Student enrollment has dropped 11% since 2011 while student-loan balances have surged 74%. Why? (12 minutes)
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Student enrollment has dropped 11% since 2011 while student-loan balances have surged 74%. Why?
Corporatists are exploiting the opportunity to consign the US educated and professional class to debt peonage by converting the higher education system into a collection of cash cows.
Bit by bit, the Financial Industrial Complex is turning the US into a Dickensian nightmare, to be disgorged of whatever wealth is left and then abandoned for greener pastures elsewhere. Asset-stripping isn’t just for the PE firms any more. All the big players are in on it. It’s what the ‘service economy’ has been designed to do. And they thank America for its cooperation.
The FIC is already in the UK as well.
I was wondering why Cognita, owner of my kid’s school, makes no investments in the said school. Infrastructure and teaching, both lacking.
Then I found KKR owns a great chunk of Cognita. All is clear now. Beancounters have descended to destroy my kid’s future too.
The fewer the debt slaves, the higher the debt amount must be. Got to keep the Ponzi going.
Doesn’t take a college degree to figure it out.
How to solve the student crisis and make college affordable again. And without costing the taxpayers a dime.
1. Get government completely out of the student loan business. No guarantees, no loans and no scholarships.
2. Allow student loan debt to be discharged in a bankruptcy.
3. Enforce GAAP and fraud laws
I know. I know. You can’t buy votes this way.
Back in the Eighties, people would go through medical school entirely financed by student loans. Upon graduation, they would jump through a few hoops and file for bankruptcy. Everybody discovered that paying back their loans was unnecessary. That’s what started the current situation.
So, because of a few deadbeats in medical school, we made getting a college education unaffordable for everyone?
Well, that certainly worked out.
It’s called “The tradegy of the commons” and it’s the general reason why we can’t have nice things.
And while we might think that we wouldn’t do such things, the pool of people abusing the system grows until even the best people give up and join in.
It was more than a few. It had become common knowledge that NOBODY needed to pay back student loans.
I know a guy that tried that. I think he owed about $100,000 in the 80s. Gov’t chased him for almost 20 years. He ended up settling, agreeing to pay $200,000.
So, not everyone got away.
When I went to college, State funding of Universities almost anyone could afford, was still going strong.
No need, or very little, for loans.
Bring that back. It worked and was not a huge drain on tax or other resources.
’78-’79 got a Health Professions Loan at Oregon State, as grad student out of state. About $4k/quarter, tuition, housing, slop meals (I lived in the International House, old, 2 of us in 12 x 20 room, bathroom and showers for whole 4th floor down the hall. Got some off for quitting early in 3rd quarter when I decided the whole industry was BS driven. Not much interest added when I could finally pay it all off in ’85. Docs often quit Med school back then (I completed pre Med but got kiss of death, a B in second semester organic. Lousy fast talking teacher, but I waited too long to drop) to become detail men for Pharma Co’s….made much more money.
As a 1980s medical school graduate (1984), I call BS on your assertion.
Apologies in advance should you provide a reputable citation for your claim.
The majority of Med school matriculants, especially in the early 80s, had little to no undergraduate debt. I had none. My dad paid some and I paid the balance from my own savings.
My grandparents paid half my Med school tuition and I borrowed the balance owing about 22K upon graduation. Certainly, others owed more but debt loads greater than 75K were uncommon.
Post residency earnings were good (managed care was in its infancy) and it was quite easy to pay back one’s loans assuming reasonable maturity regarding one’s finances.
In sum, to lay the blame for the current student debt problem at the feet of 1980s Med students is just plain wrong.
Link? I’m a physician and know literally no one who has done this.
Inf and Happy-
Just anecdotal stories going around Pre-Med. Most quit early on in Med school deciding less work faster and more money. Did not have much to do with tuition cost back then. I did see a lot of totally qualified people turned down and if they had money they went to Greneda, Italy, etc, or bit the bullet and went Dental or Vet….even Chiropractic, which is a real sales hustle money maker. Or Pharma detail men.
Not impugning Docs, some aren’t in it totally for the money, or social status.
I found one.
PS to Inf and Happy.
I wrote reply to you fast, had smog appt.
To further clarify, I quit Pharmacy school after many prime rib dinners paid for by Pharma Corps and Managed Health Care Corps and listening to both agendas. The writing was on the wall back then, and I said FU to it all. Docs from that era had nothing to do with present student debt problem. (Banana’s “wisdom” is likely what ticked you off?) But yes, pre-med (and then some) took me 10 years, JC and State College, working full time (a couple semesters at 20hr/wk) so I did hear several stories about former classmates dropping out of Med School to become detail men/women. I can’t recall names, sorry, but it is NOT BS, it happened.
Bankruptcies and regulation enforcement all cost tax payers for the time of judges and regulators.
Agree with all but point #2. Point #1 is the most crucial of all. The academia complex found its way into the public coffers, and we wonder why loans are up but enrollments are up no where near?
C’mon, think about it. Every industry on earth is looking for access to the public tough. Once the access is found, its money from heaven, cause there is no one to control it….and please, don’t insult me with anything about “Congressional oversight” or similar. They have been bought and sold more times than a leaky ship.
Oh yeah, I began to be chased relentlessly by a collection outfit in NC mid ’81, but convinced them I was essentially homeless then.
What’s wrong with you? That sounds so damned responsible and common sensical.
Are you the same guy that asked Warren if he could get his money back because he saved up and paid for his daughter’s college.
To which, Warren laughably answered: “Of course not.” What left unsaid: “Are you an idiot, you’re only one vote, and you’re not worth buying when I can buy so many votes with my college forgiveness plan.”
Excellent comment and bang on POV, Unamused.
“Corporatists are…”
You have to have a relatively insane definition of corporatists if you think they run the show on America’s left-wing dominated campuses.
Bottom line – hugely inflated tuitions are the result of enormous, very politically powerful bureaucracies that long ago captured/gamed the political process to their own advantage.
For decades, the Feds have simply ratified the malignant tuition inflation (far, far beyond almost every other sector) by upping the student lending limits.
And what is the tax rate on the income of multi-billion dollar “non-profit” endowments?
Pretty close to f*cking zero.
All so a left wing army of six semester hour socialists in the professoriate (teaching a max of six hrs a week) can generate (sometimes, if they are actually “dedicated”) an ocean of irrelevant and unread “research”.
Let them learn how to blog…
And let us not forget the hireling voter army that staffs the engorged, even more useless administrations.
This is American socialism in actual, daily practice.
Sure, but you forgot to add the Educational Complex is complicit, too. Elizabeth Warren made her salary at the expense of students.
Yes, always follow the money. Higher Ed, their vendors and contractors have made a killing last ~ 30 years. Yet another “heads – they win, tails -taxpayers lose. Moral hazard writ large from get-go. Get .gov out of the lending / guarantee / subsidy side and costs will drop by more than half.
Do you all forget that states used to fund higher education? Same degree I spent 8k for in the 80s cost 30k now.
It’s the slashing of state funding that’s most contributed to rising cost of state colleges.
So, bad person Liz?
It’s actually the government, the politicians who made this program available, guaranteed the loans, then made it impossible to go bankrupt if the debt became overwhelming. The students, of course, many of them unqualified and otherwise unmotivated except by the mantra that your life was over unless you got a BA in some nonsense degree, received the equivalent of a high limit credit card, and told to take it easy, with no thought about the obligation of future payment, a characteristic of youth in general (but not all!). Much of it would be spend on parties and other essentials.
The ‘corporatists’, i.e. banks, who would not otherwise have made such loans even remotely approaching the degree they did if there were no such guarantees, essentially gave a blank check to the education system via the students and were the recipients of a tidal wave of money to nourish their bureaucracies, building plans, and salaries. Naturally, because the Federal government is the ultimate creditor, the laws were changed to disallow bankruptcy, a remedy which is available to every debtor of every ‘corporation’.
When first proposed, I believed it ranked with the stupidest government programs ever conceived, although it’s difficult to choose among the many disastrous ‘progressive initiatives’. Maybe forcing banks to give loans to any warm body that showed up in order to promote equality is even more egregious than this fiasco.
https://en.wikipedia.org/wiki/Unmanned_aerial_vehicle
The new “Dickinsononian Bobbies”?
Not usually a conspiracy type, but us peasants simply have to be controlled as we descend into Dickinson Land.
These little gadgets can be organized better than any Police Force….and much cheaper, and WILL follow all orders.
Corporatists?
The 2010 student loan legislation was passed over the objection of big business and other corporate interests.
It took the banks out of lending and gave student loan lending directly to the governmen. The only beneficiary has been “Big Ed”, which is largely not for profit or state government.
There is very little in this for corporate interests.
And when the law was passed, Obama had the hutzpah to claim it would save money. It is hard to imagine a more costly and false statement.
https://abcnews.go.com/WN/Politics/health-care-obama-signs-student-loan-overhaul-legislation/story?id=10239569
“We were doing God’s work!” Lloyd Bankfein testifying before the GFC congressional investigation(s).
I know he wasn’t referring to the student loan problem but it applies to the kind of raping of the American (global) economic system going forward by those that did the GFC (Great Financial Crash) raping.
So for what it’s worth I have a good credit score, and continue to pay down my student loans, which are pretty manageable in terms of monthly cost and outstanding principal. I would have a hard time arguing that I’m in rough financial shape.
