The State of the American Debt Slaves, Q3 2019

Paying the University-Corporate-Financial Complex and the big bifurcation.

Student-loan balances jumped by 5.1% in the third quarter compared to Q3 last year, or by $80 billion, to a new horrifying record of $1.64 trillion, having skyrocketed by 120% in the 10 years since Q3 2009, according to Federal Reserve data released Thursday afternoon. Over the same 10-year period, when student loans soared 120%, the Consumer Price Index has increased 19%. Student loan balances are 7.6% the size of GDP, up from 5.1% in 2009.

But the explosion of student debt is not because there is an explosion in enrollment in higher education. On the contrary: According to the latest data from the National Center for Education Statistics, enrollment fell by 7% between 2010 and 2017. But those fewer and fewer students are borrowing more and more to pay for tuition, transportation, electronic devices, and other things that the University-Corporate-Financial Complex gets rich off.

This includes “student housing,” which has become a hugely hyped asset class with its own student-housing Commercial Mortgage Backed Securities where delinquency rates are now spiking.

Everyone is trying to make money off the proceeds from these government-guaranteed loans. The students are just the money-conduit from the taxpayer to:

  • Universities trying to grow their empires
  • Corporations such as Apple selling their products to students
  • Textbook publishers with monopolistic rip-off strategies.
  • Landlords seeking a high yield on their investment, and Wall Street seeking fees on securitizing it all.
  • Ticket vendors, grocery stores, bars, restaurants, car dealers, airlines, and others.

A whole sub-economy has sprung up to leech this money out of the educational process, and taxpayers, via student loans, are funding part of it – but not all of it. Students who work fund part of it. Parents fund part of it. Savings fund part of it. It’s a huge business. But the glaring part is the ballooning student debt.

Auto loans and leases.

Total auto loans and leases outstanding for new and used vehicles in the third quarter rose 4.3% from a year ago, by $50 billion, to a record of $1.19 trillion:

Over the past 10 years, since Q3 2009, auto loan balances have surged 62%, compared to the increase in the Consumer Price Index of 19% and population growth of 8%. So, on an inflation-adjusted per-capita basis, the burden of these loans has increased. In terms of the size of the overall economy, auto-loan balances have ticked up from 5.1% of GDP in 2009 to 5.6% of GDP currently.

This 4.3% rise in auto loan balances outstanding has occurred despite new-vehicle unit sales that declined by 1.6% so far this year and despite lackluster used-vehicle unit sales. It’s the result of numerous factors, including:

Credit cards and other Revolving credit

Outstanding balances on credit cards and other revolving credit, such as personal lines of credit – but not credit secured by housing, such as HELOCs – rose 3.6% in Q3 compared to Q3 last year, to $1.04 trillion (not seasonally adjusted). This was a record for a third quarter, and was the second highest quarter ever, below only the borrow-till-you-drop holiday frenzy of Q4 last year.

But in overall terms, as a national average, consumers have been fairly prudent by American standards, compared to the era before the Great Recession, to the consternation of lenders that milks enormous profits from credit-card debt where interest rates can exceed 20%.

Over the past 11 years since Q3 2008, just before it all fell apart, credit card balances edged up only 5.8%. Over these 11 years, the Consumer Price Index rose 22% and the population grew about 9%. So adjusted for inflation and per-capita, consumers have shed credit card debt.

In terms of the size of the economy: In Q3 2008, revolving credit amounted to 6.8% of GDP. Today, it’s down to 4.8% of GDP. So, in terms of credit cards, consumers overall as a national average have become more prudent.

The big bifurcation.

On one side are consumers who use their credit cards only as payment system and to get cash-back, miles, and whatever loyalty rewards, but they pay their cards off every month and carry no balances and pay no interest or fees. Since they have no interest-bearing credit card debt, their activities are not included in consumer credit.

On the other side are consumers with maxed-out credit cards or with large balances, and they have personal loans, payday loans, etc. They’re sitting ducks for the lending industry because they cannot pay off the loans but pay interest and fees out of their nose, wobble from paycheck to paycheck, and if something goes wrong, become delinquent. It’s these people who owe the lion’s share of that $1.04 trillion in revolving credit – which is why credit card debt sours so fast during a downturn.

Total Non-Housing consumer credit.

Student loans, auto loans, and revolving credit combined into total consumer credit — which excludes housing related credit such as mortgages — jumped by $193 billion in Q3 from a year ago, or by 4.9%, to $4.13 trillion, another record:

That $193 billion increase in consumer debt over the past 12 months – whether from student loans, auto loans, or credit cards – was spent and boosted consumer spending (about $14.5 trillion) by 1.3%. And it boosted GDP by about 0.9%. That’s why economists want consumers to borrow-and-spend.

Students are an increasingly big part in this GDP-boost formula. That’s why economists and politicians don’t want to attack the problem where it really is: cracking down on the costs.

Instead, they’re trying to reshuffle as to who is paying for it – and it’s not the two beneficiaries of this process, namely the students getting an education and the University-Corporate-Financial Complex leeching off the process.

And they have found taxpayers who are owed this money. Broad student loan forgiveness is also utterly unfair to former students who paid off their loans and now would have to pay off the loans of other students; to parents who sacrificed a lot to fund their kids’ education and now would have to fund the education of other kids; and to many students themselves, who tried to avoid student debt, worked like maniacs and skimped on everything to pay their way through college, who went to the cheapest schools and stretched out their education, and who got less fancy jobs because of it, and now they would have to pay off the debt of other students that splurged on debt and might have ended up with better jobs.

The real problem that needs to be dealt with in terms of student loans is the cost of education – not who pays for it – and the costs are driven by the primary beneficiary of all this, the University-Corporate-Financial Complex.

UPDATE Nov 9: Dear readers, excellent comments and discussions below. You’re missing out if you don’t venture below the line. And you can chime in as well.

Used vehicle sales are declining again, after having risen for years. Wholesale prices slip year-over-year for first time in 33 months. But “cars” still dominate “trucks.” Read…  What’s Going on in the Used Cars & Trucks v. Carmageddon?

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  201 comments for “The State of the American Debt Slaves, Q3 2019

  1. Resjudicata says:

    My wife and I paid off $175,000 in student loans over the last 8-year period. Meanwhile many of my peers did other things with their money like invest and buy bigger houses. If gramma warren swoops in and pays off my peers student loans I, for one, will be very upset.

    • Unamused says:

      If gramma warren swoops in and pays off my peers student loans I, for one, will be very upset.

      Getting ripped off by the Education Industrial Complex: still okay!

      • Resjudicata says:

        I didn’t make the rules or set the price. You have to pay to get the degree before you can get the license to do what my wife and I do. What we do paid for oureducation and supports our family, so I guess the price was okay. My beef is the government picking winners and losers.

        • Paulo says:


          Hats off to you for doing the right thing and not whining about your situation. I too would be pissed if Warren bailed out others with student debt. Regardless, when one takes on debt with eyes wide open, and proceeds to pay down the debt, that is a testament to good character.

          What Warren is saying is that it will be okay for everyone else to pay off someone’s debts….just like the banksters received. It wasn’t right then, and it won’t be in the future.

        • Wisdom Seeker says:

          Re “You have to pay to get the degree before you can get the license to do what my wife and I do.”

          That’s part of the Education-Industrial complex scam. Regulate so licenses are required for certain jobs. Even in jobs where this makes some sense (e.g. medicine), the system goes a step farther and sets laws and processes to limit the supply of licensees. This increases demand for licenses, so the educational complex can charge higher prices for certificates. It also drives up wages for the limited number of licensed workers, at the expense of everyone else.

          It’s the medieval guild system by a new name. It’s still morally wrong.

        • TXRancher says:

          Yes a socialist plan to eliminate all debt, student and other, would surely piss off all of us that lived within our means and saved for the future. And what about the future moral hazard?

        • doug says:

          You mean like banks vs the rest of us?

        • QQQBall says:

          Yes, I was talking to partner about this. I had $6k student debt to study in Japan for a year. When I graduated, I started at $1,100 a month salary and the first thing I set out to do was pay that student loan off. I worked my way through school with the help of GI Bill, which I earned. Paying off debt should be easier than it is and once out of debt, it makes you think twice about borrowing.

          The trend in the US for the past decade has been to punish the prudent.

    • RepubAnon says:

      I, too, paid off my student loans. However, I’d be very happy to see President Warren help students pay off their debt – it’d be a big boost to the economy. Freed of the crushing debt burdens, students would again be purchasing cars, homes, and generally growing the economy.

      If we never help others, we’re stuck in a downward spiral – where things can only get worse for us all.

      • Sargento says:

        Agreed. What people will eventually realize is that when the middle class wins everyone wins. And for those that have already paid off their debts or are well off financially they will be able to get even further ahead.

        I was one of those that went to a cheap school, worked full time while in college, got minimal debt and then drove a used car until the debt was paid off. But now one has to admit that the game is Uber rigged to benefit those with capital. It is those same people that continue to get ridiculously wealthy while their employees who helped get them there can barely make do. The system needs to be evened out a bit and if we don’t do it then everyone eventually goes down.

        Remember the lesson of monopoly. It does nobody good when one person wins by getting rich and knocking their friends out of the game. Ultimately the game ends for him too.

        • JZ says:

          You and and likes are the reason US GDP is NOT +4% a year. Shame on you!

          Shame on me too!

        • Alistair McLaughlin says:

          Sargento, if you need to pay more taxes to pay off someone else’s student loans, I assure you that you do not win. There is no free lunch. Paying off student loans for others will have all kinds of unintended consequences and create all kinds of moral hazard, much if which we cannot predict.

        • QQQBall says:

          Great Sargento. Please go to the local university and have them pick a student in debt…. you pay for their education and when he/she graduates, go back and get another student to support. Please post after you have done so.

      • MCH says:

        So, you want her to basically tax you and transfer that money to someone else who wasn’t as responsible as you were?

        My friend, here is hint, Warren and Sanders aren’t out to help anyone but themselves. I am amazed at how few people ask what the price is to that help that is provided. For them, it isn’t about the dollar, which they are going to trash anyway, it’s about power.

        • jZ says:

          To be honest, I think everybody knows what Warren/Sanders’s motive/intention is like everybody “knows” Epstein did NOT kill himself. What can you do?

          I think so …..

      • andy says:

        Why not just give them cars and houses for free? They can spend money in restaurants, travel, shop, donate to charity..

      • Mike says:

        I really have to assume you’re being sarcastic. You agree with having their student debt paid off so they can ‘grow the economy’ by getting back into debt with buying cars and houses etc. You couldn’t make this stuff up.

      • Dave says:

        RA, you bring a good point to the discussion. The problem is no one(in the current presidential field) is discussing the preposterous rise in the cost of education. If there would be serious reform on the costs of college then I too would be for eliminating some of the debt. As it stands I am against loan forgiveness if it is not partnered with serious and severe cost restructuring of upper education.

        Without restructuring the costs of upper education you are just feeding the machine and making it stronger and even less accountable for its truly horrible behavior.

        The other issue not addressed is that nothing is free, so if you loan forgive then that cost is shifted and those who are going to have to pay will have to reduce their consumption to offset the costs they now bear.

      • Resjudicata says:

        Fix the problem, not the symptom. Forgiving student loans might make you feel warm inside, but the real effect will be to further increase school costs, create new moral hazards, and unfairly advantage some at the cost of others.

      • CreditGB says:

        So Liz unleashes masses of unrestrained 19 to 20 something spenders, to spend more and hide out in academia for years, maybe decades.

