The looming crisis of student loan debt
What’s driving this debt crisis is a vicious cycle of bad lending policies eerily similar to the causes of the subprime mortgage crisis. Over the past 50 years, it has become conventional wisdom that everyone should go to college. High school guidance counselors and college admissions offices preach it, parents believe it and politicians cater to it. With near-universal demand and parents willing to pay or borrow almost anything to get their son or daughter through college, colleges and universities can drive up their prices.
When tuition prices rise, the government subsidizes the difference by increasing federal loans. But these easy loans, many of which are increasingly going to middle-class students, only increase the price ceiling that colleges can charge, thus completing, or starting, the cycle.
Of course, these aren’t the only problems in today’s higher education financial crisis. Many colleges and universities are failing at their most basic responsibility: education. Students are graduating ill-equipped for the needs of the modern workforce. More than half of all college graduates in 2010-11 were unemployed or dramatically underemployed. Many employers rate college graduates today as unprepared or only somewhat prepared for the job.
Blowback
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M2RB:
Pop the bubble. Round 1 of any university layoff is telling antique Baby Boomers who have run English departments since the ’80s to p-p-p-p-plllllleeeease retire now. Round 2 is closing Departments of L3sbian Underwater Basketweaving and Grievance Studies.
Tsk-tsk-tsk, the Universities have spent their mad money on buildings, and thus will have to cut people once the bubble pops. This will force a re-focus on good academics and practical degrees.
Sekhmet on December 9, 2012 at 10:28 PM
As far as I’m concerned, student loan debt is part of the learning process. If you’re too stupid to realize what you’re getting yourself into by borrowing so much, you shouldn’t have money anyway.
RoadRunner on December 9, 2012 at 10:40 PM
I have a liberal friend who got 4 degrees all paid for with student loans. $120000 in debt. He is a high school teacher. He teaches “media.” Whateverthefuckthatis. He qualified for hardship loan repayment because he earns so little. His loan payments are based on a percentage of his salary, and he only has to pay for twenty years. Then the remainder of his debt is “forgiven.”
I have less than 1/4 of his total debt, pay more than him/month, and have to pay 100% of my debt. He thinks he is sticking it to the man…he is sticking it to me.
tom daschle concerned on December 9, 2012 at 10:52 PM
Student debt is but a firecracker compared to the MOAB that is hopeless unemployment for my generation. When THAT goes off, look for mass demonstrations for Someone To Do Something. And unfortunately we’ll probably look in all the wrong places.
MelonCollie on December 9, 2012 at 11:42 PM
It’s all ok Obama took over student loans now. If you vote for him all will be forgiven…
nazo311 on December 10, 2012 at 1:12 AM
Obama takes over student loans….
Next we will have government car loans and mortgages….
Next the banks….
Next the “fill in the blank”…..
nazo311 on December 10, 2012 at 1:13 AM
Know what? I’m pretty tired of “looming crises” that people bring on themselves by trusting the government/being stupid. Who are these students and parents who borrow this kind of dough for an degree in sociology??
I left college and went to work when I couldn’t afford it. Took me longer, but I came out with almost no debt.
PattyJ on December 10, 2012 at 1:16 AM
And that student debt, which is now almost a trillion dollars, only includes the debt owed by the student to a lending institution. It doesn’t include perhaps another trillion owed by the student to parents, and by extension, by the parents to whomever.
And the idea of debt implies that you must pay it back. But in reality, student loans can be forgiven in bankruptcy if the student can show that he/she is, with the education attained, unable to pay off the debt with such an income and that paying the debt constitutes a hardship. Well, imagine that.
So in reality, it is not debt at all. It is a money that, for the most part, will not be repaid because it can’t – it won’t – be repaid.
So there is no “crisis”. The money is long gone. And any obtuse interloper who borrowed tens of thousands to study liberal arts who can’t get a good paying job, will not be paying it back. The students who spent the most and spent the most on the most inane of disciplines, are not going to be saddled with it.
But, as any progressive sees its, it isn’t real money anyway. It’s just numbers in cyberspace – digits that can be turned into paper by a mint. Nobody really needs to work for that money – so why burden the little darlings with it? And the devaluation of the currency that this money printing causes, why that is only of concern to the rich, those who make money with money. So it all works out perfectly.
