Student Loan Debts Are Unsustainable

[LowDown]

Charleston Daily Mail: Student loan debts are unsustainable.

Outstanding student loan debt is giving economists a sense of deja vu. They fear a student loan bubble similar to the housing bubble that helped tank the economy in 2008.

A few facts:

• The delinquency rate for student loans made in the past two years is 15 percent - up from 12.4 percent in the 2005-2007 period.
• Subprime mortgage delinquencies stood at 15 percent in 2007.
• 19 percent of American households have a student loan debt.
• Over the last 10 years, tuition rose 60 percent at private colleges and 104 percent at public colleges.
• The average student loan was $27,253 last year, up from $17,233 in 2005.
• Total outstanding student loans top $1 trillion. That's more than Americans owe on credit cards.

What happened should not be a surprise. To make college more accessible, Congress made student loans more available, just as it had encouraged home ownership for everyone.

Freely available student loan money resulting in a rapid rise in tuition costs. Look around academe these days and you can see where the money went -- into plush physical facilities for one thing. And into outrageously high salaries for Administration and senior professors as well as a tremendous growth of administration and its costs.

But it's all going to come down when the bubble finally bursts in a big way. And there are signs that it's starting. Several universities have frozen or reduced their tuition costs. Applications are down. Some marginal institutions have closed.

It would make an interesting study to see what effect having a huge student loan debt has on the likelihood of having children because right now US birth rates are in the process of crashing. We're going to have to increase immigration just to keep growth going. This should be of concern to liberals, because they need young people paying taxes to pay for the government programs they're so in love with.

Christian Science Monitor: Behind the falling US birthrate: too much student debt to afford kids?

The record-low birthrate in the US is showing no signs of bouncing back, even with the economy on the mend. Evidence is growing that huge student debt may be deterring people from starting families.

The bottom line: Just as with the government's efforts to put people of modest means in their own homes, this effort to get lower middle class people through college has huge unintended consequences that will end up screwing the whole country and the economy. It would have been much better if it had been left alone.

 

[MaggieD]

Charleston Daily Mail: Student loan debts are unsustainable.

Freely available student loan money resulting in a rapid rise in tuition costs. Look around academe these days and you can see where the money went -- into plush physical facilities for one thing. And into outrageously high salaries for Administration and senior professors as well as a tremendous growth of administration and its costs.

But it's all going to come down when the bubble finally bursts in a big way. And there are signs that it's starting. Several universities have frozen or reduced their tuition costs. Applications are down. Some marginal institutions have closed.

It would make an interesting study to see what effect having a huge student loan debt has on the likelihood of having children because right now US birth rates are in the process of crashing. We're going to have to increase immigration just to keep growth going. This should be of concern to liberals, because they need young people paying taxes to pay for the government programs they're so in love with.

Christian Science Monitor: Behind the falling US birthrate: too much student debt to afford kids?

The bottom line: Just as with the government's efforts to put people of modest means in their own homes, this effort to get lower middle class people through college has huge unintended consequences that will end up screwing the whole country and the economy. It would have been much better if it had been left alone.

I completely agree. The same thing has happened to tuition costs that's happened to healthcare and veterinary costs when practically first-dollar coverage became a reality. Supply-and-Demand works -- except when demand is artificially inflated.

Young people are lulled into the belief that a college education is worth the debt load...many starting out married life owing $40,000 or $50,000 in student loans between them. The loans are given out pretty much like popcorn. "Ask and ye' shall receive." And the needier a student? The more he can borrow.

Loaning money to people with no visible means of repayment has always been stupid. Borrowing money when you don't have a job? Even moreso.

 

[Fisher]

I think a 1 time mass student loan forgiveness package would do wonders for our economy since that is the prime wide-spread consumer demographic. Let people not pay any loans and they will buy iPods and crap.

 

[austrianecon]

I think a 1 time mass student loan forgiveness package would do wonders for our economy since that is the prime wide-spread consumer demographic. Let people not pay any loans and they will buy iPods and crap.

Which will add to the national debt. I pass.