        Socialists will include imported spenders with no ties to the country itself, except to feed off the “free stuff” offered to gain control over them.

        And the Billionaires, and now Millionaires are going to just sit around and pay?

        Let me ask these geniuses, after the big payers leave, and they will, who is left to pay for these entrenched freebies? Think social security, medicare, and medicaid. It is, and always has been you in what was the middle class that will pay.

        Oh, and don’t think your 401k, or your home equity is safe, these are assets of yours. Socialists have been floating the idea of taxing assets for several years now. It is only a matter of an election or two before it becomes reality.

        • EchoDelta says:

          I don’t know if you noticed, but Trump and friends never pay their bills ever. Billionaires and millionaires get free stuff handed to them all the time.

          In the meantime Biden’s big contribution to student debt was to make student loans nondischargeable in bankruptcy to satisfy his bosses in Delaware, home to the crooked credit card industry in much the way South Dakota has likewise lured in racketeers with favorable laws.

          In the meantime, if you die in your med or law school program the student loan funders go break your grandmother’s knees to get whatever blood they can out of the turnip. How’s that for moral hazard?

      • JZ says:

        RepubAron If we want to help each other, we help our neighbors, friends, the people we know dear and near. If we “help” through political system, it will turn neighbors against each other. Why? Because neighbor no longer need to “win” the help from each by convincing the common good of the community, rather, let’s vote to use the police/military violence power against each other to transfer wealth. There is no more “common good” in this process, and it brings the worst out of the neighbors.
        I understand you want to play corporation game with the neighbor, the community, the society, the nation. But the moment you play this game through political system, the game will immediately turn into competition game. And the result is simple. You want to help? Fine, we will suck you dry. Like day and night, human has good and evil. The founders of US set up the government structure to diffuse the power so that it brings out more good and evil. Nowadays, government interfers everything from economy, market to what you do in bedroom. This “way” of governing will bring more evil than good regardless of what the intention is.

      • Wolf Richter says:


        I CAN and WOULD support free but spartan higher education, funded by the federal government, where tuition is essentially free. These learning institutions would be in drab government-owned class-C office buildings with much of the work done online, where 100% of the focus is on excellence in teaching and learning.

        These schools would not fund any research by faculty. There would be no athletic facilities and sports teams or other fancy stuff. Degrees would be limited to a Masters (if you want more, you go to a regular university). Textbooks would be funded by, and copyright would be owned by the government, and they would be handed out for free in electronic format only.

        There would be a subsidy for poor students to buy a cheap laptop. There would be subsidized dorms for those that need a place to stay, with two people packed into a basic small room, with toilets and showers down the hall. The “library” would be a large room with desks, and all books would be in digital format. The top administrator would get an adequate but un-fancy salary on the government pay scale.

        In other words, an institution totally focused on teaching and learning at the lowest possible cost that mostly cuts out the University-Corporate-Financial Complex. I would be proud to support something like that. And I might even volunteer to teach a class there periodically for free.

        Anyone who wants to go to and pay for a regular university would be encouraged to do that, but there would be no federal financial aid and no government-backed student loans. It would be up to universities to fund those students. This would also be the place for foreign students, and as is the case today, they would pay sky-high tuition because that’s a big business for the US, and counts among our valuable “exports.”

        • Tom Jones says:

          Exactly! Education has been a racket for decades now. A no frills education, though would be fought by politicians who get big campaign donations. Also, the wealthy eduation institutations pay no taxes while setting on land alone worth billions. They’re run like corporations with profits being number one. You hit the full gamma of players. Textbook publishers, and courses that require new ones constantly, so students can’t resell their used books.

        • EchoDelta says:

          Wolf what do you think about California in the days before Reagan stomped down the system of very low cost universities?

          IN the sixties my dad’s generation got through Stanford and Berkeley for the price of books and lab fees. My generation could pay-go at minimum wage and book loans for grad school.

          Kids coming up today get to pay out the nose and the minimum wage market is full up, rents are preposterous and even state schools represent some stark choices financially. College is a system for extracting wealth like no other with the threat that you will never succeed without credentials and dues paying, to the extent that people are killing themselves.

          That may amuse the MAGA types but the combination of increasing prices, purple unicorn hiring practices, outsourcing and downsizing just looks like we are dedicated to eating the seed corn and turning America into another third world dump where the rich live behind walls with broken bottles cemented on.

      • I would support SL forgiveness in exchange for a couple years of public service.

        • JZ says:

          Or just good old fashioned DEFAULT. They need to build up credit for 7 years before they can borrow again.
          For those who was responsible, they will be 7 years ahead. For those who abused the loans, they have another shot 7 years later.

          The sustem essentially does NOT allow any punishment at this moment under the name of “or we will have political consequences”. When there is NO punishment, there is NO decency, NO responsibility, NO reward.

        • Jon says:

          Many of these schools have large endowments. Since the universities are the culprits, they should pay off the loans. If they go bankrupt in the process? Too bad. They’re universities, they’re supposed to be filled with smart people.

      • curiouscat says:

        If one of the classes you took was economics, I would ask for my money back!

      • Gonna be a good one says:

        Student loans should not be paid back on the backs of taxpayers. It’s the idiotic parents guiding their children into debt that is the primary reason that so many have heavy student debt. When parents look at the price of housing, text books, food, tuition, fees, transportation, etc and still send their kid into the mouth of the beast, then those parents and their kids should reap the fallout.
        There are plenty of community colleges, tech colleges, and local union halls with apprenticeship programs for a small fraction of the cost of universities. It’s the parent’s and kid’s egos that are driving this slaughter. I speak from experience, I put 2 kids through college 10 years ago during the economic collapse, after losing my job, and they still got through with ZERO debt. They both had used Honda civics when they graduated, they had zero credit cards to their name, and NO STUDENT LOANS. They both graduated from state colleges and are in the workforce today. I have ZERO sympathy for these morons. Let them slave until they die.

      • Greg says:

        If the government raises taxes to pay off student loans or the Fed just prints the money it’s a green light for the broken education system to keep inflating costs. It might help the individuals receiving free money but doesn’t fix root causes of the debt crisis.

      • Morty Mc Mort says:

        Try MORAL HAZARD – Reward irresponsible behavior and you are guaranteed to get more and more of it. Hence the bankrupt US of A – the tipping point is being reached, USA has squandered it’s wealth.

      • rhodium says:

        I didn’t have too much debt when I graduated luckily, but some do only because they didn’t choose more affordable options and that should be on them. I would support capping interest rates at cpi or doing away with interest payments while still collecting on the principal. You can’t completely destroy the disincentives to going into extreme debt without creating a culture of greater irresponsibility. What about all the people who don’t go to college? It also leaves them feeling less privileged and undervalued. Loan forgiveness beyond forgiving accrued interest is stupid and would carry tremendous political backlash towards dems from people who didn’t go to college. It would be far better just to give everyone UBI, applying the payment to the balance of those with college debt while forgiving accrued interest, and following this, subsidizing higher education so that most students do not go into extreme debt in the first place. However, colleges also have all kinds of malincentives to recklessly spend money just like their students. College budgets should be regulated and forced to comply with predetermined accounting standards that force them to dedicate a certain percentage of funding to academics and limiting adminstrative costs in order to receive public funds. Optimistically speaking, there is no reason to believe higher education could not become a financially sane pursuit, but in its current state it’s a madhouse.

    • Joan of Arc says:

      As long as the stock market keeps making almost daily record highs no one cares about all this debt.

    • Reality says:

      As the great George Carlin once said, “It’s called the American Dream because you have to be asleep to believe it.”

    • van_down_by_river says:

      I’m sorry, but you were suckered.

      Hey millennials! organize, en masse and walk out on this debt. What are they gonna do if none of you pay? Stop paying all of your debts, credit cards, medical, housing – just stop paying. A jubilee is inevitable and those who played by the rules will feel suckered and bitter. After that stop using consumer credit, credit should be reserved for capital formation not consuming.

      So many walked away from housing debt a decade ago and there were no consequences – the IRS even stopped counting borrowed money never paid back as income (they changed the rules for dead beats). Many are still living rent free in homes they stopped making mortgage payments on years ago.

      Currency and credit are just electronic numbers in an account and credit scores are B.S. If an entire generation chooses to ignore credit scores FICO will have no power over you. Wrest control and assert yourselves, this is your world now so you better grab the wheel before we drive into a ditch.

      Don’t be lectured about debt. Do as we do, not as we say.

      • Resjudicata says:

        Maybe you’re right, maybe not. Here’s the facts for you to evaluate:

        My parents are grade school teachers, my wife’s mother (single mom) is a secretary. We both went to college on scholarship. We both had to pay for post-grad (that’s where the $175k loans came from). During post-grad, we both clerked in our field part time and worked nights (I bartended and she worked at a hooters type restaurant; she made more :-). Almost a decade later we own our own business, our net worth is greater than all our parents combined, we have a family of five, we are essentially debt free, and we have considerable income.

        Don’t think for a second it was easy. We drive old cars and live in a small house for our family, especially compared to our peers. No vacations for 10 years other than to see family. No boat, no luxury items, etc. etc. etc.

        In any event, hopefully you can see why we would be upset if gramma warren steps in and makes us pay someone else’s student loans.

    • Andrew C Bonaventura says:

      Student loan fiasco is alot like the health care fiasco in this country and the defense budget .the cost is absurd because of everybody that feeds off of it .will it ever end well I doubt it.

      • Resjudicata says:

        I’m not sure if you all are talking about undergrad, post-grad or what.

        As for undergrad, tuition at FSU and UF is $6.5k per year. In Georgia and Alabama it’s $11.5k and $10.5k respectively. UCLA is $13k. Michigan is $14k. Anyone who gets any respectable degree from any of those institutions should come out making $40k plus and the sky is the limit after you learn your craft and start your own business.

        Undergrad tuition is a Fiasco? Seriously?

        Post-grad is a different story.

    • Mike says:

      The attacks on Sen. Warren boil down to “I was taken advantage of by the banks and education (and maybe the insurance-healthcare) industry, so I want all others also ripped off and abused.” At best, it is shortsighted. Even Chinese communists realize the value of our education by sending their rich to study here.

      There are plenty of explanations of the gigantic problems facing Americans. the Real Vision program with Keith Jurow as to how the real estate “recovery” post-2008 is a bankster illusion. Education funding promotes growth, particularly if government’s funds are directed to STEM majors.

      Giving funds to the majority of Americans, e.g. with some loan forgiveness depending on income, instead of to the rich by the continuing 2007 to 2019 bankster welfare covertly transferred to them by their “Federal” Reserve bank cartel, would increase consumer spending and boost the economy, not just banksters’ bank accounts. The banksters count on ethnic and similar hatreds, so the billions in below FMV loans to their insolvent entities, QE commissions, “Federal” Reserve “dividends” to banks that parasitize Americans, etc., are enabled by resentment of any aid to regular Americans.

    • WAYNE says:

      A friend told me he borrowed 120,000, paid so far 180,000 and still owes 420,000. Late fees and interest add up.

  2. W.C.L. says:

    I have to agree with you Wolf, it’s not fair to those of us who already paid for our college education to have to subsidize these people who went hog wild with student debt. I got my degree some time back by getting the G.I. bill from a stretch in the Air Force and then working full time while going to school at night over the years. I paid my own way, no Mom or Dad to help out. I didn’t agree with bailing out the banks back when either, it sets a bad precedent. I’ve long argued that students are consumers like anyone else and should shop around to get educated for the best price. I thought living in dorms or staying with Mom and Dad while working and going to school were part of “earning your bones” along with the degree, not living in a luxury condo and feeling like your already entitled in life. Silly me.

