Monday, August 9, 2010

Massive student loan time bomb

The WSJ reports today that total outstanding student loan debt has for the first time surpassed the total amount of credit card debt held by Americans. Isn't this great news! Finally people have stopped wasting their time and interest payments on meaningless consumer goods, and have started "investing in themselves" and improving their lives through education!
Americans owe some $826.5 billion in revolving credit, according to June 2010 figures from the Federal Reserve. (Most of revolving credit is credit-card debt.) Student loans outstanding today — both federal and private — total some $829.785 billion, according to Mark Kantrowitz, publisher of FinAid.org and FastWeb.com.

That is just swell, and because Americans seem to have no trouble keeping up with their crushing credit card debt payments (lol), I'm sure there will be no negative implications for this massive pile of student loan red ink. After all, the debt is disproportionately held by young people with low incomes who are having a hard time finding work. It should be no problem at all that unemployment is highest for the 18-29 year old crowd, which also is the age group most likely to have student debt.
[T]here is $605.6 billion in federal student loans outstanding and $167.8 billion in private student loans outstanding. He estimates that $300 billion in federal student loan debts have been incurred in the last four years.

$300B in the last four years? They always said that in a recession, kids would flock to all forms of higher ed to take refuge. How many millions of unemployed people are delaying the pain and making it easy for book cookers to continue claiming unemployment is lower than it is? What happens when students have racked up a B.A., J.D., M.A. and a few other degrees for good measure? We're going to have the most overeducated panhandlers in the history of the world showing up on the streets.
Student Loan Justice, a Washington State-based student loan advocacy group issued a statement on the student-loan eclipse, estimating that media coverage of credit cards exceeds coverage of student loans “by a factor of approximately 15-to-1 based on unscientific news surveys conducted since 2007.”

But student loan debt, in many ways, is different than credit-card debt. These loans typically can’t be discharged in bankruptcy. They have different repayment terms, some of which can catch some have heavy consequences for borrowers who miss payments and borrowers’ families.

No news here. The perils of student loan debt, especially the inability to get it discharged in bankruptcy, and its penchant for giving doctorates and attorneys a standard of living similar to that of Chinese coal miners, are well documented. What is the natural response to this ticking time bomb of student debt, a trend which will only accelerate given the horrible economy, lack of prospects for young people, and dump-truck loads full of readily available federal loan money?

Bob "Disgusting Shill" Herbert over at the New York Times suggests that we all need to double-down on higher education! The U.S. lags New Zealand and other developed countries in the percentage of people with college degrees! (Oh lord.) The ONLY solution is to sign up as many 18-year-olds as possible for higher education and get them on the hook for $40,000 a year in federal loans. Otherwise, we may never see the benefits of having a highly-educated populace that countries like Belarus enjoy. Says Bob:

At a time when a college education is needed more than ever to establish and maintain a middle-class standard of living, America’s young people are moving in exactly the wrong direction. A well-educated population also is crucially important if the U.S. is to succeed in an increasingly competitive global environment.

According to a new report from the College Board, the U.S. is 12th among developed nations in the percentage of 25- to 34-year-olds with college degrees. The report said, “As America’s aging and highly educated work force moves into retirement, the nation will rely on young Americans to increase our standing in the world.”

When this is the educational environment, you can say goodbye to the kind of cultural, scientific and economic achievements that combine to make a great nation. We no longer know how to put our people to work. We read less and less and write like barbarians. We’ve increasingly turned our backs on the very idea of hard-won excellence while flinging open the doors to decadence and decline. No wonder Lady Gaga and Snooki from “Jersey Shore” are cultural heroes.

Yes, Bob, the country is going to hell in a handbasket because not enough youngsters are drinking the Kool-Aid and plunking down tens of thousands of dollars for useless undergraduate degrees. This economic crisis and "failure to put people to work" is certainly the fault of a lack of education. Shunting millions more off into universities and shackling them with debt will definitely create jobs and solve all of our problems. And yes, it is definitely the fault of the Jersey Shore crew that young people today are supposedly so goddamned stupid.

I would propose that your average 18-25 year old is rightfully skeptical of higher education. On the one hand, everyone with a pulse goes to college. I don't know a single person my age who doesn't have a B.A./B.S. (Okay, maybe the guy at the gas station. Actually, he probably has a PhD.) When people graduate from college after having shelled out 25, 50, or 100 thousand dollars, only to return home, move into their parents basement, and cut lawns or work a cash register for minimum wage, I can only applaud those young people who are smart enough to avoid college. College, quite simply, is not for everyone. The value of a degree is so diluted, with so many tens of millions of students, that it imparts no particular value outside of a very narrow and elite set of advanced science, economics, or other specialized degrees from a handful of prestigious schools.

