In a Yahoo Finance article posted today entitled, "5 Genius Ways Colleges are Tackling the Student Debt Crisis," Mandi Woodruff discusses techniques that several colleges are using to help students understand that student loan debt is real, and will have to be paid off someday. The hope is that this will ultimately lessen the student debt burden by encouraging students to take out as little debt as possible.
Did you understand anything about loans payments, amortization, etc. (time value of money) before taking your first corporate finance class? Is it the responsibility of the college or university to teach students about student loan debt? What do you think colleges and universities should do to encourage students to borrow as little as possible?
How do you think student loan debt will affect this generation? How will it affect the American economy?
Haskel Kwestel
ReplyDeleteBefore taking this class I had a basic understanding of loan payments, amortization, and the time value of money. I knew that money today is worth more than money in the future and loan payments depend on risk, term, and interest rates. I did not know the idea of amortization and the fact that loan payments paid off interest, thereby lowering interest payments on the item every payment period. Colleges do have somewhat of a responsibility to teach students about student loan debt, but it is not only their responsibility. The article starts by saying that colleges and universities are required to council students on student loan debt, but this should be started sooner and high schools should be required to teach their graduating seniors about student loan debt. Colleges and universities should do what Indiana University is doing because it gives a clear layout of the student’s debt and lets the student make an informed decision on whether or not they will be able to afford it. Colleges and universities should warn their students about career paths that do not have a great financial outlook and possibly have them reconsider their career path, unless they feel comfortable taking on the debt because it will allow them to study something that they are passionate about. For example, I saw a news segment a few months ago about student debt, and a student studying music at NYU had a large amount of debt because their tuition is roughly $60,000 a year and she will have an incredibly hard time paying it off. This is because music majors generally do not make a lot of money. NYU should have warned this student that she would have a difficult time paying off her student loans. Indiana University could improve their debt letters by including a small report on the student’s majors’ career path outlook. They can add the average income for the students’ possible career paths. This can either reduce borrowing because students will recognize they might not have enough money to pay it off in the future, or students may borrow the same amount, but switch majors and go into a field that is more lucrative in order to pay off the debt. Colleges should also consider flexible payment plans with no cost, in order for students to pay the amount of their tuition over the course of the school semester. Fewer students will have to take out loans and colleges will get their money throughout the semester. Student loan debt will affect this generation because people will have less of their income to spend and this also prevents the economy from growing as fast as it could. People with student loans have less money to save and invest so they will not be able to grow their money to have in the future and for when they retire.
Xiaohan Lin
ReplyDeleteThis semester was my first time get detail know about loan payments, amortization, etc. time value of money. I think it is the responsibility of the college and university to teach students about the student loan debt. This is because many college students use students loan to pay their college tuition. Also, the students loan have many benefit for student, compared to other loan, because it have lower interest rate and students can pay back the money after their finished the college. In addition, present money is worth more than future value. A dollar received in the future has lesser value than a dollar received today. Conversely, a dollar received today is more valuable than a dollar received in the future because it can be invested to make more money. More student borrow the student loan, may help American economy growth, because the flow of the money. Students also may have some idea about investment, if the student loan give a chance to help student who want to start invest during college period. And the lower rate may encourage more student to borrow the loan. However, the student loan may also give pressure to student, because student have to paid back right after graduated.
Prabhot Kaur
ReplyDeleteCorporate Finance- Hybrid
Cara Marshall
This was the first time o got to learn about the time value of money in a finance perspective. Before this I was thought many times in Accounting to not buy anything on credit because it will result in u having to make a payment for a very long time and and you will end up paying more then what you actually barrowed. But with this class I can calculate the actual amount of money I will be paying if I want to. I think colleges should have classes that teach us to deal with everyday necessities. Like a mock class where we take out pretend loans and see what happens to our money over the semester. If there was a class that did that, we would be better off when it comes to student loans, credit card loans or house loans. Colleges can raise more money through fundraiser and give that as scholarships. Or they can make a system where any student whose GPA is above 3.5 gets full scholarships. This way the student wont be paying out of pocket and it will also give them the incentive to do well in school.
