Do Student Loans Make Eduction Affordable ?

You just assumed they did. It turns out to be a far seedier picture, if you ask College Scholarships.org!

Jess Bachman, who did several of the fantastic illustrations for Bailout Nation, turns his attention to this infographic of the scam that is Student Loan collections:

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click for ginormous graphic

Category: Credit, Digital Media, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

52 Responses to “Student Loan Debt > Credit Card Debt ?”

  1. Mannwich says:

    The new economic paradigm! Debt slavery ad infinitum. The new feudalism fever. Catch it!

    Seriously though – there’s NOW already more quality online material out there than most university classrooms in this country today. You just have to sift through all the worthless diversionary stuff first but it’s well worth it.

  2. much to “Mannwich”‘s point, nothing like a *healthy debt-load to narrow one’s options/bring “the Wolf” closer to one’s door…

    it’s part of the real *beauty of the, long on-going, Corporate consolidation (S&P 500-ization) of the American Economy..

    makes it that much easier to promulgate ~rules: “Degree necessary”, that, actually, limit the options of the great many..

    “The new feudalism fever. Catch it!”
    x2

  3. AHodge says:

    who do i short? i guessed there was trouble when the govt started kicking out lenders that had a less than 35% rate of current payment, nondefault?

  4. Kort says:

    Seeing how wise and savvy the government has been with the school loan program since 1965 gives me great hope about the health care ‘reform’. Can’t wait.

  5. scharfy says:

    These millenials are gonna be PISSED when they keep coming out of Wothless U with a degree in Behavioral Worthlessness and 85k in loans that stay with you for life, and 15% real unemployment.

    But then the fixing can begin. To my eyes, college on the whole as we know it is largely an exercise in inefficiency. Not alot of bang for the buck. Mostly you get taught compliance and how to get “a job”. BAD, BAD proxy… Such a baby boomer mentality. Wasted potential as far as the eye can see.

    Anyway,

    So I’m taking an online brush up course in stats from MIT right now. For the price of FREE. http://ocw.mit.edu/index.htm

    And learning really bad Russian for an upcoming trip here for free..
    http://www.livemocha.com/

    And one can even find sorority girls online, but that’s still a paid experience……
    (sorry had to)

    Every cloud has a silver lining.

  6. Mannwich says:

    So true, Hoffer. It’s laughable to see how many crappy jobs require some sort of a degree when basically a well trained, compliant monkey could do that very same job. Kind of like trading, I mean, “investing” OP mutual fund money.

  7. freejack says:

    Can’t find a link right now, but on WNYC (NPR) radio today – a discussion on student loans and for-profit colleges:
    for-profit college students are 10% of all college students.
    for-profit college students account for 25% of all federally guaranteed student loans
    for-profit college students account for 44% of all defaults on guaranteed student loans

    So, you graduate – get a job – and still can’t afford to pay off your student loan? ……..sounds like a bubble to me.

  8. “Kind of like trading, I mean, “investing” OP mutual fund money.”

    Mannwich, too true, sadder is that it’s Mr. & Mrs. MutFund (di-)vestor’s own cache that’s funding the roll-ups that are promulgating the ~rules that are limiting the options of their own ‘spring…

    “Ya gotta luv it, When a plan comes together~”..

  9. tenaciousd says:

    Thanks to a rift in the space-time continuum, I received a full-ride academic scholarship to a small Midwestern liberal arts college, which was a fine school but of no particular renown. It wasn’t till some of my classmates neared graduation and began bemoaning their $30K to $40K in debt that I truly woke up to how lucky I had been. (The school is now three times more expensive that it was in the early ’90s!) I mean it was okay, but I could never recommend going $100K in debt for it nowadays. I have professional peers who–at age 40, mind you–are still many tens of thousands in debt for college. I don’t know what I’m going to tell my young son, but I’m going to send him headlong into debt.

  10. DeDude says:

    The 25% collection fee and 28% commission is just plain outrageous. There is no way you can justify that kind of compensation for something as simple as collecting a student loan in default.