In the end, to a progressive, this debt is great. It allows millions of young adults to learn about Progressive African Transsexual Liberation studies, which will prepare them for a career teaching the next generation of kids about why capitalism is wrong and bad, while at the same time sticking to the those very capitalists who will have to pay for it in the end.
Crisis? What crisis?
keep the change on December 10, 2012 at 1:55 AM
You’re singing my tune, Bill Bennett! I fell for the student loan scam when I was 18 and wish I’d been smarter about it. I partly blame these schools and the parents for peddling the fiction to these kids that student loan debt is “good debt.” The payment is the same every month whether the debt is “good” or “bad.”
I say this has someone who took on the loans and has paid them back (sizable stupid tax as Dave Ramsey might say): We need to ditch student loans altogether, at least government backed ones. At least with private loans, lenders could assess the risk for themselves and only lend to students who maintain certain GPAs and major in something where they’re actually learning a marketable skill. Keep some limited grants for the poor at the state level, and leave the rest of the financing to either scholarships (merit-based or otherwise) and waiting tables at Chili’s.
NoLeftTurn on December 10, 2012 at 2:51 AM
I have no sympathy. I worked 40 hours a week in a fast food joint and didn’t sleep for the 5 years that it took to get my degree. I got my undergraduate degree with zero debt. In grad school, I got a $1500 GSL and it is long paid off. I went to a respected state university and didn’t need to waste my hard earned money at an over priced Ivy League or equivilant school.I am also employed with a good paying job. Once again, no sympathy. Take their tax returns until it is paid off. School is for learning, let this be a learning lesson.
DAT60A3 on December 10, 2012 at 6:31 AM
I can imagine that but I didn’t think it was true. Is it? I thought student loans could NOT be dismissed in bankruptcy court.
rhombus on December 10, 2012 at 6:54 AM
Lots would love to imagine that. From the article…
rhombus on December 10, 2012 at 6:57 AM
There is a three step solution to the cycle.
Step 1:Set a standard dollar maximum each student may receive and call that amount 100%.
Step 2:Require all students who receive student loans to report their employment for the first ten years after graduation.
Step 3:Peg the percentage of the maximum loan that any student can get match the percentage of students in any specific school or major at a specific school that are employed in a job related to that degree five years after graduation. i.e. if a school charges $100,000.00 for a degree in something like Minority Women’s Studies, but only 6% of graduates with that degree are working in a related field after fiver years, students entering that program may only receive $6,000.00 total from loans. The schools would drop to junk degrees pretty fast.
MikeA on December 10, 2012 at 7:27 AM
Obama will forgive student debt as a way to ‘jump start the economy’. It will ‘put more money into the hands of our future.’
And I – having paid off my loans (because the GI Bill absolutely does not pay for college) – will be furious that I did it the right way, made double (and sometimes triple) payments, and lived like a pauper to pay my debt off.
Washington Nearsider on December 10, 2012 at 7:29 AM
Like I said, you can’t get blood from a stone and the law acknowledges that. Just google student loans and “undue hardship”.
keep the change on December 10, 2012 at 7:33 AM
No, NEXT is everyone’s PENSIONS in the entire USA.
That I am sure WILL happen.
They’ll fight that bcs the left believes no matter what you get a degree in, it’s all worth it.
I, on the other hand, repeatedly tout to my HS students that getting a BA in something is mostly a waste of time. And that if you are really motivated, you often do not need a degree. Just be smart, motivated, work hard. You can go to college later if you like when you’re grown up enough to have the discipline to go.
I went to cheap colleges, but got a good education. I took the hard professors over the easy ones for instance.
Badger40 on December 10, 2012 at 8:41 AM
“In order to qualify, a debtor must pass what is known as the Brunner test, stemming from a 1987 federal appeals court decision, which carries three conditions:
The debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans;
Additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
The debtor has made good faith efforts to repay the loans.
http://www.businessinsider.com/escaping-student-loans-via-bankruptcy-2012-9
mrsknightley on December 10, 2012 at 9:27 AM
From the same article:
“Unless it looks like you are a functional quadriplegic for example, or maybe have bipolar disorder and can never work and are completely disabled for the rest of your life, you are not deemed to have this condition of hopelessness,” says David Leibowitz, a bankruptcy attorney in Wisconsin and Illinois.
mrsknightley on December 10, 2012 at 9:28 AM