How much of a schmuck am I for continuing to make these payments?
A Vespa scooter would be way cooler than paying making these payments :)
How much of a schmuck am I for continuing to make these payments?
If you can ask the question, you already know the answer.
Character, Salty. Character most likely learned at home from people with values beyond making money.
My daughter and son-in-law, when interest rates dropped way down a few years ago, simply re-fied their mortgage and paid off their loans. Their mortgage payment was actually lower, although the term didn’t drop.
I also have a brother in law who started up a business many years ago. It went bust. He owed a friend about 25K who had floated a personal loan to him when he needed to cover some bills. As he worked through his bankruptcy he started up a paper route that ran mornings, before work. He made an extra $600 per month and used it to pay off his friend. 6 days a week, 4:00am start, rain or shine to hit his huge route, then at work by 8:00.
People that walk away from their debts……. well, never mind. We all pay for it one way or another. Blaming the fools, or a ‘system’ that made it too easy to borrow doesn’t cut it.
I thought the story was going to end badly, but I was pleasantly surprised!
Do they still make Lambrettas? Someone as savvy as you should shop around, but do avoid the Chines stuff.
Actually, Cushman Eagles and Mustangs were the thing to have back then. The bigger Brit bikes were for adults long out of school with good paying jobs. Sears Mopeds and Mini-bikes for even lesser financial bunch, below Vespa/Lambretta level parents.
And yes, the Sears Allstate Puch 250 would run backwards if it backfired on start….I saw the very surprised riders, especially doing burnouts.
Right Salty ….. don’t forget to buy new I phones and multiple beer kegs too-
Send the student loan bill to the kids that went to work after high school, and the parents that worked massive overtime to pay for their klds’ education- screw them, right ? Gotta show compassion to the future lawyers, etc. that Harvard and Yale spew out.
Why am I thinking about the FC Wall St. bailout? Maybe bail out certain degrees deemed to have productive social value with a stock trade tax?
Just call me Henry Clay…;)
I applaud you for paying back your student loan. However, I wish people would stop bragging about their credit scores. Don’t they/you understand it is no different than the social credit score in China. The only difference is the Chinese are more honest about what they are doing.
Credit is the new money. In a credit based economy you earn points on merit, unlike the current system where you can get rich through subterfuge, or luck, or both. In a credit based economy Donald Trump would be driving a cab.
You don’t earn points on merit, you earn points in an algorithm they have designed and control.
That’s an insult to cab drivers!
At least in theory the social credit score is based on behavior, blacklisting “untrustworthy residents”.
Thanks for reminder…..coming up on prime eyeball time in “trial”.
Petunia,
Totally fair. I threw that in there because it seemed relevant in the context of a question about the intelligence of not paying one’s student loans. Not so much bragging.
That being said, if I were single again and could design my match.com (or whatever folks use now) profile to filter based on credit score, I’d have to think hard for reasons not to use that feature.
I appreciate your point, but I would think a credit score must at least map to conscientiousness as a quality. Sometimes just luck too though I suppose.
Thats likely what the reason is. People can sense a bailout coming so to hell with making the payments.
Whatever student loan bailout you get will just be window dressing that will allow corporate predators to continue their smorgasbord. What you’re more likely to get is a national austerity budget so your masters can amp up the liquidation.
Yea, probably a student loan payback/write-off system by the government, sorta like the past/present government assimilation of toxic securities. ?
I think the bailout should be paid by the universities, as they are the ones who charged the fraudulent fees.
definiely !!!!!!!!!!!!!
Please stop with the “corporatists” thing, it’s true of much of the government, but this one is all for the not for profit and state universities who are the only winner.
Easy credit vs austerity will make for some very interesting WR articles.
One could even easily argue it already has.
Student debt has been in a crisis mode for 10 years or better and getting worse. Anyone that was waiting for a bailout, that you alone can sense, has been waiting for a long time. If you can remember the last bailout it wasn’t the underwater homeowners made whole but the bankers who lent the money. Do you really think this time it will be different?
Nope Surely will not be any different
Underwater mortgage owners (they don’t own a home) got bailed out too. Remember HARP? $50K, $100K, $200K even more in some cases wiped off their mortgage balances.
They got to keep the BMWs, Harleys and boats bought with the HELOCs though.
Gotta love the narrative where those who were complacent with the predatory lending system for a public good and paid their loans off are the ones we gotta be sympathetic for, but the folks who refused to line the coffers of their indentured servitude masters but now are doomed to a life without wealth creation or a retirement nestegg are the real conmen getting away scott free.
“folks who refused to line the coffers” = people who voluntarily signed a contract, voluntarily accepted money and voluntarily spent that same money and now refuse to pay it back.
Got it.
What’s your feeling about paying back a house loan? Car loan? Credit cards?
Or just take the money and run?
That’s the “ new normal” haven’t you heard Meanwhile I paid out 200k in physically hard earned cash for my sons education at Georgetown U I’m obviously not on board with student loan debt forgiveness
The new term for defaulting on student loans and letting others pay the bill is called, “F_ _king”. It comes from the root, “fracking”, an aspect of the Shale drilling investment scheme, accepted as normal business practice.
No doubt that debt made your bill much higher. No doubt parental help also pushes the price higher. There’s a lot of money chasing the “ticket” to success in our society. Education has been pushed as the necessary “union card” to gain a rung on the ladder. It has altered behavior in a lot of ways, and as Unapproved pointed out, the manipulation is in full force. And the usual Cabal profits.
@frederick
200k? That’s outrageous
The new price for a bachelors degree is $7k and no more than $20k for a masters. Go online people!
If you’re not getting a full ride scholarship AND doing research AND working in the old fashioned masters ehrrr you actually write a thesis you don’t belong on campus
Banana, you’ve either got horrible reading ng comprehension or are misquoting me on purpose.
Read it again and take note of what a public good is. Maybe compare that concept with a private home loan, a car, or a credit card.
If the fire department or the police came to me in an emergency and said they won’t help me unless I take out a loan from them, what’s the morally correct thing to do?
The fire department and the police are currently coming to you with their emergencies – their pensions. What is the morally correct thing to do with irresponsible people? Be an enabler or tough love and help them learn?
Lisa_Hooker
I hope your not suggesting that people who want their pensions funded are irresponsible?
There are several reasons this is happening and a lot of it has nothing to do with those who may not get their pensions.
Survival of the fittest? In a corrupt system, shrewdness and cunning is part of survival. When you have societal sanctioned debt servitude favoring the bankster and Wall Street parasite class, why disparage a little Robinhood action for the little guy.
Our current education/credentials system is a debt trap, enabled by the FED and government favoring the funny money lending and packaging class.
“Age and Guile Beat Youth, Innocence, and a Bad Haircut” – P.J. O’Rourke
Well said.
If they just put all the student loans into a corporation, gave it a tech-sounding name like “cloud block-chain student loan Corp” and launched an IPO, its valuation would shoot through the roof. All that questionable debt would be worth multiples of book value.
Yeah – maybe call it WeStudentLoanDebt…
Oh, never mind.
They already have student loan asset backed securities – they are called SLABS – and if you have a pension, your fund probably owns some of them. Welcome to the jungle.
So-Cal:
Might also call them “concrete shoes”…….Mafioso style!
Also include such terms as sustainable, disruptive, innovation and artisan to guarantee tbtf success
And of course let’s not forget the people who get a degree in useless. Those will lit take decades to pay their student loan/s back.
Absolutely correct. Pocketing those tax cuts you voted for just put your kids in hock for tens of thousands. Not to mention the millions those developers made off of building student housing and shoveling some of the ill-gotten gains back to the state senator you voted for.
Yikes, this was supposed to be a response to oee’s comment below.
the reason is simple. the states used to pay 51 % of the cost of higher education. Now, according to Gallup’s survey the states are only paying 25% of the cost. Thus, although the total cost may not be big. the student (parent) is shouldering more of the cost of higher education.
It’s part of a larger syndrome. Back in the day, the US used to be able to afford to build schools, including the higher education system, and roads, including the national highway system, plus lots of other infrastructure. And it used to be able to afford these things without racking up trillions in debt.
But now that the country is ten or twenty times richer it can’t even afford to maintain the schools and roads and lots of other infrastructure, and record trillions in new debt are racked up every year.
What’s changed? The US no longer taxes the rich. Instead, the US subsidises the rich. They bought up federal and state governments, arranged get all those trillions back, and are profiting off the conversion of rest of the country into a dismal third-world country, complete with the replacement of democracy with autocratic rule. It’s taken them a while, but they’re almost there. You can watch it happening in real time. It’s not as if it’s any secret.
Say goodnight, America.
@Unamused-
>What’s changed?
Look no further than the middle-east. The money spent there parallels our annual deficits so closely that no elected officials dare speak of it.
“The US no longer taxes the rich. Instead, the US subsidises the rich.”
Suppressing interest rates = A universal basic income for the rich.
Now try advocating for a universal basic income for everyone and listen to the howls.
“Suppressing interest rates = A universal basic income for the rich.”
Why don’t you step through that one because savers get screwed by ZIRP and people with more money tend to save more – so you need to explain what you are talking about and what your definition of “rich” is.