    • Harrold says:

      Who paid for the GI Bill?

      • Paulo says:

        Cheap shot. The GI bill is a payment that augments the lower wages usually earned in military service, and for putting one’s life on hold while performing that service. While it may be a temptation to enlist in order to receive training, it doesn’t always happen. My WW2 vet Dad used to say, “If you’re a mechanic they’ll be sure to throw you in the kitchen as a cook”.

        My Dad encouraged his brother to enlist when he was flailing about. They sent him overseas just in time for the Korean War. He was a signalman in the war and upon return trained on the GI Bill and worked for Minnesota Tel for the next 30 years. Seems pretty fair to me and a win win.

        • alex in San Jose AKA Digital Detroit says:

          Actually the old jokes about “if you’re a mechanic they’re sure to make you a cook” are from WWI, where they really did do stuff like that. WWII on, they were much, much more careful about testing for aptitudes and also considering a soldier’s background skills.

          One amusing result of this is, if you look on YouTube, there are neat old WWII short features that were made to “sell” some jobs like tail gunner, that were less glamorous but they needed to fill.

        • NBay says:

          At the Oakland Induction Center they had lots of medical and multiple choice tests or your inputted info on your past (most all machine scored). At each station they added something to your record folder and gave you a new color of line on the floor to follow. It went on all day from around 6am.
          It was kinda comical to see all these guys in nothing but their shorts, carrying a folder, and walking along looking down at their color of line, usually hungover.
          So they did sort us thoroughly. That evening (in civvies again) they sent some back to the vomit filled halls and rooms at the St. Mark Hotel next door for further testing the next day, and in my case about 40 of us were sent on all night and till noon next day plane rides to Ft. Polk, LA, “the pimple on the ass of the Army”, the laughing Spec 4 told us. We had all assumed Ft. Ord. It was the meningitis outbreak that changed things.
          Southerners didn’t like Californians in ’67, either.

      • Javert Chip says:


        What a clueless ass.

        A lot of those GI took combat risk & got killed. Just a little different than partying at college for 4+ years.

      • W.C.L. says:

        I earned it in return for serving my country.

        • Xabier says:

          It’s comparable to the way the Romans settled their retired legionaries on farm land – perfectly fair.

      • Got my college ED on GI Bill, Vietnam Era. They have rewritten the terms, and I believe its now matching contributions or something, and of course tuition is out of reach. The lady at Lowes says “thanks for your service” and gives me a 10% discount. Monday I go to the cemetery and see my buds. Life is good.

        • NBay says:

          My Viet Vet friends and I are becoming SICK of that obligatory, “Thank you for your service”, so we don’t mention it, even skip the discounts.
          And all this “worked my butt off” so every “hard earned” dime is mine, crap that I am reading here is gonna make me start saying,

          “OK Boomer”.

          The majority of us had it easy, very very damned easy, and also far too many of us became totally unbelievable PIGS.

        • GirlInOC says:


          Don’t worry , the slippery slope logic fallacy has everyone scared they’ll be paying for someone’s great-grandkids’ rocket ship ride to the moon for a weekend of partying. Totally fair. But NOT worried about a whole generation falling behind due to failing economic policy enacted by themselves which benefited solely them. Totes fair.

        • GirlInOC says:

          Darn, the very funny (yet incredibly insightful and topic appropriate) OK Boomer meme from reddit didn’t make it past wolf’s algorithm. I’ll assume it was the reddit part, not the OK Boomer part that wasn’t allowed. Just know it was very mic dropping y’all.

      • Nodak65 says:


        The GI Bill is compensation in your contract for which ever service you chose so in answer to your SARCASTIC QUIP he paid for it!!!!

        • NBay says:

          NO choice, nobody could even enlist (before being drafted) into Navy or AF without high scores and NOTHING on your legal record. ER (reserves) were for…like the song says, “Senator’s sons”.
          If you came back in a box your family got $10K, unless you bought extra insurance from the Dragon Lady, who you were dragged to Battalion HQ to see once your orders were cut for Vietnam.
          I’m sure there was a kickback.

    • van_down_by_river says:

      Fair is where you go once a year to ride the tilt-a-whirl. Life’s not fair. Be glad you weren’t born in some awful place, obliged to join a dictators army and later killed by a drone. Fair is losing its purchasing power along with the rest of the world’s currencies.

      Sorry but sad songs and waltzes aren’t selling this year

  3. Dudu says:

    I worked my butt off not to have high student loans. I lived with my parents, commuted (4 hrs each day) on public transit, bought used books to keep the costs at a minimum. I went first 2 years to community college, and then transfer to state university to save money.
    During this time, I worked 2nd shift either full-time or part-time. There were many times coming late from work, studying until 3 am, waking at 7 am and go to school.
    And now I should bail out all the people that took college as party time?

    • PDub says:

      My highest respect to you. I did essentially the same for my college years. I have taught in community college, now in my 35th year. I believe in it, and what I am doing for my students. I minimize every cost to them. Seriously, it would shock people how little I take home each year. It is way below comparable jobs someone of my education and background would earn anywhere. My retirement fund from this is a joke. I hear comments by people who don’t know, as if my sort of person is living high off the hog. I am where I am because of a strong never-ending ethos of sacrifice, and devotion to contributing something.

      • Dave says:

        Glad you joined in as I have a pressing question for a system person. Where the hell does all that money go, as I know colleges use and underpay adjunct professors to keep their overhead down. My daughter is trying for her PHD so she can become a professor in academia so it is quite important to me.

        She did her 1st two years at community college and has attained her masters degree for free, as her grades allowed her to get a couple of offers for free masters as well as a stipend for being a TA. So she has kept her costs way down and I still fear that she will struggle as the university system screws everyone.

        • SomeGoodName says:

          The money goes to administration and to inequality. UC Davis Chancellor Linda Katehi was earning $424,000 when she was breathing the pepper spray. Having “retired” from that position she now earns $318,000 as a professor in Electrical Engineering after taking a year off with pay:

          Sadly the education world even at “state institutions” has come to mirror the outside world with politically connected top tier admins paying themselves handsomely while stripping salary from others.

          That said part of the rise in cost is not just due to this. It is also that states and the federal government have covered for the tax cuts by steadily reducing the amount of support that they provide for “public education” at all levels. Thus more and more of the total cost goes into the students. In some states such as Colorado the state provides almost no funding to the schools yet still manages them.

    • Unamused says:

      And now I should bail out all the people that took college as party time?

      All what people? The only people who can afford to take college as party time are those with wealthy parents. Most students struggle if they ever want to graduate, and can’t afford to contribute to the stereotype preferred by conservative talk show hosts.

      And not everybody makes it. The US national average graduation rate for full-time students at 4-year degree-granting institutions is typically only about 60 percent, and that’s in six years, not four.

      That means it’s not a party, and if your story isn’t BS you would know that.

      • TXRancher says:

        So I think one point is that there are a large number of people who major in degrees that allow them to party on student loans with no thought of the return on their investment when they graduate and with their parents complete knowledge. Yes an engineering degree does not allow all that partying or you are done after the first year.

        • Unamused says:

          there are a large number of people who major in degrees that allow them to party on student loans

          For which you have no evidence. Just the stereotype promoted by conservative talk show hosts.

          You can make shit up all you want. Bathroom’s down the hall to the right.

        • morticia says:

          Most of the people who have a ‘problem’ are those who can’t get a job, after the graduated.

          Those that can’t get a job, are the ones who majored in fields where no job exists,

          Back in the day, only rich brats went to college, or kids that wanted to be doctors.

          Post Vietnam war in order to keep the un-employment down, they opened the flood-gates for everyone to go ‘college’

          Prior to the 1950’s and now, you don’t need a college degree to get a good paying job, like construction, trucking, or and trade.

          This was bound to happen, e.g. if everybody goes to college, then college gets normalized to the lowest common denominator.

          I don’t hear any problem from kids who go to Stanford or Harvard, its odd just the B&C schools have this problem of its graduates bitching about the loans.

          Yes, WOLF is right, the problem is college costs too much, but just like medical nothing is done, cuz everybody is getting rich off the scam.

        • alex in San Jose AKA Digital Detroit says:

          morticia – College got much more available to the non-elite due to a little thing called the G.I. bill, offered to the ones who came back from that big, big funfest called WWII. Blame those party kids.

      • Dudu says:

        My apologies! I should have been more concise.
        I get upset on people that took advantage of student loans to party their way thru college.
        Also, there are many, perhaps majority that got stuck with the bill in unfavorable job market, etc. I truly feel bad for them, but they had choices, plenty of information to research on job market.
        Like I said, I feel empathy for hard working former and current students. My brother is in the same boat. Receive a Master in Architecture at UCLA (+$100k loans) and oversaturated job market.

        My story is real. For me it didn’t feel bad, it was just a way of life of being responsible of my future.

      • CreditGB says:

        So now, the affordability bar is lowered to ground level for entry into the “collegiate life”, and, no doubt there will be mass expansion of degrees to accommodate a 10 or 12 year term in college.

        If a 3rd generation welfare family in Chicago can rake in $144,000 in foster child care fees annually, what do you think is going to happen with “free” education? Every scammer on the globe is waiting for this to start.

  4. Iamafan says:

    The interest of myfedloan for graduate and professional programs is more than 7%. Who makes money. The government makes on the interest while the school is the one that is paid for the loan. So shame on the schools for charging too much. This reminds me of healthcare.

    • MCH says:

      It isn’t just the schools, I was at a college campus about a month and a half ago, they were selling 65” TVs, monitors that would take up entire desks, Apple stuff left and right, not much to do with education. This was at UCSD. I didn’t bother to look at what text books would cost, it wouldn’t surprise me if those pushed $200 a pop though. Like Wolf said, it’s a frigging complex, want to be hip, gotta have those $150 AirPods, or that $1K iPhone.

      Most of the kids tossed into this market focused nightmares have had no education in basic economics or even managing a budget. Why? Because our public school system doesn’t teach the basics like balancing a budget, instead they want you to know all about sex Ed, and all of the choices associated with it. These kids are mostly clueless, being led to the chopping block to be bled dry of their cash and then tossed aside contemptuously because they never even knew they were the suckers in a game with the rules stacked against them.

      But, don’t you worry, uncle Sanders or Granny Warren will take care of everything, we can start with that 4 eyes in Redmond, and the old guy in Omaha, they can be the first ones who learn to pay their fair share. And the old dude should be dead soon anyway, and no one really likes 4 eyes in Redmond.

      • Arctic Chickens says:

        300+ is not uncommon for a dense A&P textbook. To circumvent piracy and using old books the publishers are now starting to tie in software licenses that last the semester only.

  5. WES says:

    I have a daughter just starting University. Yes it is the cost! And yes it is truly a scam!

    As I a write this post there is a big ad that keeps blinking for Cambrian College with a happy smiling girl as the “lure” highlighting their 36 ways to eternal happyness! The irony!

    • Unamused says:

      Send your daughter to Europe, Wes. It’ll be cheap and maybe free. Either that, or some college where they’ll at least have the decency to teach her how to stiff her creditors.