  11. tenaciousd says:

    …not going to, that is…

  12. Mannwich is right. A college degree is hardly required for most jobs. Very few people actually use their brains for much at work, and that even includes vaunted professionals like lawyers and doctors. Think about it for a moment. Does a heart surgeon really need to know much of anything about the heart except where to properly cut it? Heart surgery is only profitable, like everything else, only when it becomes a high-volume exercise in task execution. Everything is a factory. There are always a few creative thinkers needed to keep the process running smoothly and efficiently, but mostly we need factory workers, for everything from mortgage loan factories to heart surgery factories to automobile factories.

    My son’s oncologist’s wife works for a pediatrician that does ear, nose and throat stuff. The pediatrician gets about $500 a pop for inserting tubes in a kid’s ear to help with drainage. The oncologist told me a well-trained monkey could do it.

  13. Ny Stock Guy says:

    OMG. I am so glad I don’t have to deal with all this anymore. One of the good things about being old.

    I remember one semester riding my bike to the bank with a pocket full of cash, so I could make sure my tuition check would clear, that’s how little it cost.

  14. Kano says:

    Only if Freddie Mac and Fannie Mae were run like this….people won’t be walking away from their Mortgages!…o.k just kiddin

  15. AHodge says:

    and i wonder about the no risk part
    only if you have an actual garnishable houndable squeezable person?

    fraud should not be too hard, its govt guaranteed and no one wants to know. Just get a Social and act like you enrolled somewhere. surely they can make up a schooL? or kick back from?

  16. JohnDoe says:

    This is another reason why I chose to go for my CFA rather than my MBA. Already in debt from undergrad, no way I want to add to that. This student loan scheme is truly ridiculous though. Terrific post.

  17. AHodge says:

    and its years between money going out and payment beginning to be due

  18. James says:

    Barry touches one side of the problem – consumer protection, or in this case the lack of it and the utter hypocrisy and meanness of a system that provides little protection for young people who are confronted with tough economic circumstances and soaring education costs that were created in large part by the very same people who wrote the rules that provide THEM with all sorts of fringe benefits. How is it that credit agencies, for example, can get a big pass despite having a big hand in the financial debacle, yet students are saddled with onerous terms for their loans?

    Another dirty but not so secret aspect of this problem are the soaring costs of an education, whether it is a public university, a private school, or a for profit school. These costs have rivaled health care costs for their relentless rise, whence the increasing dependency of students on the very loans that get them into finanial trouble later because of their tough terms.

    This is a scandal – but what’s new.

    I’m glad Barry highlighted this issue.

  19. ToNYC says:

    So the baby boomers are whistling all the way past the graveyards as they watch their children being trapped into a lifetime of serfdom while they boast about how little they themselves paid! Many a slip between the cup and lip to all the holders of Student Loan paper. That bubble is getting ripe when the admission ticket to a corporate job in the USA is no necessary BUT the learning to think was the real value. So if you think about it, they learn it was choosing poorly.

  20. destor23 says:

    We don’t have to treat each other this way. Do people not realize that?

  21. Arequipa01 says:

    guess the Khan Academy is verboten…s cam é

  22. donna says:

    Don’t get me started… just sold our stock to pay our kids’ tuition payments, and are putting off getting a new car, which is why car sales for August are the worst in 27 years.

    This country desperately needs an education and jobs program, STAT!!!

    Oh, and my kids are in technical and science jobs, so yeah, the university education is kinda necessary.

    And yes, I got a free ride for being a high school valedictorian myself, so? That means my kids shouldn’t get an education?

  23. Mannwich says:

    @ToNYC: But too often today students in “higher” education don’t even learn to do that – think, and think critically, so what’s the point now?

  24. dougc says:

    Debt slaves begets debt slaves. Monkey see monkey do. No sense in worrying about the middle class they are mindless employees and citizens, they destroy their future and pray a savior is on the way and medicate themselves in order to cope with life’s uncertainty.

  25. machinehead says:

    Beautiful exposé — THANK YOU!

    Exactly as in real estate, subsidized financing of college tuition helps inflate the price. So it’s questionable as to whether there’s any net benefit.

    However, the brutal collection tactics now employed by the educational-political-industrial complex are a harsh wake-up call. Just three weeks ago, the president himself was out shilling for the academic extortionists:

    ‘(Aug. 9) The president visited the Austin, Texas, campus to outline his goal to raise the nation’s college graduation rate to 60 percent in just 10 years, adding at least 8 million graduates.’

