Yet another consequence of our stubbornly stagnating economy is the degree to which young people increasingly find themselves unemployed, underemployed, and otherwise delayed in starting down the road of their adult career paths. That, in turn, rather adversely effects their collective ability to start paying down those gigantic loans many of them took out to pay for college educations — which helps to explain why the rate of student-debt default is still rising precipitously, via Bloomberg:
About one in seven borrowers defaulted on their federal student loans, showing how former students are buckling under higher-education costs in a weak economy.
The default rate, for the first three years that students are required to make payments, was 14.7 percent, up from 13.4 percent the year before, the U.S. Education Department said today. Based on a related measure, defaults are at the highest level since 1995.
The fresh data follows the announcement by Barack Obama’s administration that it would seek to restrain skyrocketing college expenses by tying federal financial aid to a new government rating of costs and educational outcomes.
Yes, about that practically worthless plan of creating what is basically a knockoff of already-existing college rankings systems that President Obama unveiled with much fanfare last August: It is yet another mistaken attempt from the Obama administration to alleviate some of the symptoms of a problem without actually addressing the underlying disease, and the other and somewhat less-noticed part of that same plan sounds an awful lot like it’s going to be directly feeding the disease. Coming soon, still more Obama-admin PR geared at getting young people to like them, via the NYT:
Largely overlooked was a more immediate change that could make a dent in the rising number of student-loan borrowers going into default. Starting next month, the Department of Education will contact borrowers who are struggling to repay their federal loans to make sure they know all the options available to them.
“We think there are lots of people who could benefit from our income-based repayment programs but haven’t signed up, and we want to get to them before they default,” said Arne Duncan, the education secretary. “The challenge is getting the word out.”
To do that, the department is planning to send e-mails to those who seem most likely to benefit from the programs, explaining debt-relief plans based on the borrower’s income. …
Education Department officials stress that the programs are not meant for all borrowers, but as a safety net for those struggling with education debt. That is an ever-larger group as debt loads and defaults keep rising.
To borrow a phrase from President Obama, let me be clear: The single largest problem students are facing today is the easy, cheap, and indiscriminate availability of student loans that heighten demand and help universities raise their prices, proactively pursued as a matter of government policy. The Obama administration has done nothing to alleviate the phenomenon, and now they’re going to send out still more signals about how “easy” it will be to repay these huge loans after you graduate with a little help from Your Friend, The Federal Government.
If the federal government could perhaps just stop interfering in free markets, which would have the doubly beneficial effect of removing fuel from the student-loan crisis fire as well as engendering well-paying job opportunities for young people, it would do them a world of good beyond anything their relentlessly counterproductive panders can every accomplish.