A strange milestone was marked this week in the history of student loans. The total balance of all outstanding US student loans (given as $730 billion in DIY U, based on OMB estimates) is now estimated by Mark Kantrowitz of Finaid.org at more like $830 billion -- $605.6 billion in federally guaranteed student loans, which have interest rates fixed and in some cases interest subsidized by the government, and a further $167.8 billion in private student loans, with interest rates that hover around 18-20%. Furthermore, Kantrowitz says, $300 billion in federal student loan debts have been incurred in the last four years.
This means the total balance of student loans has just surpassed the total balance of credit card debt for the first time in history. Each makes up roughly a third of the money Americans owe, mortgages excluded.
The good news here is that at least since the credit crisis in 2008, credit card debt has been going down slightly. Americans are saving more and spending less.
The bad news, of course, is that student loan debt is much more severe than credit card debt, because it can't be discharged in bankruptcy. That means your only "recourse" if you can't manage your loans is default, and in the case of federal loans, that means being pursued until you die. The federal government can and will seize your tax refunds, Social Security and disability payments until your dying day.
From where I'm sitting, the buildup of the national student loan balance looks like a massive betrayal of trust. People have been told for decades that this is "good" debt. In fact it's really, really bad debt. Increasingly, high unmanageable debt burdens are falling on those least prepared to deal with the stresses and costs of college: the so called "nontraditional" adult, working-class student who is more and more likely to attend for-profit colleges that cost an average of around $14,000. And 40% and higher of these students are defaulting. (The same students default on their loans at higher rates when they attend for-profits, even controlling for demographics.)
This is starting to look more and more like the mortgage bubble. What was first depicted as an exapansion of opportunity now starts to look like a massive scam perpetrated on the socially disadvantaged. The difference is that while the mortgage bubble was happening, homeownership in the US actually rose to an all-time high. Whereas while we were adding $300 billion to our national student loan tab, college attainment among young people actually fell.
Someone with experience in the for-profit college marketing business told me that the same online sales geniuses who used to work for mortgage brokers are now employed by for-profit colleges. Their business is the same: fill out the forms, get the money, consequences be damned. Will we stop them this time?
If you are moved to action, check out the good folks at Student Loan Justice , who advocate restoring bankruptcy protection for all student loans.
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http://www.topix.net/forum/source/los-angeles-daily-news/TD2D51IQI3T16N5DM
To save you the trouble of digging thru the reference, a college degree is worth $900,000 more in lifetime earnings. I think that's worth 20, 30 or even $50,000 in student loans. But, buyer beware: make sure you're getting a degree in a field that is hiring.
Yes, there are always people who have problems, particularly health problems. Sixty Minutes had a segment on earlier this year with some examples of that and other student loan problems people have. But that should be the exception, not the rule.
GIVE EVERYONE A DEGREE! MAKE ALL EXISTING DEGREES WORTHLESS!
Read this:
http://mba-underground.686460.n3.nabble.com/Altucher-College-Is-A-Scam-And-The-College-Presidents-Know-It-Is-td833515.html#a833515
Back in the 1960s we built things, and one of the most popular fields of study was engineering. By the seventies the emphasis was on the social 'sciences' as we churned out legions of MSWs. But also started in the 1970s were program after program of ethnic and gender and LGBT degree programs.
Don't get me wrong, I have nothing in particular against ethnic or gender or LGBT issues. Let me explain:
I had a friend who loved anthropology. He asked his anthro prof what someone could do with a PhD in anthropology. He was told he could teach anthropology. He asked how about a bachelor;s degree? He was told, with it you could apply for a graduate program to get a PhD.
The point is, due to political correctness we mass produced (at great expense) the machinery for a niche market. All that overhead costs, and it's paid for by everyone. We need to consolidate programs. You want an LGBT program at a university in your state? Sure. You want them in ALL universities in your state? Ridiculous.
America needs to rethink education. Everything is online, you only need some mentor to study.
I am working on the a possible alternative - online community based schools where volunteers teach for bare minimum to no costs. If I succeed I should be able to offer 3 credit hours for under 200-300. Wish me luck.
But by now it's just savage predatory behavior. These for profit, often online schools drop students after they got their federal loans.
Possibly changing / amending it to allow student debt to be discharged in bankruptcy.
This would put the brakes on the "fill out the forms, get the money, consequences be damned." boiler rooms.
If only the jobs existed to match all of the borrowing.
Which begs the question...
Why are so many worthless majors offered in the first place?
Capitalists no longer even pretend we need educated workers - they outsource American work and jobs at the speed of light to countries who DO subsidize education, ensuring they reap the benefits of an educated workforce without having to pay for it. Efficient, no?
First, college students are also encouraged by credit card companies to run up huge balances for personal expenses, further burdening them upon graduation. Colleges ought to have a required course for all students in their first year in managing personal finances. Learning as least as important to their students futures as any other required course they'll take, and it's not something many of them got in high school.
Second, at least the interest portion, and probably the entire student loan should be deductible for more college degrees than currently. If the profession you're working in requires a degree, then all the courses you took to obtain that degree ought to be deductible from your taxes. Unless we're now trying to discourage people from getting degrees, in which case the government ought to formally announce this, not just slide it in via the tax regulations.