Student Loans

Disclaimer:

This document is based on my earlier writing a year or so ago that I suspected might have been too biased and with errors. So I submitted it to Grok asking it to remove any unreasonable bias and correct any errors. Grok responded and I asked it to rewrite what it had just written so that it would be easily understood by a pre-college student or their financially illiterate parent. I then edited that version to reflect my strong opinions regarding what I see as a great fraud on students, parents, an America at large.

The Student Loan Fraud

Simple example of how student loans work and their potential risk.

Imagine borrowing money to buy a car. You get the car now, but you pay back more than you borrowed because of interest. Student loans work the same way — but the “car” is your college education, and the payments can last 10, 20, or even 30+ years. Both new cars, & especially Student Loans can ‘kill’ any future investing or home ownership potential & damage your retirement dreams.

Anecdote: Approximately 10 years ago I was staying in a hostel in Edinburgh, Scotland chatting with a 28 year old American woman (I was in my middle 70s) who was studying fine arts in Edinburgh.We chatted about student loans.

She had $33,000 in American Student Loan debt and presumably adding more each semester. I couldn’t resist asking her if she thought Van Gogh, et al, had studied art at university and acquired life burdening debt. My young friend had no idea what her loan burden would be or for how long.  I wished her , Good luck.”

Why Do So Many People Take Student Loans?

For a long time, people believed:

“You need a college degree to get a good job and be successful.”

• Schools, counselors, and administrators pushed this self-serving deception.
• Companies often say “college degree required” for many jobs.
• Parents want the best for their kids, so they help sign the loans.

Many families don’t realize how big the payments will be or how long they last. They just believe college seems like the only good path.

What Actually Happens After You Graduate?

You finish school with a diploma… and a large monthly bill and multi year debt burden.

Simple Example:

• Sarah borrows $40,000 for college.
• She gets a job making $45,000 a year.
• Her monthly student loan payment is $350–$450.
• That’s like paying for a nice apartment or a new car every mo for 10–25 years.

Because of this:

• Many young people must wait longer to buy a house.
• They save less for investing & retirement.
• Some put off getting married or having kids because money is tight.
• Some need two jobs just to cover rent and food.

Who Makes Money from Student Loans?

Here’s the simple truth:

1. Colleges and Universities

They can charge higher tuition because students can borrow more money. Raw exploitation, IMO

2. Banks and Private Lenders

They make profit from the interest you pay — often higher interest than federal loans.  They also charge late fees and collection fees.

Note: (4/24/2026) “anti-rapacious" (predatory lending/high-fees) current Senate legislation is the Predatory Lending Elimination Act (S.3793), which apparently has little chance of passage because, IMO banks, have profound influence over politicians.

3. Loan Servicers and Collectors

These companies get paid to send bills and collect money when people fall behind.

4. The Federal Government

It used to make some money on older loans. Now, because of special repayment plans, new loans often cost taxpayers more money in the long run.

Everyone in this system has reasons to keep it going —

except the student who has to pay.

Special Repayment Plans (Called IDR Plans)

These plans base payments on what you earn (not the full loan amount).

• Payment can be low — sometimes even $0 if you earn very little.
• But if your payment doesn’t cover the interest, your loan balance can grow bigger every month.
• Unpaid interest may be capitalizatized i.e.added to the unpaid principle resulting in a subtle form of compounded interest. If banks can devise an unnoticed profit mechanism they will.
• After 20–30 years, whatever is left might be forgiven (wiped out), but you may pay taxes on that amount in some cases.

Simple Example:

You owe $30,000. Your income based payment is $150/month, but interest adds $250/month. After a year, you now owe more than when you started — even though you made payments.

Important Warnings

• Federal loans are usually better than private loans (lower interest, more protections).
• Private loans have higher rates and almost no forgiveness options.
• Loans are very hard to get rid of — even if you file for bankruptcy.
• Not every college degree (fine arts vs medicine) pays well. Some careers (trades, technical jobs, military) need little or no debt and can pay well.

What Should You Do?

1. Ask yourself: “Will this degree help me earn enough to pay back the loans comfortably?” NOTE: I would love to see a high school or college advisor answer this question)
2. Ask AI (Grok, etc) for average earnings for that major and school.
3. Borrow as little as possible.
4. Consider community college first, then transfer.
5. Talk to people in the real job world — not just counselors (understatement).
6. Learn about scholarships, part-time jobs, and trade/apprenticeship programs.
7. Compare federal vs. private loans carefully.

Bottom Line:

College can be a great investment — but only if you choose carefully. Don’t borrow just because “everyone does it.” Treat student loans like a deadly serious business decision, not a free ticket. The less you borrow, the more freedom you’ll have in your 20s, 30s, and beyond.

You and your parents can make smarter choices with just a little information. Start small, ask questions, and don’t rush into big debt.