I had no idea what I was getting myself into when going to college. I went to a much more expensive College before Queens College and was in no way knowledgeable enough to make a financial decision as a 17 year old in high school. This article doesn't talk about Colleges that give you the best "bang for your buck", but in my opinion the best way not to be burdened with debt is to go to a State College.
ReplyDeleteA private University at $60,000 a year for 4 years is $240,000. That cost of capital is huge and probably not economically worth it unless you get into a top tier private college. Yet the last thing my college counselor talked to me about was cost. It was always about what University was the best fit for me. Without a single financial course in high school I was very unqualified to make the decision about which college I should go to.
This article mentions ways students can be more aware of their debt, which is a good step in the right direction. However, I think avoiding the debt in the first place is the best decision.
Towsif Karim
ReplyDeleteI have a slight knowledge of all these ideas that I learned in other courses. I always felt taking debt that was unnecessary wasn't a great idea. You should always be careful with the amount you borrow and whether or not you can pay it off in a timely fashion. I feel colleges can give you ideas on ways to invest and avoid student debt. Colleges can have more financial workshops making students more aware about the seriousness of this issue. This generation has to be careful with debt and should only borrow what they can pay back. You won't be able to grow and become as economically successful if you are burdened with debt. Good decisions are key to success. This course was a great learning experience.
Pankaj Aggarwal
ReplyDeleteBefore taking my first corporate finance course, I had no idea about loans, amortizations and how time effects the value of money. That is because we have never been taught about finance yet have had many chances at borrowing money. I feel that this puts students at a disadvantage, since you don’t really know what you are getting yourself into. If the students best interest was in mind, before taking a loan a certain amount of knowledge should be tested, if the students fails, he should be mandated to take a course. It may seem as if this is complicating the “process” but one thing we don’t seem to see at that age is the effect on the future.
There can be some type of simulator, which gives different alternatives to loan amounts and pay off schedules, paired along with realistic job salaries after graduation. There should be an case by case analysis of the kind of job prospects to expect in ones field, and difficulties should also be shared as much as success stories.
To receive financial aid, you have to meet some guidelines, such as maintaining a certain GPA, going to classes, and declaring a major by sophomore year. This puts in place checks and balances and these guidelines should be used to determine if the loan is to continue to be disbursed. This would push the student to work harder and go to class and maintain a certain GPA, thus ultimately positioning them to succeed and be able to get a job.
Also some college students are able to use the loan money for personal reasons. They should space out the disbursements, so that the money is not used all at once. Most importantly, the best option is to try to make loans smaller, by lowering the cost of education. Focusing on the basics such as a solid core education instead of unnecessary spending on high salaried positions. The academy should exist as a service to society, not as a function to profit from.
I am an accounting major and before I took any finance or accounting class I had no real knowledge about loan payments other than it was a responsibility of the borrower to pay back any loan and the appropriate interest. I knew nothing that interest accrues on outstanding loan balances or that payments may include a principle portion and an interest portion or just interest. After attending this class I have learned the actual terms of loans and a full understanding conceptually of the time and future value of money and how they therefore effect the costs associated with borrowing money. The term amortization is a vital component of the full cost of borrowing and determining what your ultimate rate of interest you are paying on a loan.
DeleteThe detail of financing an education is not as important as educating the students who are considering financing their education of what the actual costs would be. This would definitely help students make the proper decision of how much to borrow and when to start paying back. It is the easiest thing for a student to accept a loan when money is tight and you are afforded a loan with no real deadline to pay back - sometime in the future, when you start to work. This can be many years ahead and without understanding debt financing the interest accrued added to principle of the loan leaves the student starting their professional careers with a huge nut to crack. It must be the the responsibility of the college or university to teach students about student loan debt. Colleges and universities should encourage students to borrow as little as possible because the cost of student loans are more expensive that almost any other loan. The reason student loans are so expensive is because they are do not have collateral similar to car loans or mortgages. Also Congress and not the market set the rates for federal loans which account for 85% of the outstanding education debt. Congress set the rates in 2001, when overall rates were higher and has not changed them since. While the traditional borrower today is enjoying historically loan interest rates the student who borrows is not afforded this advantage and therefore it all the more important for the colleges and universities to educate the student of this great diversity.
