school, and as they prepare to enter college. 88 Unfortunately, many young Americans do not
graduate from high school, and many more do not continue on to college. 89 For those that do go
on to college, whether or not they take on student loans to cover the cost is a decision that has a
large impact on their financial future. Student loans can tie up young adults well into their later
years, and they may struggle to repay their loans if they are unable to find adequate employment
after college. 90 At seventeen or eighteen years old, it is difficult to understand the long-term
impact of such financial decisions. 91 As the statistics discussed above demonstrate, even
experienced adults have trouble planning for a financial impact that spans that far into the
Consider some illuminating examples from two student borrowers illustrating the limiting
effect major financial decisions had on their future success. One borrower explained:
I admit I did not understand [the concept of] capitalized interest until recently. I
consolidated my loans in 1997 when the interest rate was [at eight] percent. My
student loan office at Tulane University led me to believe that I ‘had’ to
consolidate and Sallie Mae was the only option offered to me.
I have repaid them over $61,000 (over [fourteen] years). I think I should be done
now, but according to Sallie Mae I still owe $25,000. A Sallie Mae employee
directed me to write the legal department and ask to have my loan written off and
to appeal if they denied. They denied, stating that federal government regulation
prevents them from writing off them balance of the loan.
When I talked to the Sallie Mae employee and said I was confused about why on
most months more of my payment goes to interest than principal ...she
chuckled and said ‘We certainly don’t go out of our way to put that in big bright
red letters across the front page.’
Another student borrower described the impact student loans have on the wider economy:
I have three degrees, including an MA and a JD. When I graduated from law
school in ’ 99 all of the offers – with the exception of those from the upper
echelon firms that essentially own you – were for little money, leaving next to
nothing for living expenses.
Now I am making a decent living and can pay my loans under the (income-based
repayment) program, but repayment is a distant dream. As a result, I am unable
to assist my son with his education expenses (thereby effectively making the debt
trans- generation), or buy a home, start my own practice, etc.
88 FIN. LITERACY & EDUC. COMM’N, supra note 25, 83-84.
89 Robert Balfanz & John Gomperts, What You Won’t Hear at High School Graduation, CNN (Jun. 6, 2013),
http://www.cnn.com/2013/06/06/opinion/balfanz-high-school-graduation/index.html. “In reality, fewer than 80% of students receive a
regular high school diploma (not simply a GED) within four years. That number drops to less than 70% for African-American
students and lower yet for students with disabilities and English language learners.” Id.
90 Harnisch, supra note 28, at 14; see also Derek Thompson, Are Student Loans Destroying the Economy?, ATLANTIC (Apr. 22, 2013),
http://www.theatlantic.com/business/archive/2013/04/are-student-loans-destroying-the-economy/275083/ (stating that the purchase of
houses and cars powers economic recoveries, and young Americans are buying neither because they are tied up with student loan
91 Mandi Woodruff, 9 Unbelievable Student Loan Horror Stories, YAHOO FIN. (Nov. 26, 2012), http://finance.yahoo.com/news/9-
unbelievable-student-loan-horror-stories-165512874.html?page=all. The price tag of a college education is tremendously high and
takes a long time to pay back. It is hard for many young people to look far enough into the future to consider how paying for college
now will impact their ability to purchase a house or buy a car five or ten years from now.
92 FINRA INVESTOR EDUC. FOUND., supra note 12, at 22.