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Tuesday, September 11, 2007

The Suze Orman show and the student loan problem

Recently was watching the Suze Orman show (one of my favorite shows) where she discussed a student-loan related problem of a woman. The student had taken a $40k loan for her culminary studies. At the time of signing up for the loan, she was told that the monthly payments would amount to around $250/mo but later she found that the payments would be around $650/mo. Her $40k loan has now mushroomed into $119k loan. She is currently working as a chef and needless to say, she was having lot of problem in repayment.

Because of the student loan contract requirements, Suze Orman couldn't offer much help other than telling her to take up another job(s) so as to pay down her loan. However, she mentioned that people need to write to their politicians to ensure that when students take loan, they are told up front about the correct monthly payments they will have to make later, and if that amount is not correct, the school responsible for providing that loan should be held responsible for those payments for misleading the students.

Writing politicians is good although I am not very hopeful if those political jokers are willing to do much, other than blaming each other for all the problems. Those guys are able to find money for pork-barrel projects but when it comes to passing laws that will be beneficial to the general public, suddenly they become conscious about the deficit, etc, and so they don't do anything. Of course, even when they do pass laws that are beneficial, they make sure to complicate them, for example, by giving tax breaks but not making them permanent or not indexing them to inflation (such as AMT that's not indexed to inflation, or estate planning laws that are set to expire in 2010). Result - people are often confused and either don't do anything or even if they do make financial plans, they need to keep making changes to it, and keep spending their time and money.

This is where it's extremely important for at least one person in every family to learn about personal finances. It's sad that schools teach various courses that may have little use in the real world, but most people don't get to learn about personal finance. I wish I had learnt the value of compounding and the importance of starting to save earlier in life rather than now. Unfortunately, that wasn't the case but better late than never. Hopefully, I will be able to impart the value of it to my kids (assuming they will listen to me when they grow up - already the 2-year old thinks himself to be very smart).

Fortunately, these days there's lot of useful and free information available on internet sites like Yahoo Finance, MSN etc along with the various useful blog sites. All that's required is for a person to spend a few minutes every day to increase one's knowledge regarding financial aspects because ultimately, no one has more concern about a person than the person him/herself.

posted by Ruby @ 7:38 AM

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