      • Em says:

        The problem with studing in EU is that they might not recognize your education back in N.America. (this in spite of very high standards over there, at least in engineering – the field I know)

      • roddy6667 says:

        College is free in Germany, even to non-Germans. A good strategy these days is for the kid to take four years of German in high school and go to university for free in Germany. Room and board would be the only expense. Many kids could swing that on their own. Back in the late Sixties and early Seventies, I worked my way through college AND partied hearty. Kids are lightweights these days.
        And get off my lawn!

        • sammy iyer says:

          In Germany in most state run universities ,tution is free .They just charge only 310 euro per semester for registration which includes free train/bus transport with in the state for the 6months/semester.You have to pay for boarding & lodging. 10000 Euro or around 820 per month. International students have to deposit 10000 euro upfront in a blocked German Bank account in germany to get the admission. (820 euro per month will be transferred to the saving account to cover expenses.
          My daughter is studying MS (Master of Physics ) in North Rhine-Westphalia State university(Paderborn).(near american base) She hopes to do PHd in physics in germany/austria/ Swiss/Holland after the 2 year MS. she manages expenses with in 600 euro/month with student network hostel 2 student share flat. The course is taught in English . 50% students are international (India/China/African countries) rest are german/european. No USA students

        • Max Power says:

          The “free” component of German higher education is just a small cog inside a larger and much more rational and well-thought-out education machine which includes:

          *More rigorous high school education compared to the U.S.

          *EXTENSIVE vocational training during high school and after to those not going to college

          *Making sure that for the most part only the kids who have the ability to do well in and a need to go to college are the ones who go

          Under a model like this free college education makes sense.

          Under the American system, with super easy to pass high schools, little emphasis on vocational education, and a silly belief that every mall clothing store assistant manager needs a college degree it does not.

  6. 2banana says:

    The more government gets involved, the more expensive “it” becomes.

    Imagine how affordable higher education would be:

    Government guarantees no loans
    Government gives no loans grants or scholarships
    Student debt can be discharged in bankruptcy

    I know…I know…

    You can’t buy votes that way.

    • Unamused says:

      The more government gets involved, the more expensive “it” becomes.

      That’s because your government is owned and operated by corporations with the morals of a famished barracuda.

    • The Colorado Kid says:

      Banana, it sounds like the German Government is fairly well “involved” and yet the Students aren’t put through anything like the American Cartel Model.

      They realize that it is of great benefit to the society as a whole to educate or train their young citizens to be productive and not to unduly burden them with enormous debt & a useless degree in transgender studies.

      • Sammy Iyer says:

        German Govt is so keen on attracting Global young talent in STEM that they are giving tution free Masters programmes in Physics, Chemistry, Maths,Engineering etc. but 75-80% marks /skill level is a must score in the relevant STEM bachelor degree.
        After Masters 1200 euro per month stipend (no more tution fee) if the student can get PHd admisson/ post Doc thro university/industry collabration.
        Straight Green Card (Blue card in germany ) if you get a job after Masters in a german university and contibute to social security maintaining 2 year work permit.
        After 2-3 years of having Blue Card , one can get German Citizenship.
        Blue collar labour in germany comes from all over the poorer east european countries. But to get top research talents in science /engineering ,Germany university system is aggressively promoting free tution program.(Equivalent 2 years Masters in any science degre in any top notch university USA will cost bare minimum 30k tution +20k living expenses . )
        To survive in germany long term in the street you need passable spoken german. To work in a German company in front end (dealing with customers & manage other german employees ) ,you need good spoken german. But in research, Computer programming , in higher echolens of industry English will do (with a passable spoken german). 48000 euro per year salary contract is a must to get hassle free work permit >then get Green (Blue) card (permaqnent residency)after 2 years of continous employment.
        German Govt involvement from primary>secondary school >College level is working & not plagued by financial drain by over paid administrators & very low teaching/exam standards in US.

      • NBay says:

        Underwater Basket Weaving is “out” now for serious intelligent debating purposes?
        Too bad, it conjured up great imagery.

  7. William Smith says:

    Another area with huge waste and snouts in the trough is the big pharma medical complex. Overservicing and expensive pointless treatments are abundant here. That must figure somewhere into all of that; medical insurance being a huge recurring cost on everyone (who can still afford it). And of course, with medical tutoring being the most expensive, they need to recoup that in the fees they charge.

  8. DSM says:

    Brilliant article. What do people think of the argument that student loan forgiveness will actually boost the economy (which, if we’re honest, is a highly likely consequence of forgiving student debt). Many people with massive debt are waiting on children, homes and cars…all are expensive propositions. Student loan forgiveness obviously won’t make whole those who chose to attend cheaper schools or who worked their butts off at night to attend school by day, but is there something to be said for a policy that, while inherently and admittedly unfair to many, will arguably stimulate the economy and perhaps create more jobs?

    • Wolf Richter says:


      Brilliant comment. If the government handed me $1.6 trillion for nothing, it would boost the economy too because I would spend some of it and share some of it with my readers and commenters and I would buy beers with it and bathe in it and use it to ignite the charcoal in my grill….

      DSM, you need to understand that this $1.6 trillion in student loans is taxpayer money. The taxpayer borrowed $1.6 trillion to fund the $1.6 trillion in cash it disbursed to students and schools. Now taxpayers owe $1.6 trillion because of it, this is part of the $23 trillion in government debt outstanding. And now you’re telling taxpayers whose money this is that they should just turn this $1.6 trillion loan that they expected to get paid back into a gift so that some other people can afford to buy a nicer car or get drunk more often?

      By forgiving student loans, you will just give a huge gigantic ongoing mega-gift to the University-Corporate-Financial Complex. That’s who got all this money.

      From comments like yours, I can see that it’s time that I start leaning against it. I’m just a little guy, but somebody has to speak up.

      • Unamused says:

        By forgiving student loans, you will just give a huge gigantic ongoing mega-gift to the University-Corporate-Financial Complex.

        It’s not at all as simple as forgiving student loans. As you know, it’s an exploitative mess on every level, and even faculties, post-graduates, and staff have been turned into commodity gig workers. The main beneficiaries are no longer students, but corporations who historically got a competitively-trained workforce largely at public expense, but now they want more, a lot more, and they’re getting it, and no path to equitable reform presents itself.

      • morticia says:

        While we’re on it lets forgive medical bills also, hell its not fair that when I get sick that I have to pay a hospital. Right?

        So I propose that everyone bitch&moan and demand that the GOV fix this little problem of having to pay.

        Also where’s my ‘helicopter money’?

        You all know where this is going right? Once the gov takes care of housing, education and medical; Then they pick & choose who gets it, already they’re denying ‘conservatives’ services in some places.

        Besides realistically Warren is talking out of her “ARSE”, we all know the money ain’t there to bail out folks that took on debt.

        Lastly, WOLF how about you lobby to forgive all our auto-payments? I think you know that racket well enough

        • The Colorado Kid says:

          Well, the real problem is that we have socialism for the Large Corps and the wealthy elite, yet it’s Cartel “Capitalism” for the masses.
          The masses are getting more and more pissed off by the minute.
          Most of them are dumbed down by a substandard education, but they are very aware that they’re getting screwed.

          Throughout history this has led to significant issues that usually resolve in a fairly unsatisfactory manner.

      • MCH says:

        Bah, Wolf, just tax Buffet and Gates, their combined net worth should handle at least 10% of the problem.

        Then, slap a 40% corporate tax on Apple, Google, Microsoft, Facebook, they can take it… and viola, student loan problem solved.

        Hell, if we raise the taxes on the Fortune 500 companies in the US, the student loan problem would disappear overnight, it will be magic.

      • CreditGB says:

        You might as well be talking to a wall. The bright light of “free XXX” is blinding to the point that the debt side is already being completely ignored.

        Between starry eyed Eloi college bound kids and the outright scammers, they will bring this whole scam down in one generation.

        Like other Gov’t programs, it will become entrenched and be an “untouchable right”. To pay for it, asset forfeiture will be the next level of “social justice”. It is already in many political discussions among the Socialists, you just have to listen for the words. Not only the tax rates but what is to be taxed.

      • So what is the state of University research? Government buys this stuff, right? The CIA puts a report on climate change on potus desk, which he doesn’t read. I mean is a science gap building? How does that affect the budgets of researchers?

      • Lisa_Hooker says:

        If loans are forgiven, which is free money, then the same amount of free money should be given to all citizens. Students can pay off their loans if they so wish . And I can buy a big sailboat if I so wish. This would increase GDP and provide dramatic assistance to the FRB desire for more inflation. (Don’t delay, buy hard assets – any hard assets. ;-)

    • Wisdom Seeker says:

      DSM and Wolf – The counterargument is even stronger than Wolf’s point above. Forgiving people’s debts does not magically turn them into responsible savers. You can change the laws and you can throw money around, but you can’t change human nature.

      Some people are wired to resist the siren call of the debt-merchants, and some learn the hard way, but most aren’t and don’t.

      Suppose you handed out money to everyone with a debt. I bet you that over half those people won’t actually use the money to pay off their existing debts – they’ll binge on whatever else is on their wish-list. Among the half that might pay off their current debts, I also bet that over half of those will be up to their eyeballs in OTHER debts within a few years.

      • WES says:

        Wisdom Seeker: For real life examples, look no further than lottery winners! They were broke before winning and remain broke after winning!

      • Lisa_Hooker says:

        I’m a believer in the 3-4 generation theory. Equally divide all the world’s money and assets among all the people. Within 3-4 generations there would be rich people and poor people. Some folks just cannot hang on to a dollar, some folks just forego consumption and accumulate wealth.

        • NBay says:

          Or, some folks get just get really good at ripping off dollars from others? Your “theory” still works.

    • wkevinw says:

      The “stimulate the economy” is always an interesting one. Whenever there is a subsidy, forgiveness, redistribution, (whatever the relevant description), half of the economic “stimulation” is missing: the part that happens when people create more wealth by working and innovating to earn the money.

      There’s obviously a lot more to it, but that is why socialized economies start to lag free economies. It takes a while, but after a number of years the economies with lots of these programs have noticeable competitive problems.

      The vast majority of technical innovation in practically all fields is in the US because of this. In many business areas, the US leads because people spend a lot of effort trying to turn a profit/earn a buck, whatever you want to call it.

      Note- I have spent my time in university faculty lounges. The administrators and a lot of the faculty are educated, elitist idiots. They don’t care (at best) about the student loan issue.

      • morticia says:

        That might have been true in the 1960’s with Apollo Program (NASA), but there is a reason that China has 5G ( most advanced cellular ) and the USA had NIL, and that reason is that USA quit investing in new technology long ago.

        Like the Unicorn’s that WOLF writes about so much, thats where USD go now in USA is into Unicorns, which means most of the cash is spent on Cocaine&Sushi in San-Fran.

        USA doesn’t lead in anything these days, except too many lawyers, and corrupt politicians.

        It was easy to start a business in say the 1980’s, today even a brewery costs $500k or more, just for pre-paid taxes, fee’s, and permits. Say in the 1980’s people were starting brewerys in their garage.

        Today children can’t even open a lemonaide stand without fronting the county $1000 or more for a health-permit to sell food.

        In summary we don’t lead technology because we don’t make it here anymore, and we don’t start businesses

        • andy says:

          Why start a buisness when stock market returns 10+% annualy for doing nothing. Dont even need to pick stocks, invest in everything.