Unless the student becomes better educated in his loan decisions since the costs of education just keeps going up the next generation of professionals will have little money to spend and have little more to save and this will have a tremendous negative impact on our economy.
Before taking this class, I understood a very limited amount about loan payments and amortization. Yes I understood that if you take a loan out, you had to pay interest on the loan in the future. Maybe high schools should start incorporating optional if not mandatory classes for finance in the long run. I feel this would help students understand the hardship of what it necessary to attend a university. This would mean that students would have to work at a younger age, which maybe isn't a bad thing because it will make them more disciplined and mature. I also think it is the job of the university or college to teach the students about loan payments and debt, seeing as how most students will probably end up in that situation and they won't gain that knowledge anywhere else. I don't think colleges can do much to lower the borrowing rate of students, this all depends on if the students need to take out a loan. It's not an option sometimes. If you don't have the money at that moment, you are going to have to take out the loan. Even if colleges increased the short term interest rate so that students don't take out a loan, they will take out the loan anyway because they have no funds at that point in time. Student loan debt will eventually catch up to, if not already has caught up to the younger generation. This will lead to more college drop outs and, i'm not saying that it is impossible to be successful without a degree, but it is a huge challenge. Many college students will be forced to work dead end jobs for the rest of their life just to survive. College tuition in my opinion is way too high. Instead of a booming economy with fresh new minds developing new technology and ideas, we will be left with untapped potential because students couldn't finish college due to loan debt.
ReplyDeleteWhen I first started to take Corporate Finance 241, I had little knowledge of the complexities of present and future values of, for example, debts. It is clear to me now that there are many ways to allocate your funds in an educated way following the techniques learned in corporate finance classes. I don’t believe that it is the University’s or College’s responsibility to teach students about the student loan dilemma. Students are well aware of the risks they must take in order to got to the school of their choice. Can schools make tuition cheaper, yes, but then it won’t be the same experience the student was looking for in the school. With less money in circulation there are less amenities and advantages the school once offered. I will personally be facing this exact in the coming years of my life, and I know that it is a risk I have to take. Life isn’t always a safe 100 to 1 bet. Coming from me, that says a lot! I am one to veer away from risk and to make the most rational and coherent decisions I can possibly make. If I were to invest $150,000 in student loans towards my future, I would know that I may not find the job that will pay this debt off, or I may not find a job at all. Life is a scary thing, and I believe, although I wish it were different, that this fatal risk is necessary for every student to learn about the risks in life, and understand that everything doesn’t come east. Everything can not be fought off by a rally, or petition, sometimes we have to face the beast up front, and do what we do best, our best!
ReplyDeleteDaniel Shimon
ReplyDeleteBefore taking this class I had a decent understanding of loans and amortization and etc due to many accounting classes i had taken in the past. When it comes to these loans its a lot more complicated of whose responsibility it is. Overall I believe it comes down to a mixture of both the student and the university. I believe the University should attempt to do all it can to help by providing classes about these loans as well as people being able to meet with counselors. But the end of the day I believe this is the students first real step into adulthood and they will have to show they are able to take on these loans and be responsible enough to stay on top of them. The notes in the beginning of the article that are sent out every fall are a good idea but I believe they should be sent out much more often than that. In order to encourage lower borrowing the universities should explain the risk of taking these loans and what it may mean for their future. This generation will definitely be affected in some way by these loans possibly causing people to be more aware of their spending which can lead to the future better saving habits. Yet at the end of the day the economy I believe won't be affected too much because no matter what their will be people who will pay back the loans with no problem and those who will be unable to and it will affect them forever.
Before I took this class I had already taken some accounting classes so I understood the concept of loans and amortization. I also enjoy reading books for knowledge so I was very familiar with the time value of money. When I was deciding which college to attend, one of the major factors was whether or not I would need to take out student loans and how much money college would cost me. That is the main reason I chose Queens College. I knew I would not need to take out any loans at all and I would get a fairly good education. My philosophy was also that it does not make any sense to go into debt for undergraduate school. It is much more economical to go to a cheaper school do well in your classes and then go to an expensive graduate program.