Savers have suffered because of falling interest rates, but the rich have inordinately benefited from assets price inflation in stocks and real estate.
Unamused,
I agree with most of your points, but what is your solution? Is it just in America or is this a world wide phenomena? Is there a country more to your liking that we could emigrate to? Just looking for answers in a sea of problems.
what is your solution?
There isn’t one. You’re doomed.
I used to advise people to do what I’ve done, which is to separate myself and a few others from the coming debacle as much as possible. But all I’ve really done is buy us some time. I no longer tell people to save themselves. I don’t tell people to hope for the best, prepare for the worst. I tell them to enjoy it while they can.
I’m not kidding, and I’m not exaggerating.
as the archdruid is fond of saying, “problems have solutions, predicaments have outcomes.” and we are in quite the predicament nowadays.
Green New Deal is certainly at least worth a try, and as T said, “what do you have to lose?”. Golf courses? Private jets? Mansions? Ethanol subsidies and food burned in cars? ETC!
Over $100 Trillion in net USA household wealth now, I’m sure many can part with varying amounts of that “hard earned” money to fund it.
How about a maximum net wealth? $20M sounds good. Rest is like a 100% tax. And if you still keep working because you like to make money, we can have a “Capitalist/Entrepreneur Hall of Fame”
I was called by a pollster regarding no bankrupcy for credit cards. After my sixth answers that lenders who make un secured loans are up the creeks sans a paddle, the pollster told me she got how i feel, and wished me a nice day.
What’s changed? It’s not taxation of the rich, they continue to pay the vast majority of taxes.
What’s changed is that since the 1930s, entitlements have eaten the entire budget, accounting for 75% of Federal spending. That’s why there isn’t money for infrastructure.
75% of the Federal budget is entitlements? Since the 30s?
Unless you consider military spending as part of entitlements then you are about as far from truth as is possible. What exactly do you consider an entitlement?
These big endowment universities should be required to handle the financing needs of their students.
Billions in their coffers as their “customers” are lent money by the federal government.
If a person wishes to buy a Ford, he deals with Ford Credit, and it should be the same for these businesses that are universities. If you wish to say send your child to Vanderbilt, Vanderbilt should lend you the money.
There will be a few side benefits to this.
First the federal government will be taken out of the equation. Slowly at first with the wealthy private schools held to this measure first, then the large state universities, etc.
Second, tuition costs will begin to be tempered as these schools will wish to increase the chance of remuneration.
Third, worthless degrees would be less commonplace so as to also increase the chances of repayment.
If the government offered easy access to credit for the purchase of any product, the cost of that product would rise. And so it is with college tuition.
Finally, the Dept of Education which had a budget of zero in 1979, now has a budget of $63 BILLION a year. If one traces the ascent and trajectory of that budget, and compares to the ascent and trajectory of college tuition over the same time period, the lockstep nature and the causal effects become clear
Finally, the Dept of Education which had a budget of zero in 1979, now has a budget of $63 BILLION a year.
A drop in the bucket compared to what corporations spend on stock buybacks. It’s what the US spends on foreign military adventurism and weapons systems that have never worked every few days.
Pubs were never able to get rid of DoED as promised during the Reagan years and Gingrich years, but they did figure out how to turn it into a spectacular profit centre for their preferred corporate constituencies.
No its not a drop in the bucket. There may be waste everywhere, but $63Billion buys a lot of rice and beans.
This thread could have ended with Unamused’s first comment.
Stock buy backs with their own money….how can you conflate that with student loans….?
$63 billion a year…imagine if the States could ,for the simplicity of math, keep a BILLION a year dedicated to education in their state…!!!
“corporations spend on stock buybacks”
Una,
It is hard to imagine two more unrelated issues and the statement borders on the frothing delusional.
There are valid criticisms of buybacks but they have less than zero to do with habituated left wing academia’s grotesque abuse of the student loan system.
What he’s pointing out is that comparatively, an annual $69B budget is small potatoes compared to the obscene amount of $s used to purchase stock buy backs. In other words there is so much money floating around the system that is wasted (i.e. stock buybacks primarily enrich the executives of those companies) when those funds could easily be spent on education without creating a massive pool of debt. To further tie this in, these stock buybacks are being purchased from the proceeds garnered through QE.
On a macro level, this is a gross mismatch in how our society distributes wealth. And he’s not even bringing in the grotesque waste in the Pentagon budget.
This seems pretty transparent to me. It is not healthy for anyone to call someone out as delusional when you can’t understand their argument.
PS: It’s not just a liberal problem. Most of the abuse comes from private “scam” universities that seem to always be founded by some right wing group or individual. Not to mention the fact that we have people like DeVos running Education and completely in bed with these free market, good for nothing “universities” that somehow get full accreditation. Go research that one.
“Frothing delusional”????????!!!!!
Damn, man! That is a situation where people are given Thorazine and locked up….and likely die off quickly.
What’s wrong with “I disagree and here’s why”, and then go spin some words around.
But then I suspect you are one of the ones who expects to get richer and therefore “safer”? True?
All part of this left-right stupidity driven anger encouraged by our masters, so we don’t see the real enemy of our planet, the excess physical resource pigs.
A novel thought. Put those big endowment funds to work loaning the university’s money to qualified students instead of playing the markets by paying fund managers.
after reading her blog, i vote for kitten as the author of said novel! it would be spectacular.
Opens a very large new market, where the owner of new science can create their own university and add their own funding model that will directly compete with all present universities, not just with delivering better science; but also a much better solution to the financing of their degrees for the students. Competition is by far the best way to solve the crisis and bring on the collapse of such a desperately stupid and classic ponzi scheme.
Recall that one of the very first things Obama went after was removing the private part of college loans. Federal control is what he sought and got. The money flow to the indoctrination centers, backed by the taxpayer was entrenched. Now, surprise surprise. There is a mess.
As I suggested, it is absurd that universities with all these billions in endowments, allegedly donated to keep costs down, are not used AT LEAST to finance their own student loans.
The private universities should absorb some of this tuition loan risk.
Its amazing how all of our current problems can be traced back to Obama. Especially the things that happened prior to him becoming President.
This particular thing IS on Obama and the Democratic Congress in 2010.
https://abcnews.go.com/WN/Politics/health-care-obama-signs-student-loan-overhaul-legislation/story?id=10239569
Lots of other things on people of both parties, Bush for Iraq, etc. Plenty of blame to go around. But yes, this one was Obama.
Traced to Obama? at least go back to Reagan, that’s my chosen inflection point, anyway.
I have always felt that us white kids who scared the powers that be when doing the Haight St thing and later even worse (like me in my Free Huey t-shirt under my Army field jacket), civil-rights, etc, to the point they decided to form the Heritage Foundation, etc, etc, and COMPLETELY put and end to all things FDR, and the middle class from which we sprang, once and for all.
Really sorry about causing that, but we just didn’t feel our “place” was as cogs in the great corporate industrial wheels, especially along with the very restrictive cultural BS that went with it.
– But but but, these loans are an asset for the federal government.
Over 90% of student loans are guaranteed by the Federal government. It is part of our growing national debt.
Some for profit colleges may have less strict academic standards as they are not in business to flunk students, but to increase tuition revenue. Students graduated without highly valuable skill sets. Diploma mills issued so many wall decorations.
In the early 1980’s there was a TV news story about a man with a PhD in history finding a job shoveling snow at the New England Patriots’ stadium outside of Boston. There was a bad recession in the early 80’s.
As high level level engineer, with several STEM master’s degrees.
Designing, leading and fixing major engineering projects over a career…
I would have been better off financially and health wise becoming a union firefighter or police officer.
@2Ban
Maybe financially, but not health wise. Those professions have unions for a reason, namely, the workers were treated like shit until they got one. They still are, but at least they get paid for it and will have a pension.
I did lots of construction work under engineering supervision. (working foreman). I guess some days I made more than the engineer, but then he got into his pickup and drove back to the office while I continued working, outside, minus 25……waiting to pour concrete after the engineer gave his okay; if he gave his okay. When we poured, he watched from his truck after a snoop and wander, checking out the rebar.
It’s why I became a pilot. :-) (no loans) After I dropped off my rich customers at their mine, or tourist lodge, I might drop into a lake never been fished, ever. One day I had lunch on top of a glacier on the Yukon/BC border. It isn’t always about money why we do what we do. People just shouldn’t borrow money to do it.
Thank you Paulo, for finally getting at the crux/heart of the problem, AKA ”issue.” Don’t borrow if you can’t pay back!!
I borrowed money from an older cousin when absolutely necessary to prevent having to drop out during a session to work full time, otherwise worked part time all the way through college, dropped out only between sessions to work.
When I paid off cuz, he said I was the only one to do so out of six relatives, and then opened a $3,000 bottle of cognac, which we polished off while talking into the night, as he continued to mentor me… that was the total of his loans to me… miss him and his wisdom every day, though, like him, debt free in retirement and able to live fairly well on SS, etc., wine budget the biggest expense, though still have the usual taxes, insurance, etc..
Why have government worker unions far, far outlasted private sector ones?
The 80 pct of the population paying taxes would like to know this of the 20 pct eating them
I figured you flew loggers to camp. My friends up there went all over BC coast, even Queen Charlottes. 21 on, 7 off. Then almost suicidal drunken boat trips while at camp.