    • nhz says:

      You sound like university students and graduates in Netherlands, where student loans were recently introduced and student loan balances are booming (interest rate: 0.4%). Just like in the US, students use these loans for almost anything like trips around the world, buying a posh apartment, investing in the stock market or sometimes even for their education. Graduates are complaining that they have to report their student loan balance when applying for a mortgage, which is SO unfair because it means you cannot buy the biggest house and have to settle for something slightly smaller (Dutch mortgage rate 10-30 year fixed 1.1-1.6%, fully tax deductible so in reality more like 0.6-0.8%). Student loans should not count when applying for a mortgage (maybe because everyone knows that they plan to never pay them off anyway, just like the Dutch mortgage?). Why make life difficult for people who want to stimulate the economy by buying the biggest home and other goodies right out of college?

      Fortunately for these complainers, there is a “fair” solution: just don’t tell the bank you have a student loan, they don’t want to know. Pile up the debt and if you cannot pay, you have been taken advantage of and could possibly file a claim with the courts. For foreign students it is even easier as it seems that our tax office cannot find 90% of them after they graduated and leave the country, so the loans are effectively forgiven ;(

  9. Gandalf says:

    The Real Problem is the bifurcation in the laws governing bankruptcy between student loans and almost every other form of debt in this country

    A series of changes in the bankruptcy laws for student loans in the 1990s and early 2000s made it virtually impossible to get out of paying back a student loan. Biden apparently voted for these laws.

    These law changes had the effect of blowing open the student loan market to just about anybody going to any school, charging any sort of grossly overpriced fee for any sort of useless curriculum, e.g. Trump University. No questions asked, the loan originators now knew they would get their pound of flesh back no matter what, unless the debtor died penniless.

    This is unlike other consumer loans like credit card debt, and auto and home loans, where defaults are still possible, although a default will ruin your credit score for a very long time and teach the defaulter a solid and long term lesson in how to be more frugal

    This is also unlike corporate debt bankruptcies where PE looters can come in, strip the company of its assets, pay themselves huge sums of money, and fund it all with massive amounts of junk debt that eventually blows up. Haha, sorry bozos, we’re just making America great again.

    I say the real answer is to return bankruptcy laws for student loans back to what they were before.

    This will increase wariness on the part of the loan originators, since they now will be back on the hook again for loan defaults, it will reduce access to free and easy money to go to these grossly overpriced colleges, and it will cull out the most useless of these over priced colleges and college majors.

    Paying off all the current student loans in America is the most STUPID horrible idea ever. Warren and the others espousing this idea are just pandering for votes – but they should know that young people still don’t vote enough to make a huge difference.

    If that actually gets passed, which I doubt, it will leave intact the entire dysfunctional system where easy and excessive student debt is available, lots of colleges charge excessive fees, students and everbody show NO financial responsibility, and very soon another trillion dollars of student debt builds up. It will solve nothing and only encourage an even worse student lian spending spree

    • Wolf Richter says:


      The issue of allowing student loans to be discharged in bankruptcy is complex because it would incentivize me to totally max out on student loans for as long as possible, to go to school after school, and get a series of degrees paid for by student loans, and then when my student loan debt is $500,000 as I finally get out into the real world, the first thing I would do is file for bankruptcy to get rid of the debt before I even have to make the first payment.

      That would be my plan before I even start college. Because that’s the incentive. In other words, all students would plan from the moment they apply to go to college to file for bankruptcy when they get out. It would just be part of the deal.

      There are ways to constrain this – for example, you cannot discharge the whole amount, but onlly part of it so that you can limit the monthly payment to a certain amount of your income, such as 15% for 20 years. But similar and even more lenient rules are already in place.

      • Wisdom Seeker says:

        In the old days when student loans were dischargeable, they were handled as Unsecured Personal Loans by the banks, and interest rates were accordingly quite high. Well above mortgage rates (secured) and up there with credit card rates.

        The move to make loans non-dischargeable in bankruptcy was done in the name of bringing the rates down and “make college more affordable”. And it did do some of that, but it also drove up prices faster than inflation – it actually made college more expensive.

        • Gandalf says:

          Exactly. In the Olde Dayes, getting a student loan in the first place was not easy. People were scrutinized much more closely in order to get a student loan

          In the Olde Dayes, lots of families were unable to afford college for their kids because they couldn’t afford it and coukd not get a student loan. The kids had to figure out some other pathway to success in life, and if they went to college eventually it would be while working and going part-time to a low cost night school

          Nowadays, EVERYBODY in America goes to college (70% of high school students go to some form of higher education), student loans are available to EVERYBODY. You and/or your parents just have to sign your life away to get one.

          Yes, there were many students who defaulted immediately after finishing college in the Olde Dayes – but this did have an impact on their ability to get future credit, and most of all, it forced loan officers to scrutinize who they were giving loans out to very very carefully.

          I’m pretty sure the laws tightening up student loan defaults were sold to liberals like Clinton and Biden by the loan industry by saying, hey if you tighten up the defaults, we’ll be able to give loans out to all the low income and poor people of America to get college educations!

          And look what happened. The money spigots got turned on and colleges all of a sudden could keep raising fees and still the students would keep flowing in

      • 2banana says:

        No bank is going to lend you $500,000 or $50,000 or even $5,000 if they have to eat a bad loan discharged in bankruptcy not guaranteed by the government.

        The market will work. Engineering students would probably get some loans. No one is going to lend a penny to womym’s studies.

        The cost of tuition will drop 90%.

        • freewary says:

          Why should tuition be so high anyway? I have got the equivalent of a masters in computer science from free resources – lots of textbooks from the library and various online resources, and my pay is high enough that paying for a real masters degree doesn’t pencil out. One one job I replaced an ivy league credentialed analyst who couldn’t figure out how to do the work. In another job I coached my supervisor who has a masters in statistics through a statistical analysis for a project we were working on.

          I actually enrolled in a masters program and it was a waste of time and my salary is already much higher than the program graduates so I dropped out. My job security is very high too. I have had several offers in the last 10 years and over 100 recruiters have written to me trying to get me to apply to their firms.

          What I am saying is what is the value of a young person mortgaging their future to have professors credential them when the education they need to succeed is now available completely free?

          And what is the value of all these credentials if the people who hold them cannot do their jobs?

      • timbers says:

        That’s a risk every lender faces. Having government take the risk so lenders can secure all the profit isn’t the solution. Also, your incentives you describe to me sound peculiar and not to be shared by many. Thst type is rare odd ball event is also not a valid reason to have grant gaurteed profit to finance companies at tax payers expense.

      • otishertz says:

        Never thought of it that way, thanks.

    • zoomev says:

      This has been my long standing belief of mine ( I await Wolf’s correction.)

      The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is to blame literally for all of this. It shifted the risk reward calculation. The students assumed all the risk and the lenders had permanent debt slaves…. no mor due diligence by the lender. No more need to make sure the curriculum was any value by the learning institution.

      It all started in 2005.

      • timbers says:

        Yes. This is spot on. Too many areas of our economy have been privatized, profitized & financialized to great detriment. Another example is healthcare were I think President Reagan paved the way of for profit hospitals and such.

        • NBay says:

          Tom Paine had more to do with success at breaking away from English control than ANY of the “Founding Fathers”. His ALL time record best seller (per capita) gave the 90-99% of the time a reason to fight and even to die.
          Their are no statues of him anywhere, he is seldom mentioned, or quoted, and he died penniless in Europe.
          Somewhat odd, eh?

    • otishertz says:

      Said better than I ever could have. Thanks Gandalf

  10. FreeFreeFreeMeMeMe says:

    Imagine a world where the frugal few have their college 529 accounts crash by 50% in 2020/2021, while at the same time college becomes “free” for the neighbor kids, whose parents park their boat, camper, and new $80,000 truck out front while celebrating their kids free tuition during the next block party. And you think the social fabric of America is toxic now…

    The most destabilizing issue facing Americans is the loss of trust, specifically trust between individuals, corporations, and government. The uncertainty creates paralysis, and paralysis feeds back into the perpetual loop of slower growth and less real future wealth. For Example:

    Do I pay off my mortgage or wait for a mortgage bailout?
    Do I pay off my college loans or wait for a college loan bailout?
    Do I put money into a HSA (Healthcare savings account) or do I wait for a healthcare for all bailout?

    Mortgages, College Loans, and Healthcare are the majority of America’s debts and expenses which enslave them to the government, to the banking cartel, and to a coporate states of America system in which a duel wage is not enough, and will not keep up with the current inflated system of capitalism (at least not for 90% of Americans).

    Uncertainty is what plagues me, and I suspect it also plagues most of Americans as we live in a bizarro world right now.

    • Zantetsu says:

      I agree with most of your comment, but I don’t think you should lump healthcare/HSA in with it, because:

      a) The current state of healthcare leads to *more* uncertainty now than medicare for all would (i.e. “do I spend tons of money for an expensive medical insurance policy now or do I just risk losing everything should I get cancer”)

      b) HSA would and should just get refunded to people (minus taxes) if/when medicare for all is implemented, so you’re not really risking anything by putting money in HSA

      • The Colorado Kid says:

        Utilize your HSA into a backdoor IRA, which it is anyway. In fact, it is better than an IRA in some ways: for instance, you don’t pay ANY tax on contributions, unlike an IRA which still gets hit with FICO.

    • Kerry says:

      Just do the right thing. nothing uncertain about that…

  11. Deanna Johnston Clark says:

    My 2 sons passed on college after seeing their sister amass 80,000 debt getting 2 degrees and working at the same restaurant she did out of high school…she’s the manager. My sons are doing fine with small businesses and little family help.
    My advice is build strong family…love each other, pray and stick together. Don’t let anybody, Hollywood or otherwise, tell you otherwise. If your birth family is too messy or mean….find good friends, go to a kindly church. Nobody succeeds alone…watch “My Cousin Vinny” again.

    • Iamafan says:

      I agree. We together with my son, put together our savings and paid for our new daughter in law’s student debt about 150k. Her rate was 7.xx % annually, and we make less than 2%. We did it to give her and our son a good beginning. I know what you’re thinking. Are we crazy, no pre-nup. Nah. Welcome to the family.

      • mikey says:

        How was giving away his savings to an unrelated person a good beginning for your son?

        • Petunia says:

          His son’s wife is a relative. And you need to go to a reeducation camp for human beings, even if you have to take out a student loan.

        • Arctic Chickens says:

          Thanks for saying it for me Petunia.

  12. Wisdom Seeker says:

    Wolf, in a credit/debt-based economy the total amount of credit/debt doesn’t really tell how enslaved people are. If I owe someone but someone else owes me, I’m not necessarily worse off than if no one owes anything. The total amount of credit/debt in the system really only measures how interconnected everyone is. A working stiff with an auto loan isn’t a debt slave if he has matching savings earning more interest in his 401K, lending to mortgage borrowers on the other side of an MBS fund. There’d be two credit/debt entries from that set of choices, and it would look like debt up the wazoo, but he’s not worse off than if he just used the savings to buy the car and skipped the 401K thing. Student loans often similarly reflect choices made by parents (under heavy government incentives) to leave their money in the 401K rather than pay tax penalties. This also increases apparent financial need since FAFSA etc. doesn’t X-ray the parents’ 401K to decide how much they should pay for their child’s education.

    A more valuable metric for debt-peonage would be the amount of interest being paid on a given class of debt. How much are the rentiers skimming from each type of peon? The Interest-to-GDP ratio is also a more meaningful metric than debt-to-GDP because of the stock-vs-flow thing. Interest and GDP are both flows. Credit/Debt is a stock.

    Even interest-to-GDP isn’t entirely fair, because many lenders are responsible people, retirees whose savings provide the credit for the younger borrowers to use in building a better life. In an aging society with more retirees, some of those higher interest flows are just another way of Taking Care of Grandma. One would have to look at distribution: who’s getting the interest?

