Going the Criminal Route to Pay for School

A piece in the October 16, 2006 online edition of the Pittsburgh Post-Gazette relates the story of a woman who forged a bankruptcy court judge’s signature in order to obtain federal student loans to continue her university studies. Seems she needed to prove she had arranged re-payment of her debts in order to get the loans and in order to do that, she needed the judge’s signature. Since her case was still pending at the time the signature was needed, she took matters into her own hands.

She got caught and is now charged with a felony carrying a maximum sentence of 5 years in prison and a $250,000 fine. She’s thrown herself on the mercy of the court and among other blatherings, stated she “didn’t want to owe the school money.”

Ok, so the lady has 4 kids and is separated from her husband. Still, she’s not so very different from the millions of other college students trying to make it through school. Yes, college is expensive and all we hear lately is how much tuition has increased while aid has decreased. However, this sense of entitlement is sickening.

Funny how we don’t want the government to tell us to buckle up or reduce the fat in our McDonald’s fries but the minute we need something, who do we run to? And if it’s not enough? Well, some of us just curse the government and some of us commit fraudulent acts.

Anybody and everybody who has the inclination can go to college in the United States. There are enough scholarship, grant and loan programs to see us through. Ok, so maybe we’ll owe $25,000 by the time we’ve graduated or maybe we’ll have to get a second job or get a job. Perhaps we’ll have to work full-time and go to school part-time maybe we’ll have to work one semester and go to school the next semester but anyone can go to school without resorting to fraud!

It will indeed be a tragedy if they throw the book at this lady and give her anywhere near the maximum. Even convicting her of a felony will greatly reduce the vocational choices she’ll have and getting saddled with a tenth of a $250,000 fine will cost her more than the student loan she didn’t want to bother with in the first place. That doesn’t even take into account the fact that she is facing a prison sentence.

Realism Often Doesn’t Set in Until After Graduation

Many students go to college in the hopes of expanding their career possibilities or to prepare themselves for entering a profession that they are passionate about but that requires a college degree. The following article that appeared in June just after thousands of recent college grads were beginning to experience the realities of post-college life clearly illustrates an all-too common scenario that college grads are experiencing: having their job choices solely being influenced and determined by their student loan debt. According to the article, Joe Palazzolo, who recently received a master’s degree, has over $100,000 in student loan debt.

Full-fledged adult living will be postponed, and the communal living of his college days is going to be extended. Palazzolo needs roommates to share living expenses with, and he is forgoing a rite of passage of many adults: the purchase of a first home.

This scenario is unfortunately a reality for many of today’s college grads, yet it is a relatively new phenomenon. When the parents of today’s recent college graduates went to school, tuition was much cheaper and could be paid for by a steady summer job. According to this article by Lou Dobbs, middle-class families are severely affected by the rising cost of a college education, which has increased by as much as 44% just in the last four years. As college tuition increases, college graduates in the recent decade (and probably well into the future) leave college with a sometimes unmanageable amount of student loan debt. Student loan debt can not only affect or alter the career path of graduates, but it can also delay marriage and determine if, and how many, children they have.

New college students who know they will graduate with high student loan debt should keep these realities in mind because it might help them decide on the best college major for themselves. Sometimes college students shy away from certain majors that have excellent job prospects because they want to pursue a discipline that interests them. The reality is, though, that even when you select the major that is your first choice, your job choices in the decade following college graduation might be severely limited because of your student loan debt. If you realize entering college, that you might not have your dream job during your twenties, you might be more willing to consider college majors that have more lucrative job prospects.

Despite this student loan debt, the outcome is not bleak. On a somewhat optimistic note, do realize that the sum total of all student loans a recent graduate leaves college with often does not exceed his or her annual salary. A college graduate with a sizeable amount of student loan debt just needs to be flexible and creative when deciding on a career path. Steady employment for a few years at a job that is not the graduate’s first choice will probably be necessary.

Also, working a second job might prove to be beneficial if it provides enough additional income that it enables the college grad to pursue a less lucrative daytime career that he or she is very passionate about. While some flexibility and compromise might be needed in the short term, over the long term most college graduates will discover the recurring theme that many studies have demonstrated: having a college degree is correlated with increased income over the course of one’s lifetime. Most college graduates inevitably find that to be a worthy tradeoff for a mere four-year investment.