ReplyDeleteI believe it is the parents job to understand student loans and explain them to their child and children. Most parents are helping their children with the college application and the financing of it anyway so it is important that they understand student loans and how much they can affect someone's future. The interest rates on student loans are so high that it takes the average person at least 10 to 15 years to pay them off, and that is assuming they have a good job and very low expenses. Especially in today's economy where companies are still reluctant to hire more employees, it is increasingly difficult for students to pay off their loans. There is a relatively high percentage of people who end up defaulting on their loans because they just can't afford the interest rates on top of all their other expenses. When someone defaults on their loan, someone down the line ends up paying for it, which is harmful to the economy in general. In my opinion to help alleviate the pain and frustration of student loans, banks should charge much lower interest rates. In fact college itself should lower tuition costs. With increasing tuition not being matched by increase in wages and employment numbers, it creates a situation that is unsustainable.
Jared Biller
ReplyDelete241
Extra Credit
Student loan debt is a real problem. Before taking this class I had taken classes, which went over amortization and various kinds of loans. Students go to very expensive colleges, and the advice from their parents is go out and take a loan. Parents don’t want to have to pay for the tremendous amounts of college tuitions that some of these colleges make you pay for. At end of the day I feel that the responsibility is in the hands of the college as well as the students. However I feel that the responsibility weighs just a bit more on the colleges. With colleges knowing every year that students take out loans from these expensive colleges. They are more familiar with what goes on, how to be responsible, and what precautions to take. These colleges so-called have been around the block so they definitely have a step up from the students. However we should not deter college students from learning about debt, taking loans, and the consequences of not paying back a loan. Before someone makes any decision especially college loans, you should do your due diligence and understand the ins and outs of this decision that your about to make. Don’t go into something and just run with it. You have to be knowledgeable, and a ware of your surroundings, and make the best decisions, with having the best possible information to make those decisions
Anthony DellaRatta
ReplyDeleteBUS241 Extra Credit
This Business 241 corporate finance class is the first finance class that I have taken. Before this class i had very little knowledge about student loans and paying them back. I only knew that I was borrowing money and after I graduate I would be expected to pay back the loans + interest being added. The first time I ever heard the word amortization was in one of my first accounting classes in college and I had never thought of what the time value of money was. I think most students do not understand the depth of their loans as I didn't but even more probably don't even take finance classes to ever know the full concept of it. I personally knew I wanted to borrow as little money as possible. My first semester I went to Pace University, a private school in Manhattan. During my first semester there it sunk in about how much I was paying. After realizing that i transferred to Nassau Community to save money and from there I knew I had to go to a suny or cuny school because having so much debt was not something I wanted, so I came to QC. I think most students don't think about it. They just want the college experience and don't really care about how much they're paying for it because it all seems fictional until the payments start coming. I do not think it's the universities responsibility to inform students about their loans. I think students should care enough themselves to know what they're getting into. From my experience most schools do not do anything to encourage students to borrow as little as possible. the universities don't seem to care how much anyone is spending because if they did I don't think the cost of education would cost as much as it does. Universities seem to just want to make money and are will to take money from anyone willing to spend it. I think student loan debt will definitely affect this generation and their (our) future standards of living. Most students going to private school will have debt the amount of a mortgage and won't be able to afford the luxuries they might expect... or credit card debt will be tremendous. I think students should really think about the cost of what they're putting into college compared to their future reward from it.
Zack Goldglantz:
ReplyDeleteI personally think that the colleges should be responsible to inform the students about the dangers of high student loan debt. Although I think that everyone should be accountable for their own actions, many students are faced with no other option than to take out large quantities of student loans. Especially these days, when student loan debt is a serious issue plaguing our nation, colleges should make it a requirement for all students, whether an art major, science major, or finance major, to take at least one personal finance class. This class should include the basics of personal finance that will be applicable to every young adult when they graduate, such as filing income taxes, pension and 401K plans, how to balance a checkbook, credit and debit cards, bank loans, student loans, and mortgages. These are all finance related matters that every single person needs to have some basic knowledge of in order to properly function in our economy. Right now, unless a student takes it upon himself to register for these specific classes, universities are throwing most graduates into the "real world", without providing any sort of basic knowledge of how to manage your money. How can a natural science be more of a priority to every student than basic finance?