 

[Fisher]

Which will add to the national debt. I pass.

Or it will create lots of revenue as a byproduct of the velocity created over 20 years of people not having to pay banks who sit on the money in favor of McDonald's and Target.

 

[Hugo]

I am a student in the UK, and feel that I am victim to similar shortsightedness. I was recently told that 68% of the students that graduated from my current university two years ago were unemployed 18 months later. Some voluntarily, others involuntarily. It seems to me that governments encourage further education for all high school students regardless of whether it is suitable for the individual student or not. The problem is the increase of individual debt that results. This means that further education is now stunting graduates further down the line. Graduates can't get jobs, can't clear debts, can't buy homes and can't start families.

 

[austrianecon]

Or it will create lots of revenue as a byproduct of the velocity created over 20 years of people not having to pay banks who sit on the money in favor of McDonald's and Target.

Considering Uncle Sam is the largest loaner and guarantee of student loans.. means Uncle Sam would have to forgive the debt, not the banks.

 

[Fisher]

Considering Uncle Sam is the largest loaner and guarantee of student loans.. means Uncle Sam would have to forgive the debt, not the banks.

Well, then (even though it is only about 1/2 based on the numbers I have heard), we will just have to mint a few extra trillion dollar coins.

 

[austrianecon]

Well, then (even though it is only about 1/2 based on the numbers I have heard), we will just have to mint a few extra trillion dollar coins.

More Than Half Of Student Loans Are Now Delinquent - Forbes

 

[iguanaman]

More Than Half Of Student Loans Are Now Delinquent - Forbes

When more than half of college graduates under 25 are unemployed or under-employed would you expect anything else? This is just more consequences of the Great Recession.
I wish the Right would stop using those consequences to further their agenda. They are the ones that caused it.

 

[Helix]

bankrupting the workforce pre-employment and placing financial barriers between the country's population and advanced intellectual development seems to be poor national policy.

of course, my own solution would probably be significantly different than whatever the OP might support.

 

[austrianecon]

When more than half of college graduates under 25 are unemployed or under-employed would you expect anything else? This is just more consequences of the Great Recession.
I wish the Right would stop using those consequences to further their agenda. They are the ones that caused it.

Has nothing to do with left or right.. both sides caused the recession and no it's not so Great historically speaking. But I also view the last 30 or 40 years of the US economy as part of a big era of stagnation. Try reading "The Great Stagnation" by Tyler Cowen.

 

[iguanaman]

Has nothing to do with left or right.. both sides caused the recession and no it's not so Great historically speaking. But I also view the last 30 or 40 years of the US economy as part of a big era of stagnation. Try reading "The Great Stagnation" by Tyler Cowen.

Tell that to the top 5% who quintupled their net worths to over $40 Trillion during your so-called "stagnation". The Great Middle Class Stagnaton is a much more accurate term for the last 40 years. Median wage growth has been non-existant for the majority of Americans while the wealthy have cleaned up.

 

[Paschendale]

The reason why so many recent graduates can't pay their loans is because about half of them (us) are unemployed. In an effort to squeeze the most profit and productivity out of workers, businesses aren't hiring entry level people for entry level jobs anymore. This is where our profit driven system is leading us.

The OP is right about one thing, though. This is leading to a lower birth rate. I'm a 26 year old urban professional. NO ONE in my demographic is marrying and having children. It's too expensive. We can't afford it. I literally only know one married couple with kids my own age. And then only tangentially. Everyone is either devoting themselves completely to building economic stability, or if they have children, they fall out of the middle class. Family is simply too expensive right now.

 

[austrianecon]

Tell that to the top 5% who quintupled their net worths to over $40 Trillion during your so-called "stagnation". The Great Middle Class Stagnaton is a much more accurate term for the last 40 years. Median wage growth has been non-existant for the majority of Americans while the wealthy have cleaned up.