Saw an old picture when larger boats did all the transport up there. Sign said “Indians and Loggers” and pointed below decks.
Something of an image to uphold, ya know?
I had an offer to go into an old established electrician’s union at age 21, big one in a major city. But no, I had to go and do electronic hardware engineering, then software engineering, then engineering “project management.” Saved a lot in 401k, IRAs and in after tax savings. But I would probably be better off now with the union IRA and lifetime pension and health benefits. Who’da thunk.
Electrician installation, problem solving not so bad. But doing all new construction will kill ya physically…high work are speeds expected including pulling wire which can often be brutal.
That’s why ALL electrical connections must be made in a “fireproof box”….doing connections too fast is asking for fires.
You likely made right decision.
One can acquire a Ph.D in History for the most trivial research, of no marketable -and all too often of little intellectual – value.
A Ph.D at my old College is researching ‘Queer perspectives on the combats of knights with giants in Romance epic literature of the 12th century.’
That’s Cambridge University, and straight out of Monty Python. :)
The Liberal Arts education may be making a comeback. In a world where mega-cash goes into some of the most trivial pursuits. McLuhan was doing similar studies when he developed his media theories. Steinbeck spent a large portion of his later years interpreting Malory. The diminution of ‘culture’ is directly correlated to our loss of empire.
I look forward to having that PhD serve me coffee next time I’m in the UK
:)
You want to go to Vanderbilt or Harvard…..borrow the money from their multi Billion dollar endowments….
Why isnt that fair?
You want to buy a Ford, you go to Ford credit….
Excellent report. It does shed a new light on things. It also makes a good case for cancelling SOME of the debt by putting a limit on how much per student would get cancelled. Much isn’t going to get paid back and just puts an additional drag on the economy by reducing young people’s credit ratings.
Reset the student loans interest rate to the same rate at which the government borrows money. This makes the loans more affordable and avoids the moral hazard of debt foregiveness.
@magicphoto
Why stop with tweaking interest rates?
Why not have the govt just declare everyone equal and reset everyone’s checking accounts to have the same amount of dollars?
sigh…more reductio ad absurdum….aren’t you intelligent enough to envision balanced middle ground solutions? Or is it you simply refuse to give an inch?
For the size of the loan, it’s already assumed that the max amount that the 18 years old can pay, counting in loans, is the standard price for most major colleges. It’s very telling that peaked 8 years ago.
One of the major things to bring up is changing demographics. How many people turned 18 each year, and what about the racial demographics of those turning 18, that could easily be apart of the falling attendance.
We also have to factor in how many went to tech school instead.
Overall though, the younger adults are getting poorer, and that can explain them going to college less and paying back their loans at a lesser pace.
There are a lot of smaller factors. With so many retail stores closing and many elderly and middle aged adults now taking starter jobs, has this loss of money for many younger adults and teenagers effected their ability, to even try to go to college? Many people of course commute to college, do less of the potential students have cars; if they did that would limit them. Teachers in high school are big pushers of college, have they changed their tune? Has a change in party culture at colleges occurred? The party culture in the surrounding cities could have an impact, especially as weed becomes legal in many places and, possibly, more available everywhere else.
Some politicians are calling for the government to foot the bill for student debt. This is quite infuriating for the 2 out of 3 that didn’t go get a degree or who paid most or all of their education. That’s just another reason why I think a UBI would be the humane way to start to bring some balance into our economic mess. If a portion of student debt were to be canceled it should be taken from the entities that supplied the funding.
The sensible way to fund a UBI would be a VAT, making big spenders bear the brunt of this tax instead of workers and savers. The Brits look to have managed Brexit against the will of the globalists and we as Americans now have the opportunity to put in place a UBI funded by a VAT.
This allows the bankers to continue operating their money machines but force them to share the profits with the citizens that create real wealth.
The problem with a VAT is that it is a “stealth” tax that is added in each stage of production of goods and services, so that the cost is hidden from the consumer. Once the politicos have established a new “stealth” tax, it will be slowly but surely be used as a cash cow for all sorts of things that have nothing to do with the original intent. Prices will mysteriously rise and few will know the real reason is a VAT tax.
Most people, for example, don’t even know that the “FICA” tax that they pay (7.65% for Social Security and Medicare combined) is only half of the story. Their employer pays another 7.65%. The real tax is 15.3% of their paycheck (for all but the highest earners, as the cap is at about $133K).
The self-employed get hit for the full 15.3%, which is a considerable deterrent to self-employment. In reality, employers simply lower the wages that they are willing to pay to account for the tax. The tax actually hits employees as hard as the self-employed, they just don’t realize it because only half of the tax shows up on their paychecks and W-2 tax forms.
If this all seems byzantine and confusing, it is because the system is deliberately designed to take your money without you even realizing that it’s gone, and to spend it before you realize that it’s “lost and gone forever”.
For decades, Congress “borrowed” from the “trust fund” for Social Security and Medicare, and now there is $6 trillion in “intergovernmental debt” that Congress skimmed from Social Security and other programs. There’s no plan to pay this back – all that money was raised by FICA and other such taxes and spent on *other* stuff by Congress over the past decades, and that $6 trillion IOU is somebody else’s problem to solve.
https://www.treasurydirect.gov/govt/charts/principal/principal_govpub.htm
I’m also no fan of UBI, but that’s a completely separate issue.
As an aside, Europeans complain when they come to the USA that prices that are shown don’t reflect sales tax. i.e., they buy lunch for $10 and then a 5% sales tax makes the bill $10.50. What they don’t get is that sales taxes are at least explicitly stated as a separate item so that taxpayers KNOW what they are paying is an extra charge. A VAT tax is a sneaky way to add the sales tax and hide it from the consumer.
Ensign_Nemo,
“…and now there is $6 trillion in “intergovernmental debt” that Congress skimmed from Social Security and other programs.”
That phrase is nonsense. The SS Trust Fund has invested its cash in interest-bearing Treasury securities (they have CUSIP numbers) just like Apple (and I do that too) invests some of its “cash” in interest-bearing Treasury securities.
The only difference is that the SS Trust fund buys Treasury securities that cannot be traded (whereas Apple’s and mine can be traded). The benefit of these “non-marketable” securities is that they don’t have to be marked to market because the SS Trust fund will hold them to maturity and will get paid face value for them.
In other words, the SS Trust Fund is invested in what is considered one of the most conservative and safe interest-bearing investments out there.
Here is more on the SS Trust Fund, including charts:
https://wolfstreet.com/2019/10/13/social-security-trust-fund-recovers-a-tad-in-fiscal-2019-interest-rate-earned-sinks-to-record-low/
Thank you Mr. Richter!!
Geeeezzzzz!
Past Congresses took the money that was intended to be used as a Social Security “trust fund” and spent it on other things. They did the same with other programs too, SS is about half of the “intergovernmental debt”, but let’s discuss just SS for now.
Now – this year, 2020 – the Social Security program is expected to stop running a surplus. Congress can’t “borrow” from it and leave an IOU anymore. SS will start to draw down its “trust fund” and Congress will need to find some cash to pay off those old IOUs.
How will they get the cash? They can cut other spending, raise taxes, sell more debt to the public, or get the Fed to print money and then buy US governmental debt.
All four of those options will decrease economic activity in the long run.
Less money will spent by the government, or less money will be in the pockets of overtaxed consumers, or the debt will go up even more and higher interest payments will then decrease future spending, or inflation will spike.
Past Congresses borrowed from “the future” back in the 20th century, and during the first two decades of the 21st century, by spending, rather than investing, the proceeds from taxes that were intended to build up this “trust fund”.
Well, the future has arrived, and now the IOUs are coming due.
When I said “there’s no plan to pay this back”, I meant that there’s no plan in place to repay the trust fund money. Some combo of the four options will need to be devised, but nobody knows exactly how that will occur. Future Congresses will have to “wing it”, and they must choose some or all of those four bad options.
No, Treasury bills and bonds aren’t going to default tomorrow, or this year, or next year. That idea seems to be the cause of your objections.
This *will* be an anchor around the neck of the US economy for the foreseeable future, however.
This is analogous to a company that underfunded a pension plan for decades and “suddenly” needs to come up with billions of dollars to fill in the hole.
That “free lunch” that Congress ate in the past wasn’t free at all.
It’s not just 18 year-olds. It’s parents and grandparents who have co-signed, the middle-aged seeking to rebuild a career after a corporate down-sizing. Ignorance, stupidity, bad luck –
Good point Crush! ”Back in the day,” high school was meant to teach all the lifelong skills needed to deal with finances, etc., as well as either prepare for college or for a job that absolutely did not need college…
Few years back I was working with young college grads, several of whom did not have the ability to write or read or even spell simple words without using some digital device.
It is my firm belief that the basic problem today is the education system AT ALL LEVELS being used to deliberately dumb down MOST people, and if this is allowed to continue, we are all, rich and poor alike, going to be living in a world of poop as is apparently the case in SF today.
”Back in the day,” high school was meant to teach all the lifelong skills needed to deal with finances, etc. …
… and kindergarten got kids over the need for “safe spaces”.
I’m 73 and I don’t recall ANY financial training except HS Home Economics for girls. Nobody in my middle class neighborhoods spoke of stocks, other than they were some strange thing rich people did.