Before I took corporate finance, I did not know much about personal finances. I am an accounting major, so I learned about tax, pensions, and other financial topics through the required classes, but I have friends who have not taken one finance class because it is not required of their major. It is the students responsibility to know what they get themselves into, but the colleges should definitely offer more, knowing that it is such a large issue these days. Students don't take out loans because they WANT to, they take out loans because they HAVE to. If something is necessary for many students to do, it should be necessary for colleges to teach them about it. The fact that still today colleges don't require a basic finance class, disgusts me. Colleges shouldn't just encourage students to borrow less, because that is not always an option for the students. Rather, they should educate students on how to borrow the smart way, how to properly plan to pay back the debt.
I know that student loan debt is greatly affecting this generation negatively, it is all you hear about from recent graduates. If something does not change soon, the American economy will suffer, and a recession might be around the corner.
Jasdeep Kaur
ReplyDeleteBefore taking this class, I had minimal/basic understanding of loan payments, amortization and the time value of money. The responsibility falls on individuals themselves and also the Universities and colleges to let the students know about student loan debts. Students should find out on their own as well, not just rely on their university/college alone, as to what benefits and cons will arise if they choose a certain major, a certain school, and if they choose to take out a student loan and what lies ahead as to how to pay off those debts. The pros of student loans are that they can have lower interest rates, and you do not have to pay back until after you graduate. Unless the student has a job or other means to pay off the student loan debt, the debt may rise and hinder them from having a growing savings.
Student loans affects this generation in quite a few ways. One way is that, the students who owe money, will most likely wait to buy real estate/housing and automobile vehicles until they pay off their student debts. As student loans continue to increase, students will probably also save less. One would be focused on paying the monthly payments that they would not be able to save or spend the money on other necessary things they may need.
In return, the students not being able to buy a home, that then affects the American economy. It affects it because the students are not participating in the economy as much or participation has reduced.The economy is affected by these student loans, even if it is by a very small percentage, in my opinion. But at the same time, some may take on more loans to buy other necessities or housing/vehicles.
Students must learn to manage their personal finances. One way is to have a plan/goal of how they will pay their debts and or how they will save their money. Planning is important when it comes to personal finances.
Jasdeep Kaur
I had some decent amount of knowledge going in to corporate finance about student loans and debts. The issue is that we as a country are charging money for something that most Americans are trying to better themselves for a future and often forget how harsh it becomes upon individuals. It a psychological torture in a sense because student loans are the death of many up starting young individuals. Most people don't even realize it when they start signing up for one, be it with their parents, or alone. They feel that as soon as they finished college that they will be employed immediately and that everything is peachy after that. Sad tale of the story is that because of these loans the economy is facing an unprecedented time of imbalance in that most graduates don't get a job in their field, or are being underpaid all together. One's belief is that following graduation that after a certain period of year(s) that they can simply invest all their eventual income or salary into their student loans in which they owe. The problem with this situation is that you’re not guaranteed that future salary, or position, or the circumstance of the capability of paying it. Anything can happen, many don’t even make it to that situation only because the loans get the better of them, and for those for who it doesn't they feel it still as it's a dark cloud that follows their every move. The idea pointed out in the article whereby students were notified of their debts in a repetitive and consistent manner was good because it kept them in a loop and was a sense of check list to know if they could even possibly afford that loan or not. This showcased the differential between how much they raw borrowed and how much more upon that raw value they are expected to owe.
ReplyDeleteMoral of the story is know what you are getting yourself into before you sign a loan and to weigh out ALL your possible options. Having to go through a headache just because of going to college is not worth it in my opinion. I do believe going to college is important for ever individual who wants to pursue the usual route in life, however, there are times where things cannot simply be done in haste due to money complications. You'd rather invest your money knowing full well of how it will serve you later than as opposed to blindly. It is the responsibility of the college or university to inform their students about loan debt. As it has caused a lot of complication in today's economy and is only going to cause more if we don't act now. There is a huge imbalance from how college is supposed to work out for an individual on average compared to how it eventual pans out. Colleges should put more restrictions on students as to being able to register for another semester if they haven't already started to pay of previous loans. Chances are near 100% that if a student didn't pay for a recent semester and is already registered to the next one, they will simply be hurting themselves financially in the near future because they don't see the bareback value of them not paying loans on time relatively and they decide to take it for granted which in turn affects them severely in the future. So students should borrow on average less and be more educated in loans and student debts and that there should and are ramifications of not paying accordingly.