Down right silly. Maybe you should read the work before actually commenting on it. Btw.. It's the top 10%, not 5% as you claim. And here's some interesting facts for you about "money". If you used 2011 dollars to buy something that cost $1 in 1972, you'd need $5.30 in 2011 dollars. So $40 trillion measured in 1972 dollars would actually be $7.52 trillion. It's called inflation. Now what do you call a period of inflation and very little growth (stagnation)? Stagflation. Welcome to the 1st world economies since the 1970s. Wanna see real growth.. go to the 2nd world and 3rd world which can actually add wealth through creation.

 

[sangha]

Now what do you call a period of inflation and very little growth (stagnation)? Stagflation.

No, that is not stagflation

 

[austrianecon]

No, that is not stagflation

Hmm.. pretty sure it is.

A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation.

A situation in which inflation is combined with stagnant or falling output and employment.

 

[sangha]

Hmm.. pretty sure it is.

A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation.

A situation in which inflation is combined with stagnant or falling output and employment.

I'm certain it is not.

 

[iguanaman]

Hmm.. pretty sure it is.

A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation.

A situation in which inflation is combined with stagnant or falling output and employment.

The only incidence of Stagflation of note came in the 70's when OPEC raised the cost of oil from $3 a barrel to 12$ overnight. That caused inflation that trickled thru the entire economy and unlike "real" inflation was not caused by too much money chasing too few goods. It was mistakenly (and foolishly) "corrected" by sky high interest rates that put us into a nasty recession. That's when that "miracle worker" Reagan came in and cut interest rates back to normal and spent like a drunken sailor. Of course the economy came back like gang busters for a while at least until the lack of wage growth put a damper on GDP growth. Reaganomics had already reared it's ugly head and the "Bubbles" and Bush's had not even begun their dirty work.

 

[austrianecon]

The only incidence of Stagflation of note came in the 70's when OPEC raised the cost of oil from $3 a barrel to 12$ overnight. That caused inflation that trickled thru the entire economy and unlike "real" inflation was not caused by too much money chasing too few goods. It was mistakenly (and foolishly) "corrected" by sky high interest rates that put us into a nasty recession. That's when that "miracle worker" Reagan came in and cut interest rates back to normal and spent like a drunken sailor. Of course the economy came back like gang busters for a while at least until the lack of wage growth put a damper on GDP growth. Reaganomics had already reared it's ugly head and the "Bubbles" and Bush's had not even begun their dirty work.

wow.. okay.. let me get this straight.. it was foolish to correct a monthly inflation rate of 10%? That comment alone shows me how foolish you are and it's absolutely pointless for me to point out to you.. these facts.. Volker appointed by Carter hiked interest rates. :lol:

CPI-U uses a 1982-1984 baseline of 100. So 1982 CPI was 96.500, 2012 it was 229.594. So you get a graph something like this:

Yeah.. that's a 41% increase in prices from 1982.

 

[justabubba]

Charleston Daily Mail: Student loan debts are unsustainable.



Freely available student loan money resulting in a rapid rise in tuition costs. Look around academe these days and you can see where the money went -- into plush physical facilities for one thing. And into outrageously high salaries for Administration and senior professors as well as a tremendous growth of administration and its costs.

But it's all going to come down when the bubble finally bursts in a big way. And there are signs that it's starting. Several universities have frozen or reduced their tuition costs. Applications are down. Some marginal institutions have closed.

It would make an interesting study to see what effect having a huge student loan debt has on the likelihood of having children because right now US birth rates are in the process of crashing. We're going to have to increase immigration just to keep growth going. This should be of concern to liberals, because they need young people paying taxes to pay for the government programs they're so in love with.

Christian Science Monitor: Behind the falling US birthrate: too much student debt to afford kids?