Here at Scholarships Around the U.S., we stay out of the politics and report on the issue. This week, a controversial bill in California is due for signing or veto on governor Schwarzenegger’s desk by the end of the month.

SB 160 gives illegal aliens the right to apply for financial aid from the state. Here’s a word from some opponents of the bill:

“We have a crumbling infrastructure, a failing educational system, a collapsing public health system,” said FAIR spokesman Ira Mehlman, “and California legislators spend most of their time dreaming up public benefits for illegal aliens”.

Rosa Perez, chancellor the San Jose-Evergreen Community College district had this to say:

“These kids, for all intents and purposes, are American kids,” We’ve got to help them. If we ignore them, we’ll undereducate them and they’ll remain on the margins. That’s a loss to the country.”

The California bill is similar to the federal DREAM Act, which will allow illegals aliens to apply for federal student aid and then provides them a path to become actual U.S. citizens. This federal solution seems like a reasonable compromise.

In a related issue, most illegal aliens are immigrants from Mexico…so if you are of Mexican descent, you may be eligible for hispanic scholarships.

Gail Buckner answers a question in Fox News’ Money Matters help section.

The woman wrote in for help asks about her son who:

…has a scholarship for $10,000 per year for 4 years. My husband and I have never really saved much for his education. We have agreed to pay $10,000 per year, as well, but he has to pay the rest. We have taken out parental Sallie Mae loans to cover our part of the bargain.

Would we be better off having him be independent, not declaring him, and taking the loans out as student loans?

The woman asking for help is perhaps a little confused about the difference between dependent and independent statuses in regards to tax and financial aid status. They are completely different

To claim your child as dependent in your tax return, you must prove that the child provides at least half of his own support. This is difficult for a full-time student, and is hardly ever the case. If it is the case, then Hope and Lifetime Learning tax credits (Form 8863) may be utilized if the student qualifies.
With financial aid:

…you’ve got to be 24 years-old or older to be declared ‘independent.’ The only exceptions are if you are a veteran, have a dependent yourself, are married, or have already received your undergraduate degree and are in graduate school.

In the end, the bottom line is what must be looked at. If you have the choice of declaring your child student as independent, then you must work out the two options. Just take note that a child must provide more than half of the support for themselves. Scholarships help, but one must look at the total cost of college, books, and all other costs of living.

Stafford Loans should be taken out first, and PLUS Loans for parents are a secondary option for high education costs.

Visit our page on student loans and taxes for more information.

An article in Bloomberg entitled, “Kindergarten to Grad School Loans Boost Bond Market”, covers the increased activity in the bond market due to the increase in both federal and private student loans being taken out.

The interesting part was the mention of modern trade schools and how some lenders are catering to this market:

Students enrolling at The National Schools in La Mesa, California, can finance classes in bartending and casino dealing through Sallie Mae. The bartending program costs $500 while a two-month course to learn how to deal poker, including Texas Hold-Em and 7 Card Stud, costs $895.

The Maharishi School of the Age of Enlightenment in Fairfield, Iowa, advises its students that they can take out a loan with Citigroup. It costs $2,500 to study transcendental meditation and loans can be repaid over as long as 10 years at an interest rate of prime plus 1.50 percent. The prime rate is currently 8.25 percent.

The tuitions mentioned for the bartending and casino schools are small enough where many students can afford to take out a small personal loan or line of credit.

Ideally we should have accreditation agencies that approve alternative and trade schools for government student loan status. Many community colleges are accredited and have these alternative classes, but there are not enough of them to fulfill the demand. Online bartending schools do offer a solution, but lack the important hands-on experience.

There doesn’t seem to be a big push by lawmakers to include some smaller trade schools in federal education funding, so look for an increase in the private banking sector to market their financial services to match the growing demand.

All new Stafford Loans taken out after July 1, 2006 will have a FIXED rate of 6.8%. The interest rates used to be variable, changing every year on July first. Experts remind us that the average student loan rate has been in the high 6 and low 7 percentile, and this current rate hike reflects the average over time.

Many have become used to the historically low rates that have been prevalent in the past couple of years. The interest is capped at 8.5%, and the closer the Stafford rates are to that figure, more private loans will become more attractive. However, private loans usually require a cosigner.

Students looking for additional funds should look into PLUS and Perkins Loans for more federal funding options.