Most everyone had their 900-1200 sq ft, 1 bath, 1 wall heater, home to raise us 2-4 kids in, a car, and a SECURE job that enabled them to stay in that home till long after the kids were gone on pension/ssc. I don’t even recall paying for college as a parent’s duty, higher Ed was cheap, and K-12 was world class for most all. (Except for southern blacks, which we were unaware of till MLK.)
No shortage of educated imbeciles at “onewisconsinnow.org”
Here is how to solve the problem:
1- If you default on your student loan, you pay us back doing 10 years of military service.
2- The banks share 50% loss in the defaulting loans
Done.
Service in the military is a privilege and not a punishment.
75% of those who walk in the recruiting center are unable to join due to the stringent educational, physical and legal standards.
A private loan between a college/bank and an adult citizen should not involve the government. Period.
Done
My dad was a US vet, and went to war. It didn’t sound like a privilege to me sleeping under his half track to keep from being shelled every night.
“75% of those who walk in the recruiting center are unable to join due to the stringent educational, physical and legal standards.”
Like bone spurs? Come on.
Many go into the military because they lack direction and cannot afford post secondary. I like John Fogarty’s take on it:
Some folks are born made to wave the flag
Ooh, they’re red, white and blue
And when the band plays “Hail to the chief”
Ooh, they point the cannon at you, Lord
It ain’t me, it ain’t me, I ain’t no senator’s son, son
It ain’t me, it ain’t me, I ain’t no fortunate one, no
Some folks are born silver spoon in hand
Lord, don’t they help themselves, oh
But when the taxman comes to the door
Lord, the house looks like a rummage sale, yes
Spoken like an elitist snob.
The 1970s called, they want the draft back.
In 2020, here is a partial list of what you need to get on the bus to basic training.
You need to pass the ASVAB – a SAT type test.
You need a HS diploma. GEDs don’t count.
No behavior prescription drugs for a year.
Height and weight standards.
Pass a modified physical fitness test. 40 pu, 40 su and run a 2 miler under 15:30.
No runs in with the law. No drug offences.
Pass a criminal background test.
Pass a physical.
Pass a drug test.
And there is more.
Go to.your local HS. How many do you think would get in?
Definitely not a privilege. Probably 90-95% of enlisted recruits join because of economics. Just another aspect of socialism for the rich, capitalism for the rest of us folks.
2 Banana
Just had to point several errors in your snarky response. Also wondering what branch you served in. GED is fine. Even Felony convictions will be waived if the recruit is able to demonstrate superiority in other aspects. As to the physical aspects you mentioned, this is dependent on the branch. If you’re in the Marines you will need to have the physique and DNA to get through Parris Island. The Army, not so much. The Navy? Forgetaboutit. Of course all of these will be watered down if the US begins to need recruits.
The reality is that almost the entirety of the enlisted side of military ranks are filled with members on the lower rungs of the American economy. There they are privileged to protect the asset holdings of the true “elites”.
CAS127
It’s called globalization. When they finally get around to outsourcing government jobs to India & Viet Nam you won’t have to worry about supporting these freeloaders.
Of course you will to still live here. I guess.
Just curious folks. If we could outsource the job of U.S. President to a foreigner, who would you want?
Or…maybe….who has it now?
@2banana
Exactly. If the government didn’t back the loans, half would not have been made in the first place. Thousands of fake private colleges would shut their doors overnight. The Obama administration started to clamp down on these loan backings. Trump reversed these rules.
PS: FTA….turn those 16’s around.
@GSH
Please tell us more-
Now that you have a military with debt slave soldiers, what will you order them to do?
i will go out on the limb here and suggest pretty much what we order the current ones to do. will the debt slaves perform as well as the “volunteers?” your guess is as good as mine.
I may be wrong but don’t these loans need to be co-signed by a parent, or someone that has a bit of collateral? And if so then why are these parents signing for loans so their children can pursue a degree in some field that certainly has little guarantee of them getting a job in that area. For instance, I sign for a loan so my kid can then study Underwater Basket Weaving. Upon graduation they find that underwater basket weavers are not in high demand, so they go back to school to study something just as worthless. The circle is unbroken.
It’s very complex, and I’m sure some corruption (possibly much corruption) is involved. But I for one would never co-sign for my kids college loan in the first place, and especially not for some worthless degree. If that’s what they want to study then make them work for it up front.
A/C in SD,
People who are 18 and older can sign legally binding contracts. No parents required. Student loans are personal loans, and there is no collateral. But they cannot normally be discharged in bankruptcy court, unlike other debts.
It depends. IIRC, you can take out up to about $50k-$60k in Stafford loans for undergraduate.
Anything above that is a Parent PLUS loan that the parent has to co-sign.
There is nothing wrong with the education system (other than the usual complaints about efficacy) and nothing wrong with the economy. If you do a little post graduate work the sky is the limit really. Software has affected many high end engineering jobs. There is a glut of civil engineers being educated in India, and other places, and fewer restrictions on immigration. Our colleges are the most multi-ethnic part of America, and these people are willing to spend a lot for a little advantage, and that puts financial pressure on the system. American students have it good, they just don’t know it.
“American students have it good, they just don’t know it.”
Okay, Boomer.
Take a look at tuitions in the 50s, 60s, and 70s and inflation adjust them to the 90s and beyond.
Then compare to actual tuitions of the 90s and beyond.
Do the same for median income and employment levels.
You need to really, really, really re-think who had/has it good.
Yes, that’s when the federal government college “assistance”, Corp Globalization, HB foreigners and open borders took off.
The two extremes of modern economic theory, unfettered Capitalism and Socialism. Both create poverty among the masses. The US works best when it has somewhat of a balance between the two. Today we are way out of balance. Swinging towards Socialism seems inevitable. I just wish it would correct to the mean rather than wild swings to the extremes. Being this far out of balance is very dangerous.
The govt. backed loans could be repaid in service of all sorts…so much needs to be done.
I realize it would be like the 1930s, but those programs did a lot of good for the country that for-profit companies would never have done…the Federal Writer’s Program was wonderful.
Much of those loans will never be repaid…why not get creative?
I hope many of those who commented here have some skin in the game, so they can understand this problem closer, in-person.
I just paid off my daughter-in-law’s 6 figure student loan from my son’s (trust-like) savings in Treasuries. I did this so they can start a good life without the stress they don’t need. I also zeroed his 5 figure credit card debt and got them a new car.
If you don’t own student debt nowadays or you are not paying off someone’s debt, you probably REALLY don’t know much, other than maybe the fact the government is the lender and it does so at around 7% annual interest. If you don’t pay up soon, you can see the numbers add up fast.
My D.I.L. was not thinking straight. She had no idea how deep in debt she was. She desperately wanted that degree to get a job or career (at least she thought). In the end she was desperately assuming a NON-PROFIT would help her pay off her loans by working for them. I think my son run up a credit-card bill just so they can keep up. Dad to the rescue. I told my D.I.L. to get any job she wants, whenever, and if possible save money and replenish my son’s savings. Mission accomplished. I wish them luck.
Moral of the story, this problem is more personal than you think. Helping out is key.
That’s not helping.
“I also zeroed his 5 figure credit card debt and got them a new car.”
It’s personal. You don’t get to decide for ME.
I deploy MY money MY way.
Even though my parents could afford it my sister got a full scholarship. She’s good at books. I studied partying and got an electric pot from my IL’s when I got married after my gf got knocked tf up.
Your DIL’s story is an example of why “financial education” needs to once again be mandatory in high school.
Parents, if your kids aren’t getting a financial education from their schools, that means it’s on you to do the job. If you don’t, either you or your kids will be paying a high “tuition bill” for their initial mistakes, because it’s a predatory world.
“it’s a predatory world”
Golly, even in the socialist paradise of government subsidized higher education?…
I voted blue in 16 because the candidate promised “free” college education, and I promised my teenage GD I would help with college, which is six figures. I have sort of decided to renege on the deal, let her take out a student loan and she can pay it off when I pass and my trust kicks in. Nobody handles money, you gift em you are part of the problem.
It’s not government subsidized. They’re loans; not grants.
@Markin: the main subsidy is not to the students but to the universities. The loans make the marks (I mean, teenagers and their parents) better able to afford higher payments.
The two main differences now versus before are (a) the government guarantee to investors (= lower rates) and (b) the student debt being non-dischargeable in bankruptcy (= lower rates due to lower risks to lenders). Student loan rates would be several percent higher without those subsidies. Ask yourself what universities would be able to charge for tuition without preferential rates on student loans?
@ Wisdom Seeker
Agree 100%. So let’s call it the capitalist paradise of government subsidized higher education? Because that’s what it is.
Kitchen table personal finance:
Compound interest / exponents (6th grade these days?)
Amortized vs non-amortized payment
Forebearance vs forgiveness
Gross pay vs take home pay
Here’s an example of an online personal finance education “course” for college students:
https://www.cashcourse.org
Note: I haven’t tested this personally, but I do know that some universities refer their students here. That might mean it’s good, or that it’s slanted to favor university interested, or a bit of both.
it, at first glance, looks like the new interface for my 401k plan. and, without delving further in just now, i bet it makes it way harder for an individual to not stick with a “plan” and instead do what is right for them in accordance with their particular circumstances/abilities. one size fits all as it were.
thankfully, and for what it’s worth (hat tip to unamused on this particular subject), i know how to navigate around the pretty icons and links and dig into the handful of “investment options” the fund offers. most people, i assume, stick to the slider bars that allow them to pick how much money per month they want in some future retirement instead of paying attention to what they are investing in. the managers obviously have no interest in my best interest.
but they do let me reconfigure my allotments every 30 days or so…so i guess i shouldn’t complain.