    In that vein, another metric would be financial sector profits to GDP: between the interest-paying cash cows and the responsibly-saving lenders, how much milk are the middlemen siphoning off?

    Data on these flows might be more fundamentally valuable than simply adding up total debt levels.

    Finally, with particular regard to student loans, it would be very cool to see a breakdown of loan balances by age of borrower. Are total loans rising because today’s kids are borrowing more, or because yesterday’s kids are still struggling to pay older loans off?

  13. kk says:

    The government could replace the students loans with a lifetime additional graduate tax for those who wished – say 5% of earnings and an additional 10% of assets on death. If the loan meant you got an education giving you a high-paying job you would pay more proportionally – if you work as a nurse or teacher etc on lower income, you would pay less. If you want not to borrow or not go to college then you don’t pay the tax. The loan would be at a set value and all colleges would have to offer degrees at the set price or have only privately paying students. People with existing loans could carry on or switch to the graduate tax. With creative thinking the problem of student indebtedness can be solved for it certainly cannot carry on.

    • freewary says:


      Since you are in favor of massive govt intervention into your life, why stop at having the govt decide how you finance your education? Why not have the govt plan what education you get, what job you get, where you live, where you go on vacation, when your healthcare gets cut off, what car you drive and how many pets and children you have? Just think you’d never have to make any decisions for yourself or have any risk or want of any kind.

    • Wisdom Seeker says:

      Take it one step further – if the college education is truly worth the price tag, the government is already recovering the student-loan tuition in higher taxes. Because even without a penalty rate of taxation, the education boosts the income power of the graduates, boosts GDP, and boosts federal tax receipts.

      So why not simply grant every citizen and permanent resident $50,000 when they turn 18, call it Personal Startup Money, maybe require a year or two of national service to collect it, and let them decide how to spend it?

  14. Todd says:

    Public university education was considered to be a public good back in the late fifties and early sixties.
    The University of Michigan charged $25 per semester for in-state undergrad and $200 for Medical School. Add a zero at the end of these amounts to get a pretty good idea of what those prices might be today, thanks to the miracle of inflation.
    This was for, the COMMON GOOD.
    The labor unions were strong, and taxes on high incomes were extraordinarily high, and nobody in Ann Arbor was complaining, back in the days when being a simple millionaire was plenty.

    • JW says:

      As long as Americans don’t get over their phobia of socialism, it’s only going to get worse from here.

  15. KFritz says:

    Isn’t each and every bankruptcy an insult and affront to each and every prudent and provident citizen? Why are student loans such a different animal? Perhaps because provident students are articulate and loud, and leap into the breach to back up the entire predatory higher education establishment/industry?

  16. freewary says:

    Where in the US Constitution is the federal government authorized to create student loan and housing loan programs for individuals?

    Nowhere. Therefore federal student loan programs (and many other things the govt does) are illegal.

    Just restore constitutional order and poof, this problem (and many others ) disappears.

    • Resjudicata says:

      Probably the Ever-more expansive reading of the commerce clause.

    • Top-GUN says:

      AMEN to that,,,,
      The root cause of the problem is the federal government doing something (spending money or lending money) that it is not authorized to do.
      And just to make this clear, banks stopped lending money to students a good dozen years ago. Uncle Sugar is the bank making all those student loans.

    • Tyson Bryan says:

      This is covered in the introductory paragraph. This paragraph contains the word “welfare”. This paragraph further outlines the general purpose of the document.
      The other significant paragraph of the document is the last paragraph of the 1791 amended edition (10th amendment).
      These two paragraphs together cover the essentials.

      • freewary says:

        @Tyson Bryan

        Many mal-educated or otherwise ignorant people believe that since the Constitution says something about “General Welfare”, therefore the rest of the document with lists out the limited powers of the federal government and the bill of rights can be completely ignored. FYI if a specific power is not granted to the federal government it belongs to the states or the people.

        Also, many people mistakenly believe that everything a person does or doesn’t do is interstate commerce.

        • Resjudicata says:

          It’s not just “people” saying everything is interstate commerce, it’s the people on the Supreme Court and they’re the only ones who get a say.

  17. Squid Man says:

    To run against the narrative, wouldn’t fixing bankruptcy laws, cap tuition costs AND forgiving student loans be the right thing to do? I hear a lot of “Why would I help irresponsible borrowers? Let them suffer all their life for a mistake they made at 18 years old. Something something personal responsibility.” Forgiving loans without stopping rising tuition costs is obvious not a solution, but are you happy with the idea that young Americans will suffer life long debt servitude? If you had $100k in debt at 22 and couldn’t get a job paying enough, what would you do? Saying “Well I had it hard and I want other people to have it hard too” is a selfish mentality. Why do anything that makes anything better?

    • Wolf Richter says:

      Squid Man,

      How about forgiving my buddy’s mortgage and car loan so that he can avoid “debt servitude?”

      Remember, one person’s debt is another person’s asset. Everything has two sides. You forgive the debt, you wipe out the asset. That’s how it works. So whose assets do you want to wipe out?

      • Kasadour says:

        Gosh, ^^^ this is so true. But let’s be real- these are not persons or people holding assets. They’re bag-holders, namely pensions, about to be screwed big time.

        I diligently paid off my student loans. In the event of a general debt jubilee for debtor students, do I get a refund? How does that work for me me me???

        • Wolf Richter says:


          No refunds. All student-loan payoffs are final :-]

          However, you do get to pay for the forgiven student loans, because that cash that the government handed to students and schools was borrowed cash, and those borrowings are now part of the $23 trillion in Treasury debt that the taxpayer (you) pays interest on forevermore.

          So you get to pay twice for student loans: yours that you paid off and all others going forward.

      • Squid Man says:

        Having debt that you can’t pay and can’t ever discharge is debt servitude. What are these people going to do, have their social security garnished? I feel worse for the people who will be saddled with debt for life than people who don’t get a good return on investment. The government should levy taxes on the weathy to cover the debt and try and make creditors whole.

        I feel it strange that it’s only when we try and forgive loans we talk about the cost. When it’s another pointless war or tax cut nobody cares.

        • nhz says:

          Move to the Netherlands where there is a significant wealth tax (of course not for the super-rich, they are exempt) and many other rules to punish those who are financially responsible and reward the financial idiots and fraudsters.

          Remaining mortgage debt after selling your home is forgiven right away if you have mortgage insurance (which 90% of recent mortgages have). In general all debts can be discharged after 3 years of “mandatory debt counseling” which means nothing, you could even keep the 100K BMW that you bought with the loan. And after those 3 years you can splurge on debt again without any limitations or responsibilities. Probably student loans can be discharged the same way (not 100% sure though).

          Even if you have no intention to speculate on homes or education with borrowed money and all risk for the taxpayer, life can be good because there are countless ways to profit from the state and live the good life without ever lifting a finger for it. That’s why most of the “refugees” coming to Europe who don’t want to work but just want a lifelong free vacation apply for refugee status in Netherlands (or Sweden, just as crazy).

          There are always options ;(

    • Bobber says:

      College was always viewed as a reliable ticket to a comfortable life. People that take out student debt rely on companies and the economy to treat them right after they graduate. The problem is that global corporations are outsourcing jobs to foreign countries and giving more and more local jobs to immigrants on visas. And it’s not just technology companies. In finance, I see tons of jobs going to immigrants who were educated outside the U.S.

      Global corporations that are eager to sell product in the U.S. often refuse to hire sufficiently from the communities they sell into.

      I have nothing against immigration, but I believe immigration rates are too high when too many students go to college and cannot find professional jobs to pay off their student debts.

  18. RagnarD says:

    Several years ago Glenn Reynolds of InstaPundit wrote a book about a revolutionary way to for a college education.

    The idea was u take a defunct college campus in a nice location so it’s got dorms and common areas, and the students all independently/together take online courses from say Stanford MIT, etc. etc.

    there’s lots And lots of free material. And then there are paid professors that Work as full time use as tutors to help them with material they don’t understand.

    I got a computer science degree in the late 80s, and it cost like $8000 at a private college. We had deck Digital Equipment mainframe computers Relaticley cutting edge STate, which were no doubt expensive.

    Now your computer/Internet, etc. is essentially, free yet the cost of the degree has gone up like five times. It makes no sense.

    So the question to me is, the same as it is with the Fed, “why have a supposedly free , democratic people put up with such an inherently corrupt / expensive system?“

    • nhz says:

      Several countries are or were experimenting with online university education over the last 20 years, sometimes with a slimmed down campus for practical experience that you cannot learn online (computer degrees are a very special case, many degrees require handson experience like lab work).

      In my own city that is in a remote corner of the country there was an “Open University” with very affordable but good quality university courses. It was dismantled to be replaced by a partly private university that gobbles up tons of taxpayer money, pays high salaries to failed university teachers (otherwise they would probably not want to come here) and offers degrees that mean nothing in the academic world. But this university (the people behind it) did have the right political connections to grab the money, and the same works for their graduates: although they have learned very little, the university helps them get posh jobs because of their ties to government and companies. Money corrupts everything.

  19. David Hall says:

    Over 20% of those who graduated from Thomas Jefferson School of Law did not find jobs as lawyers. Spending hundreds of billions to send people to college to train for jobs that do not exist might be another big government bridge to nowhere.

    • Mars says:

      TJSL is a situation where law firms do not want to hire an attorney from a school losing ABA accreditation (TJSL high failure rate 75% on first try California Bar Exam)


      lol, you always leave out some detail which skews your point in an entirely different direction

  20. Lt says:

    2020/21 will be my last year for tuition payment for my college age kids. I used 529 savings to pay for their first three years but seriously considering using a loan for the fourth year if it looks like warren or sanders could be nominated and elected.

    I mean if it’s going to be forgiven, then why not. I can’t be the only parent that’s thinking this way … if so, could see a surge in student loans in the next year for people who would otherwise pay cash.

    • cd says:

      I paid for the 4 year but hearing this insanity I made the kid get loans for masters….

      If forgiving loans, you have to remove college degree requirement for all jobs, its discrimination. Many didn’t choose to spend the money and learned a trade….

      what a bunch of credit criminals we have in America now…..

  21. Unamused says:

    So whose assets do you want to wipe out?

    Just the ones acquired through dirty dealing, coercion, theft, war, and so forth. Unfortunately that would reset civilization back to the Sumerians, which it couldn’t possibly survive, but since its inequities have doomed it anyway it’s all okay with me.

  22. Augusto says:

    Do you know how many people I worked with in my lifetime who had University degrees, but did jobs that had nothing to do with those degrees. Most of them would have been better off financially just working out of high school and taking courses as they needed them for their job. Instead they went to Uni for 4-5 years, gave up an income and then spent money and time on degrees that never paid off. So many BA’s in English, Biology, History, Geography, etc….No doubt all those professors and faculties, not to mention the Uni Admin made their careers out of these suckers. Its sad when you think its people lives that were affected, more often than not for the worse.

    • Just Some Random Guy says:


      I couldn’t disagree more.

      I work in a field that has zero to do with my degree. I make a lot money working in that field and have for the past 20 years. However, I can guarantee you, had I not gone to college, I wouldn’t have had the career I had. Everyone I work with has a degree. Everyone I can ever remember working with has a degree.

      Liberal Arts isn’t trade school. You don’t get a degree in history to become a historian or a degree in Poli-Sci to become a politician. You get a degree to better yourself, learn critical thinking, learn to present ideas and so forth. Sounds cliche, but you learn how to learn. And that’s valuable to everyone, regardless of the career path chosen after graduation.