Name: Waqar Rizvi
ReplyDeleteI had a background knowledge of loan payments, amortization and the time value of money before taking this class. I had many finance and accounting classes during my undergraduate and graduate education which focused on these topics. When I attended Fordham University the school made students take a seminar when they wanted to take out student loans. The seminar was either in person or online. I took the online version and although I had a background knowledge, I learned a lot from the seminar that specifically applied to me. I learned what my specific interest payments would be and I could play with the payments to try different scenarios and loan payment schedules. I do think it is the responsibility of the school to provide guidance on student loan debt because even for well off families many schools are still extremely expensive.
Overall I think that the student loan debt will have a huge impact on this generation. In the five or ten years after graduation, when previous generations were able to save up to buy a home, this generation will be hoping to make a dent in their huge debts. People that finally pay off their debts may be wary to take on more debt and purchase a home or car. My goal will be to pay off all of my student loan debt in the next five years, this may not be attainable for many individuals who will be plagued with student loan debt for much of their lives.
Apart from the economy, I think that the increasing tuition costs and student loans will have an impact on legislation. As tuition costs are increasing faster than any other costs including healthcare I think it is the responsibility of our congress and other law making bodies to protect people trying to get a decent education.
Shahien Noori: BUS241
ReplyDeleteFirst off to start i would like to say how much corporate finance has helped me with considerable amount with main core of corporate finance and the importances of time value of money and how it changes over time. Little was known before about Interest rates, stocks & bond valuations, investment decisions and much more. But with the help of this course, i feel comfortable with all topics related to those. We all know that the student debt crisis is a growing problem. It effects almost each student that takes out a college loan. After finishing college they charge interest on the loan you have taken out and with competition growing in almost every field of work, students don't find a job straight out of college right away. Sure some student's get help from the government or apply and get a scholarship, but most of us don't have that option or don't get accepted for a scholarship. Like written before, you said eventually we the students have to pay back this huge loan and amounts to more than we took out already. I know this issue personally and have heard from many including my brother. So i would like to discuss how we can manage out loans and pay it back as soon as we can. Paying off student loan debt can be a long, complicated, and often arduous enterprise, one that can put significant pressure on an individual’s finances, influence major life decisions, and put healthy credit at risk. Loans are financial aid which have fixed interest rate and flexible repayment. First whenever you take out a loan, be certain you would be able pay it off whenever it's due. Set up your repayment plan and follow up on your payments on a monthly basis. Moreover, you should know which loan you have. As well as stay in touch with your loan servicer. After this the right repayment method that suits you well should be picked. Know how to consolidate and not to consolidate. Lastly be careful and try to stay out of late payment and trouble all together. Hopefully we are all able to repay our debts and in the near future have a solution to this student debt crisis.
Luzhen Wu
ReplyDeleteI have taken some economics course before. So I have learn some knowledge about loan debt and amortization. The value of money is higher in the future,so there must have interest rate . After take the finance corporate course, I have difinite recogniztion about the value of money, interest rate and YMT. Also learn how it's a better way or time to pay the loan.
In my opinion, college should encourage students borrow. because it will be a long term debt, it will teach student how to mange their money and pay their debt. It will also affect the generation and American economic.Because loan is a good way for those student who can not afford the college .Taking college it's a better way to change life. higher education help people improve.
Before taking Corporate Finance I have actually taken previous accounting classes. Student loan debt is a serious problem. Students go to very expensive colleges and are often told to take a loan form the bank. Many parents or grandparents do not want to take on the burden of paying for a child’s tuition in college so many students are left with burdening loans when leaving college. I do believe that it is mostly the college’s fault for student debt. They know very well what a student goes through to have to get a loan while students generally are lost. It is not fully the college’s fault either. A student should od all the research possible before taking any loan out and make sure to see an advisor to see what fits best for that individual. I think having classes or videos explaining to students certain key points before they even start college would be a great idea. Email videos along with the college brochures to the potential new students and it will pay off in the long run.
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