Imafan,
Hopefully they stay married. I mean this seriously and am not taking a shot.
Markin,
You are very wrong – student loans *are* heavily subsidized by the government (and via that mechanism tens of billions in taxpayer and ZIRP expropriated monies are funneled to the political vote machines that are US colleges).
1) No non politically contaminated private sector entity would ever make tens or hundreds of thousands in wholly unsecured personal loans to non working 18 to 22 year old s regardless of field of study.
Without that DC induced blindness 75 pct of colleges would cease to exist due to irrelevancy and activity more than bordering on outright fraud.
2) The interest rates on current student loans are a small fraction of what even a delusional private sector lender would charge – that is a huge subsidy.
Simply take a look at the hundreds of billions of defaulted college loans to get a sense of the scale of just how economically unsound (and politically poisoned) the current student loan system is.
*That* is a huge gvt subsidy – aimed, as usual, at buying votes.
@cas127
Someone should post the count of congress-members who are investors in for profit degree mills. oh and what about the current sec of Ed. deVoss?
D LA,
Fine…nail the crooked private sector schools…in fact, it has been started already (after decades of corruption).
But don’t use that to deny or excuse the much, much older and much, much more expensive scams that have been going on in “traditional” colleges.
The same sort of corrupt bullsh*t has been going on in almost all “traditional” colleges – while their six figure socialist professoriate (working 6 classroom hrs per wk, in institutions charging in excess of 25k per semester) pontificate about the “capitalist” failings of every other sector of American society.
This is a tiny fraction of the student loan problem and yes, they should be shut down.
But so should degree granting programs from any institution with elevated default rates.
The majority of the problem is loaning money to anyone without any underwriter looking at the likelihood of the person being able to pay it back.
And the problem is largely a non profit and state university problem.
@happy
someone, surely, will step into the breach. probably a slightly funded pension scheme. any losses will be privatized and/or socialized, so as to not inconvenience our betters… like always, everyone is a winner!
I agree with some of your points but calling this socialism is off the mark. In socialist countries around the world a college education is free of charge. The scheme you lay out is capitalism in action. Big money gets bigger (mainly through a series of tax cuts, deregulation & globalization) and that accumulation provides access to the political system. Essentially the purchase of government who in turn provides access to the various revenue streams it controls. Calling it a subsidy is not accurate. It is a well designed, thought out mechanism for mass wealth transference, further impoverishing those on the lower rungs (and capturing greater & greater segments of the population as it plays out) while enriching idle investors. Of course these investors have managed to pack the courts with sympathetic judges and local legislators as well.
Hence they can get laws on the books that don’t allow bankruptcies or renegotiating rates (as say everyone does to their mtgs.) on student loans.
People write that this is not really capitalism but that’s exactly what it is. Pure capitalism is ultimately a predatory system where the most ruthless, cunning and amoral will end up with all the marbles (monopoly?)
That us why this fake argument of capitalism vs. socialism is for people who live in their heads. The US has, since the 30s at least, been a combination of each. When in balance, the 50s and early 60s for instance, America was a great and powerful country with opportunity for most. As it has diverged from that path, it has become an oligarchy.
But I feel your pain.
I hope they are grateful for what you did. If not, cut ’em off.
Wolf,
I think your report would have been much clearer if you could separate total debt owed into the principle and interest piles. If the borrowers could just pay back the principle, the pile would probably be very small. A bailout of the system should probably only rollback all the interest, most of which was tacked on at over market rates.
Petunia,
With decades of malignant tuition inflation, the amount borrowed (before any interest) is far, far, far from small.
Petunia,
Accrued but unpaid interest that gets rolled into the principal amount that is outstanding would certainly be an interesting data point to have, but I don’t have it :-]
Meanwhile, the federal government, which borrowed the money to fund the student loans, has to pay interest on those Treasury securities it issued to fund the student loans. That interest expense is part of the total interest expense (about $580 billion in 2019) that the US government pays. So it’s not a freebee.
Yes, the money is not free. However, when the last president reset the rate, he did so at a much higher rate than the long bond. I think it was a multiple of the long rate. Some actions are stronger than words and fester in the memory.
“has to pay interest on those Treasury securities it issued to fund”
Wolf, oh would that have been true…
Just kidding.
But it is a fine measure of the certainty of the US’ economic death (thank you DC scum sucking bastards) that with the US paying a ZIRP debased interest rate of 2 to 3 pct on long debt, just the *annual* interest pmts total 580 billion.
*That* is the true size of DC’s cancerous accumulation of debt.
In the 90s, non ZIRP long rates were 7 to 8 pct (or about 3 times what they are now).
If those rates were ever allowed to return (DC stops printing money to cap rates – by defrauding savers) DC’s annual interest payments would *triple* to about 1.8 trillion or about 1.2 trillion more than today.
And DC would cease to exist.
So at this point, DC will commit any crime to keep that from happening.
Always remember – the government is not the people.
just be happy you live in the shining city upon the hill. otherwise you would be subject to negative nominal interest rates. plus, most likely, fees,
The debt has increased because a borrower may go into Income Based Repayment (IBR). In that situation the loan continues to accumulate interest, (if it is not a subsidized loan), your payment may be as low as zero dollars or whatever the calculation determines it should be. The payments are usually low enough you barely cover the interest not touch any of the principle. Once you leave IBR, you must payback the accumulated interest before your payments start drawing down the original principle. While it may give some breathing room for the borrower it is a scam to keep people in debt. Of course, they will use this to take your Social Security in your old age.
Only a fool pays debts. Why payback the money you’ve borrowed; why pay back your friends; why payback your parents; why payback your country. If previous generations had thought like this, we wouldn’t be debt-slaves we would be real ones.
Kk,
What you are saying is true…
But many in those “prior generations” are part and parcel of utterly corrupt institutions (both public and private sector) that have grown fact by lying to the younger generations actually on the hook for debt.
Prior generations – some honorable, some cannibals.
Fat, not fact…
sensible people repay sensible debts:
what will the others do?
Lisa_Hooker
I hope your not suggesting that people who want their pensions funded are irresponsible?
There are several reasons this is happening and a lot of it has nothing to do with those who may not get their pensions.
@timbers No, not at all. But I do think that they should have kept a better eye on the fund-er’s shinanigans, year by year. Too much trust on their part. They’re just now waking up to the fact they’ve been lied to by the politicians and some fund managers. Now it’s falling apart, and in no small part due to the federal reserve interest rate management of the past ten years.
I have a solution:
Cut our military spending bout 90% – where it should be.
Use some of this to fund non private, non for profit, educational institutions…put the public back into public education. Like it used to be.
Shrink the financial industry. Think of finance as grift – just like for example health insurance, a fundamentally defective product. It is being used in ways that hurt not help us.
Also enact 2banana’s suggestions:
1. Get government completely out of the student loan business. No guarantees, no loans and no scholarships.
2. Allow student loan debt to be discharged in a bankruptcy.
3. Enforce GAAP and fraud laws
Sounds like you are talking out of both sides of your mouth.
The cause…….once unlimited dollars flood into the system the greedy get to work taking more and more……salaries way out of wack……college football coaches taking 8 million per year…….administrators taking millions to administer a state budget. The kids demanding dorms that are like mini country clubs. Multiple degrees. Secretaries getting degrees and companies demanding a degree for typists. All paid for by the parents, state budget, loans, kids and financial aid that floods money into the system. No cost control.
The more cash that floods in the higher the cost.
Interesting…..the same folks that teach, lecture and write books about greed in the capitalistic system are first in line to grab whatever they can get when the chickens are unguarded.
I have one private loan I took out – $22,000 to pay for a full year of school when my parents divorced and I was without anything and nearly finished with the degree. I’ve paid $180 a month on it for nearly 10 years – but my balance is only down to $14,000.
The loan has been sold to at least 3 different lenders, and every time they do, I am not informed for months (which interest accrues, and I never know who to talk to set up payments). Having worked mostly contract engineering jobs – every time I am unemployed between projects, the loans automatically put themselves into deferment, and I am not allowed to make any payments (and interest goes up yet again).
As far as I can tell – I’ve paid nearly $20,000 on this loan over 10 years, but only reduced my principal by $7,000. Just paying minimums I have at least 7 more years of payments – but given my current contract appears to be reaching its end (the project is nearing completion), I will once again have to deal with finding new work. I used to pay at little extra, but every time the loan sold, they just recapitalized the interest and it was for nothing.
Just freeze the interest rate at 0%. I’ll pay back the damn money, but when we’re drowning stop holding our heads underwater. If you’re super generous allow loan repayment pre-tax in lieu of 401k. Otherwise, I feel like a chump actually paying – while 50% are in deferment, and 25% are in income-based repayment (which locks you into low income). I feel like a fool in the 25% actually paying for even trying. I’ve paid off some of the smaller ones, using the Debt Snowball, but man the large balances get away from you so, so quickly.