      The problem is kids today expecting everything handed to them on a silver platter. Oh I have a degree, therefore I deserve a starting salary of $125K. And if I don’t have it, stupid boomers!! Uhm, no. The world owes you nothing. Get your butt out there and make life happen for yourself. There’s endless opportunity out there. But you’ll never find it sitting in a corner pouting about how unfair life is.

      I tell my kids all the time, life is unfair. Deal with it. Sadly, no millenial’s parent ever said that to them.

    • nhz says:

      Agree … I’m from the Netherlands and graduated in Biochemistry.

      Problem was that when I graduated a severe recession had started in my country. Most university positions in life sciences were taken by Baby Boomers with rock solid contracts, so there were no research jobs available and very few acceptable jobs in industry. The same happened to many others in my country who graduated in those years in physics, biology etc. Many got jobs when a few years later the computer and media industries started to boom, with no formal education available yet. In some cases the university education may have helped to get a more interesting or better paid job, but those were the exceptions. I started a computer company by accident and had zero benefit from my education, it was basically 5-6 lost years (the university computer classes were useless in real life and my experience with computers in research left an especially bad impression).

      I got interested in biochemistry again much later in life, but it didn’t have any career value and I could have learned most of it just from reading the web for free. Fortunately in those days education cost was still low and I paid off all debt very quickly. I think I chose a promising education at the time but there are many factors beyond ones control; but that’s something else than chosing a fun degree and spending your university years partying or traveling the world with OPM …

  23. R2D2 says:

    Don’t worry, the “market” always self-corrects when prices get too high.

    And the market for (overpriced) US education is now starting to correct.

    For example, US MBA attendance is collapsing. Harvard has seen a 5-10% decline in MBA applications in the past year or two.

    The US is approaching “peak education”.

    • CreditGB says:

      The Socialists are determined to NOT let the market correct by making education “free”. Thus there is no correction, only vastly increased demand and multiples of debt.

      There is NO MAGIC, and we’ve just about used up all the denial that has been laying around.

  24. Lance Manly says:

    Don’t forget the biggest debtor of the all:

    “Estimates for October 2019
    The government recorded a deficit of $133 billion in October, CBO estimates, about $33 billion more than the shortfall recorded in the same month last year.”

    The tax cuts will pay for themselves! Remember these are the good times just wait until things roll over.

  25. John says:

    What ever happened to Sen. Sanders wife and that college she ran that closed? I believe she was getting all kinds of money. Every time I here about student loan forgiveness I can’t help but think about his wife. Thanks Wolf.

  26. Kasadour says:

    What should universities address cost issues when the govt guarantees these loans. In fact why should universities even care about the quality of education when the govt is guaranteeing these loans. This is a prime example of a govt created problem with a govt created solution.
    Oh wait. . .

    • Old-school says:

      Maybe 50% of economics teaching should be the price mechanism. A ‘clean market price’ is a miracle worker for so many things. Society gets in trouble real fast when it starts replacing price mechanism with political mechanism. The opposite of price mechanism is OPM which always leads to temptation to become corrupt.

      I just saw New York had to write off about a billion $ of taxpayer money on the Tesla factory. Here is a hint to local governments: if it was a money maker the private sector will do it without you.

  27. Old-school says:

    Having lived 63 years I can see looking around at people my age that you could divide people into two camps:

    1. People who contributed to society by working, following the rules, saving for retirement, paying their taxes.

    2. People that we used to call deadbeats who are a burden to society that whether by taking drugs, drinking too much, repeatably getting in trouble with the law end up with society paying for their misbehavior.

    • Bobber says:

      It’s complicated. I think some of the worst deadbeats run around in 10-piece suits, go to church, and have the ability to impress others.

      The “bad camp” is in all of us, ready to be let loose if we aren’t careful. In my life, I’ve met plenty of “nice” people who work very hard, but can internally justify some consistent bad behavior. And we’ve all done things we regret.

      There’s this feeling out there that, if you where a white collar, don’t do drugs, get educated, go to church, you can’t hurt anybody. But much damage is done by supposed leaders of all types, including politicians and executives, who push things too far in the guise of hard-work and progress.

      If it’s “legal” they say, it is justified, but does anybody want to live in a society that operates under this low standard? How many times have you heard people say “we operate in conformity with the law”, usually after they are caught doing something morally questionable, as though “the law” somehow purifies everything.

      Putting people in “two camps” isn’t so easy these days, especially when people can’t agree on basic rules of conduct.

      • Bobber says:

        But I agree with the sentiment, Old School. It’s hard to have sympathy for people who continually “fall off the wagon” for lack of willpower.

  28. Alistair McLaughlin says:

    I can tell you where students are NOT spending their money. In shopping malls. I am in Burlington VT right now. Very much a college town. I was at the larger area mall last night (called University mall) for a couple of hours and it was dead dead dead, except for the Applebee’s. A rather pleasant shopping experience, though I can’t see how a mall can survive with that little traffic.

    • Old-school says:

      You may think I am joking but I am not. My son got his doctorate and became a teacher in a large Metro system. He teaches around 10 hours a week 9 months a year. He makes about $70K. He can make about $15K more teaching summer school. He is bored as this semester he teaches 2 days a week. His hours are limited by the union. He has a nice pension. If he wants he can put in up to $18,000 each year in additional retirement account and get guaranteed 7% fixed return.

    • Wolf Richter says:

      Young people buy online. They grew up buying online. For them, there is no transition from one way of buying to another way of buying, as there was for boomers and gen-x-ers.

  29. Winston says:

    The root cause: government guaranteed loans that can’t be extinguished via bankruptcy. Golly, whoda’ thunk BOUGHT government would be at the root.

    Accounting for the Rise in College Tuition
    Grey Gordon, Aaron Hedlund
    September 28, 2015


    “These results accord strongly with the Bennett hypothesis, which asserts that colleges respond to expansions of financial aid by increasing tuition. Existing theories can fully explain the increase in net tuition between 1987 and 2010. Our model suggests demand-side theories have the most predictive power. In fact, our results show the Bennett hypothesis can fully account for the tuition increase on its own.”

    Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Program
    New York Federal Reserve

  30. nofreelunch says:

    After helping my son try to pay down his loan, I noticed a few curious things. The loan web page would try hard to apply the over payment to future payments rather than pay down the principle, which is a really bad idea for the borrower, and certainly not my intent. After I get it to apply to the principle, it sometimes keeps payments the same, while reducing remaining term, and sometimes reduces the payment while keeping the remaining term the same. After looking at what it actually did after applying these payments, I realized they were all the most optimal ones for the lender. But of course, this if the Federal Government, who is not your friend when it comes to an ambiguous question of money being yours of theirs. It is refreshing to help my son become a call risk to the Federal government and watch them squirm with making the best of that.

  31. Sushi says:

    Moral hazard and variations are at work in the student loan business, as elsewhere in so many other nominal government initiatives. There are parallel stories told to different audiences of students or purveyors when the bills are proposed and then enacted. You just need to read the legislation to see that, and ignore the bits that you don’t like.

    The students are told how great life will be once they punch that golden ticket with their educational tour through some purported institution of higher learning. That triggers those so-called institutions into an arms race of sorts, offering those much-discussed climbing walls and other perks while getting that degree in Solipsism Studies. The alleged benefits of those educational choices turn out to be non-existent.

    The purveyors and their supporting cast are told that there is now free money courtesy of Uncle Sugar via unwitting, gullible, credulous saps. Now just gin up programs to get your share and don’t worry about the lack of real deliverables, meaning education and, shudder, employability. We’ve got you covered, as those students signed away their lives for the chance to enter the life lottery and our friends in Congress, say, Senator Biden, made sure that you and your financial services compadres won’t have to face any obnoxious borrower bankruptcy processes.

    That same process eliminates accountability from the mental calculus. The education industry, a funny term, took notes while watching their elders in defense and pharma infect DC like parasites.

  32. Mike says:

    I think the connection between the housing bubble and the cost of a degree needs to be discussed more. ~15 years ago I paid about $600 a month for the cheapest/ most run down dorm on campus (it had one summer camp style bathroom for 20 of us, and one small kitchen on every 3rd floor)… and they ‘kick’ you out over holidays. These dorms are being replaced (to the extent that there is any new housing supply) with more expensive luxury housing.

    I made it through without much debt by choosing a less distinguished university that offered me a scholarship and living in substandard housing (a warehouse for a few years and a shotgun shack without a/c … this is in the south)

  33. unit472 says:

    Europe used to get by with only about 2.5% of secondary students going on to ‘university’. There were lesser schools of course but the notion that 50% of the population needs a university degree is absurd.

    There are many things that cannot be taught. You either have the talent or you don’t. If you do then you don’t really need a degree. In fact, if you can write songs, jokes, dialogue etc going to school can be a waste of your most productive years.

    OTOH if you don’t have any apparent talent then going to work ASAP gains you 4 or 5 years more productive years unemcumbered by debt. You might even discover what you do have a knack for and get paid for doing it.

    • RD Blakeslee says:

      “In fact, if you can write songs, jokes, dialogue etc going to school can be a waste of your most productive years.”

      Or if you can build a house. My son is financially independent after building a few of them and renting them out.

    • nhz says:

      2.5% in Europe, that’s probably long ago. In my country nowadays a really big chunk of sec. students go to university or similar level education (probably around 30%). Of course, entry requirements have been lowered in order to make university studies possible for everyone irrespective of intellectual capacity, otherwise it wouldn’t be “fair” to those without talent. We now have at least 10x more university educations to chose from compared to one generation ago, many of them catering to the latest social fads and almost useless to society. I agree that we don’t need so many university degrees, especially not within the current system that has little incentive to chose something that may benefit society.

      In a way the economy is already correcting for this though, e.g. a carpenter or plumber can make more money here than e.g. family doctors and many others with academic degrees … which is partly the result of (housing) bubble economics but still …

  34. Just Some Random Guy says:

    Have you been inside a college dorm in the past 5 years? It’s a 5 star resort. On top of that you’ll be hard pressed to find a car older than 5 years in any of those dorm parking lots. Then inside the dorm room, it’s the latest i-this and i-that, xbox, Alexa, etc. Add in a diet of nothing but GMO free, organic nonsense and ta-dah!! $150K student loans.

  35. timbers says:

    The solution to the student debt issue is to render debt unnecessary and a thing if the past, and go back to it the way we used to do education by restoring our tax dollars going to free or low cost public not for profit college. In my college days a state University was quite affordable but not free. Tax dollars flowed to the public not for profit universities not the banks & privatized for profit entities that are increasing unregulated.

  36. flashlight joe says:

    If memory serves me, and it sometimes doesn’t, there were laws passed 20 or so years ago which prevented a debtor from escaping student debt by declaring bankruptcy. Does anybody else remember this or know anything about it?

    We could avoid the whole bankruptcy issue and stop the predatory lending if non-secured personal debt was unenforceable by law. That is, all legally enforceable personal debt must have an asset to back it.

    • unit472 says:

      Since student loans are usually ‘guaranteed’ by the taxpayer ( who else would make a multi thousand dollar unsecured loan to an unemployed 18 year old?) it was reasonable to put them in the same category as taxes. Not dischargeable in bankruptcy court.

      Think anyone would pay their taxes if they could get out it by spending all their money and then declare bankruptcy?

    • Anon1970 says:

      Congress did pass a law preventing student loan debt from being discharged in bankruptcy. But a neighbor of mine had his outstanding student loan balance written off 25 years after he left college.