Young people taking a hard look at college and deciding to forgo the "experience" is a positive trend. If your parents are footing the bill, or if you're a genius who plans on getting a glitzy degree from a top Ivy program or MIT or something, then you probably will go. For the vast majority of us, who were told we needed to go to college to become "marketable," to learn, and to "grow," this has proved to be a pretty lie that has brought most people nothing but economic hardship, a diminished sense of self, and a lack of faith in our nation's once-vaunted educational system.

So, on this day when we toast the rise of The Student Loan as the new consumer debt god of the American people, let us also remember and salute those bright and clever youngsters who were not enticed by the fairy tales and promises of the good life, who forewent those boring lectures on aboriginal toolmaking and hegemonic heteronormativism, and are chugging along making the same hourly wages as the college crowd. That is, if they're not all unemployed like the college graduates.

Post Script:

There will always be blowback from the folks who refuse to believe that higher education isn't "worth it." It's easy to be skeptical and critical, and to lie through your teeth and put a falsely-positive spin on things, when one has no skin in the game. When one sees articles like these that draw heavily from the comments of law school staff, TTT administrators, and legal industry apologists, they cannot be taken seriously. When the stories from students and graduates in the trenches are so different and blearly compared to the upbeat forecasts offered by these shills, something is amiss. The question is, which side will prospective students believe? Tread warily.

10 comments:

  1. Now, THAT is depressing news - and illustrates the pressing need to make student debt dischargeable in bankruptcy. After all, the schools lied about their employment figures.

    Bob Herbert is a fine example of a mindless automaton at work. He spews forth garbage, based on his limited understanding of the real world, and posits it as if it were PROFOUND truth. In the process, he seeks to indoctrinate the next generation.

    This is sheer folly, at a minimum - and unethical at its core. For instance, if everyone had a college degree, how valuable would this asset be?!?!

    The higher education industrial complex pushes full steam ahead, because of belief. It is a house of cards, in the final analysis. The industry has its "journalists" and policymakers and politicians to promote the faith. The reality of the situation is that college is not worth it, for most of us. You CAN find a job making $35K-$45K without taking out $140K in loans. Yes, you may need to work your way up and make some connections along the way. But that has always been the case.

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  2. The thing that makes me wonder the most is if non-dischargeability allows the banks to keep toxic loans on the books forever? As is this bubble wont pop (which is downright frightening) but a change in the laws can totally pop the bubble.

    Hey, since the non-dischargeability law is retro-active

    In re Lewis, 506 F.3d 927 (9th Cir. 2007)

    then conceivably it can work the other way. Time to lobby :)

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  3. Aha! That means we're just about at the end game. The mass defaults are right around the corner. I can't wait!

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  4. Time to bail out of the USA. This is going to be bigger than the housing bubble.

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  5. I wouldn't call Bob Herbert a "disgusting shill." Some of his columns reveal a sympathy for the excluded that most establishment columnists do not share.

    Education is normally a virtue. Having an educated populace is normally a matter of pride. It turns into a problem when universities and creditors destroy students' financial future, or when universities deceive applicants.

    Let's compare education to housing. Owning your own home is normally a good thing. Predatory lending and ripping people off are not good things.

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  6. Bob Herbert lives in his cotton candy 1962-based fantasy delusion where all tuition is extremely cheap, and 99% students graduate with zero debt and don't owe Sallie Mae a dime.

    The rest of us live in the brutal, vicious reality of 2010, where 99% of students are sold into slavery.

    Bob, please leave your coma-induced dream state and join the rest of us in massive educational debt.

    Then, and only then, will you understand the truth about college and graduate school.

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  7. Another excellent post. I saw this mentioned on the national news last night--that the U.S. is now 12th for the percentage of people earning college degrees. So what!, I thought. We don't have nearly enough jobs for Americans who have college degrees now!

    Of course, our mindless news pundits and politicians want to address the problem of our being 12th in the world--by producing even more heavily indebted college graduates for non-existent jobs.

    Perhaps the Machiavellians in Washington are hoping to reduce the unemployment rate by sequestering yet even more unemployed people in the universities.

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  8. Some degrees are worth it. You can't be an engineer or an accountant without a degree. But if you have a two-word degree, where the second word is 'studies', you are screwed.

    ZT

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