Your situation is the average case from what I can tell. I know someone who works for the federal govt, but doesn’t qualify for their student loan repayment benefit, because they consolidated their loans before getting the job. They have worked for the govt for almost twenty years and still owe $50K+ on student loans. The system is crazy.
“Just freeze the interest rate at 0%.”
Absurd. You borrowed money. Now pay it back according to what you agreed to. Stop demanding freebies.
TheDreamer,
(hi, been a while). Just doing the math here. At 0% interest and making a monthly payment of $180, it would take 10 years and 2 months to pay off your $22,000 loan. At 5% interest, and $180 payments, and no periods without payments, it would take you 14 years to pay off the loan. So yes, interest makes a difference.
If you buy a new car today at the average transaction price of $35,000, and finance it at 5% over 72 months, your payment would run about $680 a month. And that’s just a car that becomes worthless after a while. Your education sticks with you. It’s for life. While degrees have a limited shelf life, what happens to your brain when you learn, that’s a lifelong asset that no one can take away from you.
Question: how about charging the same interest Chase in paying my mother on her hard earned savings…about .09 % something interest? And then index the rate.
Answer: become richer. you will have little need of “rates’ or “indeces.”
As I said above, it’s a predatory world. Interest payments are like parasites, but instead of eating your lunch, they eat your loan payments so you don’t benefit.
“Minimum payments” are a bankster scam to keep you stuck on their interest treadmill as long as possible. They want you paying as little principal as possible, so you don’t kill their parasitic infection of your budget.
Every project you do, every job you take, they will take a cut until you finally get smart and decide to do whatever it takes to pay it off.
You just said you’d paid $180/month for 10 years. If there were no gaps, that’d be about $20,000 in payments for the privilege of reducing your balance by $7,000. The other $13,000 – how many hours of your hard effort – you fed to the parasites. They love it when you do that!
On the other hand, if you had squeezed your budget harder, or found a few hours of extra work each week – whatever it took to double the minimum payment – you’d have been debt free years ago already. And the interest parasites would have eaten less of what you made.
Don’t ever settle for “minimum” payments. If you survived the divorce and fought your way through to complete the degree, and survived the economy of the last 10 years, you can do this too! And now is the time, before the next recession hits and everything gets tough again.
I would dare say that most students who take out loans have zero understanding of loan amortization tables or how compound interest works. Same with most Americans. And so student loan holders are mystified to find that they can pay off the original loan amount but still owe so much more, or step away from paying only to see the loan balance balloon. Lots of ignorance with a healthy spoonful of magical thinking.
Young-adults’ lack of personal finance skills also plays out on auto dealer showrooms where the marks (I mean, prospective buyers) are frequently asking the dealer (!!) to find out “how much car can I afford” (!!). Instead of doing their own math.
I worry that the mindset cultivated in schools – always defer to your parents and teachers, who have your best interests at heart – leaves a lot of students unprepared for a world in which the adults do NOT have their best interests at heart. Kids need to be taught how to defend themselves against financial predators.
Schools charge whatever they want since they know govt backed loans will provide whatever they charge. Get the govt out of student loans and tuition drops 50% the next day.
I had about $15K of student loans when I graduated in the late 90s. Paid it off in 3 years. God, I was such a sucker.
Anyone who pays their debts be it home loans, student loans is a chump in the new America. Responsible people get punished while the irresponsible people get rewarded. And still the ones getting rewarded complain it isn’t enough.
Jeff Bezos, Bill Gates, Goldman Sachs partners and other billionaires met with Jerome Powell, and members of the Trump MAGA family at Jeff’s newly remodeled D.C. mega mansion last night.
Maybe to discuss raising interest rates and helping savers ? Not good for future student loan debt holders.
Annual Alfalfa club dinner. In addition to passing a straw vote on higher interest rates, Ivanka said she wanted her father to retire :)
Wolf – I agree the major problem with student debts is principal is not being paid down, but I’d like to offer an alternate reason for this phenomena.
What’s seldom considered about student debt is the possibility that current university education costs are higher than what many graduates will be able to repay during their subsequent careers. It’s not rocket science to figure out a loans amortization, which combines its principal and interest into fixed monthly payments, that will pay off this loan over over a fixed period of time. If many of the people who take out these loans cannot make these installments, without extending the loans maturity to a date which is longer than they will live, then this loans principal is obviously too high for many borrowers and cannot be repaid. Keep in mind that current interest rates cannot get any lower. According to Bloomberg:
https://www.bloomberg.com/news/articles/2019-08-16/you-may-be-dead-before-you-pay-off-your-student-loans
“though they’re meeting their $1,300 in required monthly payments, their balance has remained roughly the same over the last year because Vicky’s outlay doesn’t cover all of the interest on her loans. For all their education and career success, the Wilsons can’t envision repaying their school debts—ever. And forget about buying a home or opening a college fund for their 3-year-old son. “We don’t even think about it,” Jon says”
and
“few know that this generation of borrowers is chipping away at their debt so slowly that some may not escape it until they’re dead. That’s the grim assessment of a new Bloomberg Businessweek analysis, which found that U.S. student loan borrowers as a group are paying down about 1% of their federal debt every year. It’s as if a former student were reducing the balance of a typical $30,000 college loan by only $300 annually. At that rate, it’s almost unthinkable how long it would take to repay the government: a century.”
I think the current average tuition is $9,970 a year for in-state public colleges ( $39,880 for 4 years ), $35,830 a year for private colleges ( $143,320 for 4 years ), and at the high end $47,074 a year for Harvard ( $188,296 for 4 years ). Universities arbitrarily decide these prices which grow at a phenomenal pace each year and which have little to do with either their cost of doing business or the burden of repayment.
https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/05/Income%20vs%20tutition.jpg
A universities costs on the other hand are all heavily subsidized by our government. Lets not forget that many universities earn revenues from their endowments that are larger than what they earn from tuition, and these endowment pay at most a tax of 1.4% on their net investment income, and these universities are exempt from federal taxes, state taxes, local taxes, property taxes, they are often the largest landowners in their community, they can issue tax exempt bonds, and they receive tens of billions of dollars per year in federal research funding.
Maybe its time for universities to lower their tuition costs. The most expensive accredited universities are supposed to be non-for-profits anyway.
@Iapetus –
The all-in annual cost for top-tier universities is actually $75,000 or more. In addition to the tuition payments (your numbers look about right), most students live on campus so they are paying room-and-board costs. Then there are mandatory fees, required textbooks, and a few other expenses.
The metric to search for is “Cost of Attendance”. Each university is required to generate this number (with the breakdown of items I listed above) and report it to the FedGov, so there’s a good comparative database.
I don’t have any stock positions or anything in Salliemae. The bank offers good rates in money market and savings compared to the treasury bonds. compounded daily paid monthly. I don’t know how they give so much ;-)
I think during Boomers time, the tuition was low, wages were high enough to support on the part time job. Also government funded the education a lot. Now, The funding is reduced because students are expected to pay themselves. Unless government steps in, the tuition rates will be high.
If the democrats capture power again, student loans will be forgiven!
Reading all these posts I’m both offended and inspired. There’s one serious issue that we almost NEVER have about education and student loans.
Going to college should not be, and mostly is not, about making money. It’s not about pragmatism. When “how much it costs” and “how can I pay it off” are the major part of the decision of going to school, you see:
1) A a huge drop in attendance.
2) A big gap in who goes and who doesn’t based on the financial situation of the parents
3) An overall less educated population, which can have a big affect on every aspect of our society over time.
We have to do something about the costs because it’s completely changed the discussion of what school is about. The true cost is not in some student loan number – it’s in what our society loses when a better education is about a financial decision rather than a dream of self improvement.
Now we have parents telling kids not to go to school because it’s so expensive. We have parents having to work 2 jobs to pay for their kids college, instead of spending time with their kids.
FYI – I’m a child of middle class parents who couldn’t afford to pay my education. My wife came from a very poor background. We met at grad school and combined have 250k in student loans.
Is it expensive? Yes
Does my loans affect my participation in the economy? Oh yeah.
Did we know how expensive it would be? No
Did we work during school? Yes
Do I regret it? Not for a second.
Would I go back and change it?
It would mean changing who I am – no way.
Will I pay my loans off?
I will make loan payments long as I can. But because of interest and the fact that I need a roof over my and my kids heads, I may never actually pay the off.
One loss you did not mention is emigration. Some graduates, with little accrued Social Security credits, are simply leaving the US and ignoring the loans. The US is not only losing brains they are losing taxpayers. A US passport is not what it used to be.
My friends daughter just started college in the Netherlands paying one third the cost (1/3!) of a similar degree in the US and will be done in three years instead of four because the colleges there don’t pad their bill with required underwater intersectional man hating electives and indoctrinating political grievance studies.
Same thing with medical services. Much cheaper out of the country.
Let the kids declare bankruptcy. It’s obvious they are the victims of predatory lenders who sold them a dream on credit. But forgive their loans? Heck NO!
Banks need to eat their bad loans… one day.
Blows my mind that people pay for a professor in an auditorium to repeat the same lesson ad nauseum. All they do is cut, copy, paste, and regurgitate the textbooks provided to them; professors don’t research, they collect rent through intermediaries.