      If non-secured debt (e.g. credit card debt) were made unenforceable by law, the only lenders would the type that break your legs if you stop making your loan payments.

      • timbers says:

        Umm the law was passed 14 years ago so 25 yr old debt was not covered by the 2005 law.

  37. CreditGB says:

    All you philosophers, consider this “Social Justice” concept, perhaps 10 to 20 years down the road.

    All wealth is controlled and distributed by the State. Not just incomes but all assets including all pensions and 401k accounts, living quarters, food, travel, and what exactly you are qualified to do in order to be appropriately productive. Your family’s political connections will be more influential than anything else. (See “State Department” of the past 10 years or so).

    A class of selected people will be “educated” to move into the Governing Elite State positions of power, while others will be trained for whatever is needed. Plumbers to plumb, carpenters to build, electricians to wire, labor to remove waste, etc. (Read up on France’s “Managerial class” grooming, I believe published by the Harvard Business Review back in the 1980s.)

    All this sounds perfectly logical to the Social Justice crowd. It just needs to be implemented INCREMENTALLY. You exist to be managed for their vision of the greater good, as long as that definition stands. Unfortunately, the next Stalin, Hitler, and Kim Un are already born and are somewhere among us waiting to grab the Socialist’s highly developed and refined set of controls.

    • NBay says:

      Not to worry, GB, there might still be one more flow blown Gilded Age here to savor before the planet is trashed, at least as regards hominid survival.
      Keep the faith.

  38. Cashboy says:

    There appears to be student debt, car loan debt, mortgage debt, credit card debt and corporate debt.
    I assume that this debt has been given by banks.
    I cannot see how this debt can be paid back to the banks.
    Am I not correct in thinking that the banks would be insolvent and go bankrupt.
    I have savings in banks.
    If banks go bankrupt, I would lose my savings wouldn’t I?
    So what should someone with cash savings in a bank do?

  39. Anon1970 says:

    In recent years, I think many colleges have competed on the basis of student amenities rather than cost. But this is the American way in many parts of our economy. Fortunately for big business, many Americans never bothered to teach themselves basic financial principles.

    At an early age, I realized that there would be no trust fund in my future and that I would have to make the best of the limited amount of money that came my way.

    While the $1.6 trillion in student loan debt is a large number, it pales in comparison to the amount that the US has spent and will spend in the years to come on its War on Terror in the Middle East. Read here:

  40. IslandTeal says:

    Great article and commentary as usual. There was a time when you could go to a JC for a while and then work on getting your BS at night while you worked during the day. Anyway…. So many today come out of HS totally clueless to what comes next….

  41. PC Coker says:

    What seems to be missing in this debate is the absence of any tying of loan forgiveness or free education to minimum academic performance while studying. As someone who rents apartments to students, I see too many who come to college to have a good time. While I am all for learning, I can not as a taxpayer see paying for someone to come to college to party. Therefore the loan forgiveness or free education must be tied to academic performance above a minimum to merely remain in school.

  42. Matt Keprta says:

    You have to also count the compounding interest on the existing loans in default or not. Some have no intention on ever repaying and it’s just stacking up. People who have repaid their loans are not going to be as mad as the people who paid into Social Security when it disappears. At this point the government an the people are two different entities. “We the People” has been thoroughly discredited. It’s We the Rothschild’s. Don’t fool yourselves. There is no hope of the US paying off its debt. There is no hope for anybody to pay off their debts. The great Jubilee is around the corner. Corporate America is jumping ship. We will all go together when we go!

  43. timbers says:

    The 2005 law banning discharge of student debt effectively socializes the expenses (debt) by granting government guarantee, while financial profit remains private. If we tax payers are taking on the risk them we ought to get the profit – not corporations. In other words, cut the parsitical financial company out and fund education directly with tax dollars. Socialized expenses/risk paid by us tax payers to give away private profit for corporations is wrong.

    • Just Some Random Guy says:

      You must have been asleep in 2010 when the govt took over student loans away from the “parasitical financial companies”. As always, when the govt gets involved to solve a problem, the problem gets exponentially worse

      “Lost in the kerfuffle and fuming of the Affordable Care Act’s passage in 2010 was the Health Care and Education Reconciliation Act, signed into law just seven days after Obamacare. Half of the act consisted of small and otherwise innocuous amendments to the ill-fated Affordable Care Act, but the other half, Title II, radically overhauled the country’s student loan industry, replacing federally backed bank loans with direct government lending.”

  44. Just Some Random Guy says:

    Didn’t want to quote too much in one post….more from the link above….

    “For decades, student loan debt had remained in the low hundreds of billions, but during Obama’s presidency, it exploded from $150 billion to more than $1 trillion, the overwhelming majority of which is owed to the government. As student loan debt continues to spiral upward, the federal government’s revenue streams for the programs are becoming more tenuous than ever. For instance, the Department of Education has found that income-driven repayment plans, which allow lower-income borrowers to dodge payments and receive complete debt forgiveness 25 years after the loan initiation, increased by 625% alone.”

    This makes perfect sense. When the govt takes over a program, it expands the program. After all govt exists only to grow itself. More money lent = higher tuition = a demand for more money to lend. It’s a self perpetuation circle. And the answer is always more govt to solve the problem govt created.

    Get rid of govt interference in higher education and the so called student loan crisis goes away with it. No college would dare charge $70K a year tuition without Uncle Sugar Sam writing the checks. Like with anything else, when govt subsidizes it, the cost increases. See also housing with all the “low income assistance” programs that do nothing but make housing unaffordable for low income people.

  45. Shipman says:

    I need to chime in here. I am one of those parents who scrimped and saved for 20 some years to put my kids through a less expensive college (but still expensive). Because of our location they couldn’t live at home so room and board had to be funded as well. I have two nieces who are totally irresponsible when it comes to money, who took out loans without concern for the consequences. One of them took out a loan while she did an online college course mainly so she wouldn’t have to work at all. She lived off that loan rather than work part time which she easily could have done. She has a teaching degree now but is $100,000 in debt. She has not paid any of this debt off in over 10 years yet boards two horses and has taken at least one vacation abroad. I can’t tell you how excited she is at the prospect of her loan being forgiven. I often think of how much more I might have saved for retirement if it hadn’t been for that expense. I’ve noticed one of the ideas being floated is to compensate those who already paid their loans off. What about those modest income parents who did without to put their kids through college? They are not even considered.

  46. Jon says:

    One thing that’s missing in this conversation is that many here say they paid for their school by working. The question is, when did you go to school? If you went before the middle eighties, it was easy to work summers for your tuition and live at home. Kids today do not have this luxury and telling them to work today won’t help.

    • Mars says:

      clueless Jon
      “when did you go to school? If you went before the middle eighties, it was easy to work summers for your tuition and live at home.”
      In the 80’s and 90’s had 2 majors yet I paid rent for my own apartment, I worked a full-time day job and went to school at night Fall and Spring semesters, I took 15 hrs two Summer semesters and worked part-time.

      No debt.

      Nobody told me – It’s what I decided to do.

    • Just Some Random Guy says:

      Kids can’t work summers today….why?
      Just more excuses by lazy millenials.

  47. Jim E says:

    My stepson came to me a few years ago and wanted to go to a fancy fashion design school in San Francisco. It offered a 2 year program for $52,000 . I was unwilling to cosign on a student loan and he moved on to nursing school. The point is that 18 year olds are clueless. If a parent is willing to cosign on a loan for a ridiculous major, they are guilty of being an enabler. Shame on clueless parents.

  48. Old-school says:

    I have theory that because of vested interest things go on until it’s just so obvious the system has to be reformed or the tapeworm is going to consume everything. At some time it will be 1. Education system 2. Health care system 3. State pension systems

  49. Satya Mardelli says:

    Instead of studying at a university maybe you should work at one. Check out these ridiculous salaries at the three Arizona institutions of higher learning. The student loan mess has created a bubble in University salaries around the country.

  50. Tim says:

    A simple fix that does not require any pandering politicians: Start educational “Go Fund Me” campaigns.

    All those in favor of forgiving student loan debt can link up with those in need and help them out.

    That poor art history major from NYU who is six figures under water and is now waiting tables would love your help. To bad he/she never got a basic education in economics and personal finance. But it doesn’t matter. If you help them they can spend their money on acting lessons, a trip to Europe with their pals, and the latest Apple smart phone. This would be a real boost to the house of cards…I mean the economy….that we’ve created

  51. hikusar says:

    Something that wasn’t mentioned and one of the lesser known reasons why CA college tuition keeps going up is because the PIGS in Sacramento can’t help themselves in passing new unfunded mandates to the higher education system every year. This forces the education system to higher more administrators to make sure they are in compliance with the new state laws. Politicians see no reason to fund education when there’s an unlimited amount of loan money available for students, so higher education has no choice but to pass the costs onto students.

    It’s weird that we have this completely outdated model of learning in the internet age. There’s no reason to get a college education on the chance you’ll go into academia, there’s nothing you can’t learn from resources available on the internet today that’s either free or just a reasonable fee. Employers need to stop looking at certificates as a means of employment or promotion and stop this nonsense.

    In terms of payment of loans, I personally know someone who chose an expensive graduate education because he would just work for the government for 10 years on the income based repayment plan and then the rest would be picked up by the taxpayer. Even when government policies are offered in good faith, people will use them to their advantage as best they can.

    I don’t have the same story that many have written on here. But my parents sacrificed a lot and established college investment funds at birth and made annual contributions to it so the money was there when I was ready to go to college. They could have bought a bigger house, bought fancy cars, spent thousands remodeling the house that is 30 years old now and everything is still original fixtures but they chose different. I feel lucky to have had the time to focus on my studies and found a paid internship to help forward my career. Eventually I found my way and am doing better than a lot of my peers and without any student debt or debt at all.

    How is bailing out the banks any different than bailing out people with student loans? Once it happens, it will encourage bad behavior and punish those who tried to play by the rules and not abuse the system. Our federal budget continues to balloon out of control. One day, it will have to face reality and it will be a blood bath. God speed when that day comes.

  52. zagonostra says:

    The “moral hazard” of writing-off student loans is captured in Mathew’s Parable of the Workers in the Vineyard (Chap20 -1- 16). Those workers who started late in the afternoon and received the same payment as those who started early is a teaching that is lost on those who have a problem with student debt forgiveness.

    E.O. Wilson, drawing on his ethnobiology, shows how in the animal kingdom individuals don’t want other groups getting an advantage over the one they are in. Advantage to your own group is fine.

    What parent would want his child to go through difficulties he experienced? Do you want your own child to be in debt for the rest of their life? Would you not want the gov’t to forgive your child’s loan. But for the “other”, well that’s a whole other matter…”moral hazard,” in that pregnant phrase lies the limits of the social.

  53. RonB says:

    I was born in a low income family and I had no monetary assistance when I graduated from high school. I worked at 2 low-pay part-time jobs while I put myself through college, mostly attending evening classes. Getting more than 5 hours of sleep at night was a luxury. It took me nearly 17 years of working days while attending night classes and doing homework past midnight, but I earned two Bachelors and a Masters degree in science and engineering fields. I never used debt. Those pains and struggles made me stronger and more determined and it taught me some lessons on being frugal that most Americans will never get.

    Today I am earning over $160k as a Sr. Engineer in a major Aerospace company. It did not come for free…

    I would never vote for any political candidate that wants to forgive student debt. To me, the students would miss out on some the most important lessons in life.

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