| An article appeared recently in the New York Times | | | | start out earning about $55,000 per year to afford that |
| which discussed how many for-profit trade schools | | | | level of student loan debt. There aren't that many jobs |
| are doing very well in these difficult times. It seems, | | | | paying $55,000 to fresh-out trade school graduates. |
| however, that their students don't always fare so well. | | | | Worse than that the former students are often facing |
| Federally backed student loans are used to pay for | | | | underemployment and jobs paying close to the |
| this training over 80% of the time, and many students | | | | minimum wage, if they get hired at all. It is not unusual |
| cannot afford the debt load when it comes time to | | | | for people who graduate from cooking schools to get |
| repay them. | | | | jobs bussing tables or washing dishes rather than being |
| Many of these trade schools advertise frequently on | | | | the glorious chef they expected to be, for example. |
| television and subsequently have become household | | | | The trade schools are doing very well, however. In |
| names. Some examples are the University of Phoenix, | | | | fact in many cases they have begun to offer student |
| ITT Technical College and the Cordon Bleu cooking | | | | loans themselves. As stated previously, these schools |
| school among many others. It is not unusual for these | | | | average well over 80% of revenue coming from |
| for-profit schools to be billion dollar per year | | | | student loans. So why would they lend additional funds, |
| enterprises. The fees they charge can be substantial, | | | | in fact their own money, to students? A lot of this loan |
| sometimes surpassing $40,000 for a two year | | | | money ends up being written off as bad debt, so what |
| program in some cases. | | | | is going on? The answer is that there is a requirement |
| These trade schools have been booming lately | | | | when taking out federal student loans that at least 10% |
| because of the recession. People see that business is | | | | of the cost of schooling be paid either by the student |
| down and that the future does not look brilliant for | | | | or from other private sources. So the trade schools |
| many, and they think that the only way to get ahead | | | | step in and lend money to students to meet these |
| and lead a decent lifestyle in the future is to get training | | | | requirements. Their business that is funded by federal |
| and a good paying job. The problem is that they are | | | | student loans is so good that write-offs on the money |
| letting themselves be misled in a lot of cases. They do | | | | they lend to students themselves are worth it. |
| this by listening to the recruiters for these schools who | | | | It could be worse. There are many trade schools out |
| tell them it is likely they will be placed into a job through | | | | there that are not well established household names |
| industry connections the school has developed. They | | | | like the companies cited above. There are lots of |
| also are led to believe that they can expect a certain | | | | smaller, unaccredited schools. Sometimes these |
| level of salary upon graduation, and this often turns out | | | | schools just close up and students are left holding the |
| to be totally unrealistic. Of course these figures are | | | | bag. And that bag is a heavy one because these kinds |
| never put in writing and are not guarantees, but people | | | | of schools, being non-accredited, are not sanctioned by |
| tend to latch onto these dreams and find themselves | | | | federal student programs, so private student loans are |
| in trouble when they don't earn nearly the salary they | | | | required if the student needs to borrow money, which |
| were expecting and cannot afford the student loan | | | | is the case most of the time. Private student loans |
| payments after finishing trade school. | | | | have much higher interest rates and far less protection |
| It is an axiom of student loan borrowing that a person | | | | for borrowers than do federal loans. So the student is |
| should only borrow in total as much as his/her first | | | | left with a heavy loan burden and no job credentials |
| year of salary is expected to be- beyond that the | | | | from the trade school that he can use to find |
| debt burden will be too high. If someone were to | | | | employment and pay off the student loan debt. There |
| borrow $40,000 for a two year trade school program, | | | | are more and more reports of trade schools declaring |
| this will lead to payments of $460 per month for a ten | | | | bankruptcy and closing in one location and then |
| year payoff period. Another axiom is that student loan | | | | opening up shop and starting again somewhere else |
| installment payments should not exceed 10% of a | | | | under a different name and organizational structure. |
| person's monthly earnings. So someone would have to | | | | |