The bottom line: Just as with the government's efforts to put people of modest means in their own homes, this effort to get lower middle class people through college has huge unintended consequences that will end up screwing the whole country and the economy. It would have been much better if it had been left alone.

the short sightedness of folks who believe this crap is disappointing
look at this site and see the actual benefits of making sure our citizens have access to a higher education:
Education pays
8.3% unemployment for HS grads vs 4.5% for those with a 4 year degree
weekly pay $652 vs $1066
so, in an information age, those with better educations enjoy higher earnings and lower unemployment rates
and that is something you think the government should quit making possible
such a narrow, uninformed view

 

[LowDown]

the short sightedness of folks who believe this crap is disappointing
look at this site and see the actual benefits of making sure our citizens have access to a higher education:
Education pays
8.3% unemployment for HS grads vs 4.5% for those with a 4 year degree
weekly pay $652 vs $1066
so, in an information age, those with better educations enjoy higher earnings and lower unemployment rates
and that is something you think the government should quit making possible
such a narrow, uninformed view

Yeah, meanwhile the reality of it is that a lot of graduates are suffering under huge student loan burdens that they can't get the kind of employment needed to pay off. They would have been much better off avoiding the debt somehow, either by working their way through or skipping the whole thing. Many of them say that the cost of college wasn't worth it.

 

[justabubba]

Yeah, meanwhile the reality of it is that a lot of graduates are suffering under huge student loan burdens that they can't get the kind of employment needed to pay off. They would have been much better off avoiding the debt somehow, either by working their way through or skipping the whole thing. Many of them say that the cost of college wasn't worth it.

sounds like buyers remorse to me
bet you do not hear that complaint from those who were able to get good educations, good jobs and good incomes, only because the funds for an education were made possible
the data on that site is clear
those with skills provided by an education are more likely to be employed and more likely to earn a higher wage than those who did not

no doubt there were those 'students' who took out loans to attend school and wasted their opportunity ... those loans kept them out of the (low wage) work force temporarily and now they are having to pay the piper for making bad choices
they knew what they were doing when they signed the loan documents
just like those who took out mortgage loans they knew they were without the means to repay
they made their mistakes. let them deal with the outcome
but their poor judgment should not deny many others who will seize the educational opportunities made available by money to get an education

 

[ReformCollege]

Charleston Daily Mail: Student loan debts are unsustainable.



Freely available student loan money resulting in a rapid rise in tuition costs. Look around academe these days and you can see where the money went -- into plush physical facilities for one thing. And into outrageously high salaries for Administration and senior professors as well as a tremendous growth of administration and its costs.

But it's all going to come down when the bubble finally bursts in a big way. And there are signs that it's starting. Several universities have frozen or reduced their tuition costs. Applications are down. Some marginal institutions have closed.

It would make an interesting study to see what effect having a huge student loan debt has on the likelihood of having children because right now US birth rates are in the process of crashing. We're going to have to increase immigration just to keep growth going. This should be of concern to liberals, because they need young people paying taxes to pay for the government programs they're so in love with.

Christian Science Monitor: Behind the falling US birthrate: too much student debt to afford kids?



The bottom line: Just as with the government's efforts to put people of modest means in their own homes, this effort to get lower middle class people through college has huge unintended consequences that will end up screwing the whole country and the economy. It would have been much better if it had been left alone.

Colleges have absolutely no incentives to cost control, because doing so would make them loose proportional government funds.

I don't understand why so many of my fellow college students are so pro-left on this issue. Perhaps they are too smug and naive to see that the left's policies is running up their student debt with many of them getting degrees that won't get them a job. Simply put, my generation is being riled up for slaughter by this college hoax.

 

[ReformCollege]

sounds like buyers remorse to me
bet you do not hear that complaint from those who were able to get good educations, good jobs and good incomes, only because the funds for an education were made possible
the data on that site is clear
those with skills provided by an education are more likely to be employed and more likely to earn a higher wage than those who did not

no doubt there were those 'students' who took out loans to attend school and wasted their opportunity ... those loans kept them out of the (low wage) work force temporarily and now they are having to pay the piper for making bad choices
they knew what they were doing when they signed the loan documents
just like those who took out mortgage loans they knew they were without the means to repay
they made their mistakes. let them deal with the outcome
but their poor judgment should not deny many others who will seize the educational opportunities made available by money to get an education

Yes, but some of it has to do with professor tenure and the clout of liberal art programs in colleges. Both of these provide huge resistance against cutting programs that aren't economically useful.