingly Going Toward Non-College ExpensesIt’s no wonder that the ballooning U.S. student loan debt — currently exceeding $1.1 trillion — is worrying economists.
Some Americans, particularly those struggling with finding jobs or those who don’t earn enough to cover living expenses, are seeking low-cost student loans.
The proceeds from these loans are increasingly being used to cover daily living expenses, and not tuition or other college-related costs.
Low-rate student loans cover tuition, textbooks and a vague category known as living expenses. The figure for living expenses is determined by each school and can make it easier to get a student loan than a more traditional loan from the bank.
The federal government performs no credit checks for most student loans.
An article by the Wall Street Journal examines the rampant use of student loans for non-college expenses. It followed a warning by the U.S. Education Department’s inspector general last month about the rising popularity of online education, which has led more students to borrow excessively for personal expenses.
“Its report said that among online programs at eight universities and colleges, non-education expenses such as rent, transportation and ‘miscellaneous’ items made up more than half the costs covered by student aid,” the WSJ reports.
In 2011-2012, about a quarter of student borrowers got loans totaling more than their tuition, after grants, by about $2,500, according to research by Mark Kantrowitz, a higher-education analyst and publisher of the education site Edvisors.com.
Some students say they are planning to get a degree but must borrow as much as possible because they can’t find jobs that pay enough to cover day-to-day expenses.
Tommie Matherne, of Billings, Montana, is a 32-year-old married father of five. He has been going to school since 2010. That’s when he realized that the $10 an hour he was making as a mall security guard wasn’t covering his family’s expenses, he told the Journal.
“We’ve been taking whatever we can for student loans every year, taking whatever we have left over and using it to stock up the freezer just so we have a couple extra months where we don’t have to worry about food,” said Matherne, who owes $51,600 in federal loans.
There is another worrisome element of the growing student loan debt. Most of it stems from federal programs and amounts to debt that cannot be discharged in most cases of personal bankruptcies, unlike credit card debt.
Federal debt has no liens on any assets, and carries with it the possibility of wage garnishment by a government-appointed debt collector.

One thought on “Portions of Student Loans are Increasingly Going Toward Non-College Expenses

  • March 22, 2014 at 7:58 am
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    According to DegreesAnywhere.com, a general MBA can be obtained for as little as $6k and as high as $120k. If students would do a little research, they would find that it is not nearly as expensive to get a college degree.

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