Now that mainstream knowledge is essentially free and distributed on the internet just for asking, there is no use for the massive redundancy of eggheads singing the same song every semester and charging exorbitantly for reruns.
Where is the online university that hires the best minds to give their best lecture and pays them with royalties on test fees? There is no rational solution like this because this is America, and there is a dream. Buyer beware.
The infrastructure of testing facilitates is already in place. Take the best lecturers, cut copy, paste, then post online. Give them a royalty.
Of course this would cut out JPM, the main servicer of student loans through sallie may. That would be such a shame.
Think of selling the same “knowledge” over and over. Schools are rehypothecating knowledge and re-billing poor children for something already said.
It’s the same thing as selling the same mortgage more than once which brought us to this curreent situation of rehypothecating everything and hiding that fact.
For proof see the Fed purchases of MBS where the chain of title was deliberately broken on real estate transactions. Every MBS on the boks of the Fed is a cover-up.
Turn education into a podcast. Define the parameters of a body of knowledge. Let those eggheads sell that knowledge and charge students for a certificate of proficiency from a testing center and give the content providers a cut on the revenue stream from monetizing the test fees paid by students desiring certification. Watch this liberate and enrich the worthy professors.
Also, think about the term, “professor,” for a minute.
A professor is one who declares, or professes statements.
Whose statements are those?
Let the best professors become podcast rock stars. If their words have worth then put them on the market and let the market decide. They could be enriched, or promoted, by a democratic acceptance of their ideas as expressed in something as infantile as a “like”button, which is easily manipulable.
There are several avenues to monetize content and much of what is taught, I mean professed, in college, is in the public domain already. Let the best describer win!
An online free college of democratized common knowledge could reward the effort of orators, innovators and independent thinkers, if they were judged on downloads with certified downloads and certified testing.
You can see the problem here. Who controls the testing?
The higher education system is all about gate-keeping of information. Who has an interest in that?
Once upon a time I offered an opinion at a public meeting and a lady asked “Are you a professor?”
No ma’m. I’ve professed a time or two but I’m not a professor.
“Banks need to eat their bad loans… one day.”
Which of course will result in pension fund investment returns declining and more older folks needing more government support.
The real question is”Why has the cost of college zoomed so much ?
The answer is complicated but leads directly back to government regulations
For example among the fastest growing positions ( numbers and in dollars) are diversity officers at universities .
Why has the cost of college textbooks zoomed? Because the textbook manufacturers know that the government will guarantee all college costs
Anybody want a free college education? Just do what I and millions of others have done……sign your name to a contract for 6 years of service. Free tuition, room and board, books and a living stipend.
Oh……yes you have to work for it…….its not a handout……..sorry…….
What a unique concept to our current attendees……work for it.
There is little value to personal or societal commitments nowadays. The Fed prints money to serve unspeakable goals . Congress creates $1T+ deficits and continually increases its debt/GDP ratio to avoid tough decision-making. The political system and tax systems are skewed to support the top 1% because of money in politics. Jobs get outsourced without hesitation to increase already high corporate profits. Big banks and tech companies are allowed to create mega cash flow for executives and stockholders via oligopolies or practical monopolies that stifle job growth and competition. Meanwhile, the media puts all the corporate and government thieves on a pedestal.
In this environment, is anybody surprised when debtors look for excuses to relinquish their debts? It would be more surprising if people honored their debts.
The first step to get rid of the student debt, is to prevent new students from piling it on. There would almost definitely have to be greater state subsides; but, it’s important to remember that the original purpose of state universities is to make their prospective states better off, by increasing the number of people who are scientists, doctors, or have other important knowledge.
Right now one of the main issues plowing high school graduates towards college is that, a large amount of jobs available require college diplomas, even though the job doesn’t have any real need for it. If you’re curious just trying looking up jobs in your local area and find out how many require a college degree for basic office work. They often even say associates of arts or bachelor of arts/science degree required, it doesn’t matter what the degree is in. This is why some students, though not most get a more ridiculous degree. Any degree gets them most jobs in America, in the past not many people had college degrees and they would instead just take a high school graduate and train them for a little while.
The government is the one who enforces debt, which also means the government has the ability to establish the validity of each type of debt; the federal government needs to scale back the size of loans that can be given to students or replace them with something else entirely. A better option might be to charge a small fee each semester, and then to charge a percentage like 1.25% of your income for each year of college for 10 years after graduation; something like this could also be retroactively offered to people with student loans, instead of paying their current balance they will just give up a fixed percentage of their income instead. The states then will have have to decide what degrees to offer and how many people can get to enroll in each degree. The state needs to be the one to set aside the bulk of the money needed to put people through universities.
As a side note, many young people often dream about traveling the world, instead of going to college, in the past it was usually in addition to going to college or as a part of study abroad program. Also all the talk over the last 10+ years about how college isn’t always worth it, has certainly killed a part of the appeal.
We are the live well below our means types; no mortgage, car loans, or any loans whatsoever for the last 12 years. Have two daughters 29 yr old and 22 yr old. Both with bachelors degrees at the top of their class from in state (NC) public universities. We paid all expenses (with some college fund help from my equally frugal parents). Our daughters have no debts.
While their degrees were not the most marketable, they are both extremely hard working wage earners and savers, all from day they were “babysitter” age. Savings balances are what they think about, NOT credit scores!
Hey, life’s good…just take out a loan! Someone I have known since grade school leveraged student loans thru graduate school (theater). He (51 years old) now owes over $200K and is in servitude.
1. Government guarantees student loans
2. Debt cannot be extinguished in bankruptcy
3. Thus, no risk to lender
4. Therefore, lender will lend any amount to anyone with a pulse for any useless degree
5. College costs naturally rise to what the customer can bear
Accounting for the Rise in College Tuition
Grey Gordon, Aaron Hedlund
September 28, 2015
http://www.nber.org/chapters/c13711.pdf
Excerpt:
“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
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf
Study: Yes, Student Loans Are Making College More Expensive
Driving up tuition prices.
Robby Soave|Aug. 3, 2015 4:54 pm
http://reason.com/blog/2015/08/03/study-yes-student-loans-are-making-colle
Student Loan Subsidies Cause Almost All of the Increase in Tuition
Monday, December 21, 2015
https://fee.org/articles/student-loan-subsidies-cause-almost-all-of-the-increase-in-tuition/
The Bennett Hypothesis Confirmed — Again
21 Jul 2015
https://www.forbes.com/sites/ccap/2015/07/21/the-bennett-hypothesis-confirmed-again
Winston – you nailed it! Thanks.
There are degrees of debt. Owe a mobster or drug dealer money and the collection process can be quite brutal, even lethal.
Government debt too can be quite stern. The IRS won’t fool around with excuses or attempts to stall. They’ll seize your money.
Even down at the county courthouse failure to pay court ordered debt can lead to your arrest and revocation of your drivers license. The judge doesn’t want to hear about ‘income based’ payment plans. He wants the money so his paycheck doesn’t bounce.
Why we make student loans any different is my question. I’d rather let Mr. Jones slide for a few weeks to pay his traffic ticket than let Mr. Jones put off paying thousands in student loans for years.
Unit472,
The problem is very simply young people are compelled to get a college degree to make a living or do the jobs America needs to function. In the current system it’s impossible for the vast majority to get that degree without student loans. It’s not the same as being irresponsible. Some, but less and less young people do well without one. What do you think America is gonna be like if young people are afraid of racking up debt and the number of scientists, engineers, doctors, and many other things plummet.
@Otishertz
you are right about the over priced cost of college education in USA & that European college costs are much lower!
My daughter is now studying Post Graduate MS Degree in Physics (hopefully get in to Phd next year with no fees + 1200 euro /month salary stipend) ) in Germany in a prestigious Govt funded college in the state of North Rhine-Westphalia.
Tution is almost free -315 Euro per 6 month semester including free transport bus/trian semester ticket (with in the state)
But foreigners have to show upfront 1 year funds proof of Euro 800/ month to cover hostel/ food/med insurance etc.
We spend total 10,000 Euro per year on her (she is not looking for any part time jobs & focusing on studies)
@NBAY
I graduated in a Degree in Chemistry 1975-79 (organic chemistry was my stong suite) . I got a partial free grant instituted in the Chemistry Dept of my college+ 4 year Govt Loan scholarship (no co signing as the amount was not so big). I stayed at my grandmas house (3km near to college) & went to college as a day scholar by bycycle with packed lunch from home!
Out of college My first job was as a Medical Detail Man with the pharmacetical firm Hoechst AG. ( with 3 months vigorous training ) The pay +travel allowances was much above market at that time in my country.I stayed at Hoechst for 5 years & later climbed the ladder in a new field at AMEX.
I forgot about the college loan scholarship & later moved to a different country. In 1991 (after 15 years) my younger brother was informed of a court final notice that was pasted at the local area court notice board with my name as a loan defaulter . I was earning very well at that time & the loan overdue interest amount was very very nominal. I wired my brother the full loan amount with interest etc & he made a cashier’s cheque & cleared the loan+interest outstanding in one shot. Given that my parents were in a poor financial state during my college days , I would not have got the college degree with out the loan+ free grant scholarship.
Curious what your feelings are about the massive direct to consumer drug advertising. Not just the usual OTC junk, but the RX stuff.