    Where is the evidence that the US economy ‘needs’ a 60 percent college graduation rate? Where is the evidence, in fact, that a 4-year liberal arts degree confers any net value on a typical graduate, given their sacrifice of four potential working years?

    The ugly secret is that online study has made vast swathes of academia hopelessly uncompetitive. Probably a third of the bricks-and-mortar colleges in America need to disappear. Using kneecapper tactics to pursue students to the grave, to the point of garnishing their Social Security, is going to provoke an ugly backlash. The message is getting out that well-coiffed, ex-politico college presidents are scammers, usurers and con artists, selling an inflated, misrepresented bill of goods which will consign their victims to indentured servitude, some for life.

    Jess Bachman’s brilliant graphic should be posted in every high school guidance counselling office, under the headline ‘Truth in Education Mandatory Disclosure.’

  26. franklin411 says:

    This chart is not entirely accurate, Barry. The Democrats passed a number of student loan reform measures under Bill Clinton and Barack Obama that created an expanded loan forgiveness system. Let’s say you major in something useless like American History (after all, who needs to study history when we have Glenn Beck?). Your starting salary is $7000/yr as a fryolator operator at McDonalds, so under the Income Contingent Repayment Plan the Democrats established your monthly payment is $0. 25 years later, you’re making more money–your income has risen to $14,000/yr as an assistant manager. Your payment rises with your income level, so now your monthly payment is $5/mo.

    As long as you stay current (and “current” can mean making a monthly payment of $0), your loan will be forgiven after 25 years.

    The idea behind this was to encourage young people to go into public service. Bill Clinton is a lawyer and he saw how some of his fellow young lawyers wanted to work in public service even though the pay was low, but they had to work in the corporate world instead because they couldn’t make their loan payments. This program addresses the issue.

    Compare that to the Republican student loan “reform,” which all but eliminated the ability to consolidate student loans and set fixed interest rates on loans at 7%. So the banks were borrowing money from the Fed at 0.25% and lending it to students at 7% risk free! Thankfully, the GOP lost Congress soon thereafter and the Dems repealed the law.

  27. Bokolis says:

    The irony of this is that, with the economy in the crapper, I know so many people going back to school to get Masters and such. I have a friend who copped one of those from Rutgers- she worked the whole time- and is carrying around a $95k nut on a 25 year payment plan (that’s a flippin’ mortgage!), but doesn’t have the balls to take the leap into a position that will pay her well enough to possibly pay off that nut before she puts in for Social Security.

    To further the Mannwich/Hoffer/Curmudgeon point, from a knowledge standpoint, I could have been doing the job I have with whatever brains I had at 12 years old. The key skills that make me pretty good at what I do are my analytical abilities (which, had I started at age 12, I surely would have honed by 18 or so) and the ability to get people, over whom I hold no authority, to do things for me…admittedly, I didn’t learn that until about age 30.

    There it is; it’s all about people skills and critical thought…and balls.

    I was sure they didn’t teach you these things at college, which is why it took two years of begging by me mum to enroll (hustling had its benefits, but not much of a future). I settled on the cheapest and closest city school and worked just hard enough to get B+s in my major and Bs for everything else (which involved showing up half and a quarter of the time, respectively). I spent at least one TAP check (my ghetto-poor upbringing got me a free ride) at the track, but stopped applying for federal aid because I was too embarrased to be making money off the deal. Kind of naive, I know, but I would’ve pissed it away just the same.

    In any event, only Reggie Hammond knows where my hustling money went, but no student debt for Bokolis. It was kind of hard, though, to get a real job having to name-drop that school.

  28. Julia Chestnut says:

    I’m thinking that I may have to emigrate. Most places you get free college education if you qualify (at least most places I would want to live). If not, you often qualify for trade school and come away with real skills that are useful in the real world.

    I got merit scholarships – chose my university based on who would give me the best package. I worked several jobs all the way through and still got done in three years. I have one sister who went to state school (which back then used to cost about $250 a semester). I have a third sister who worked her way through school as a carpenter (no kidding – and she does nice work). Suffice it to say, we’re down with the alternative funding.

    But these days there just aren’t enough merit scholarships out there. Even state schools are insanely expensive. How am I going to get my kids educated? Frankly, I am working under the assumption that my kids aren’t college material and will probably take a different path. But it could still happen. . . . . . I suppose I’d better get those passports lined up and work on what skills I might have to sell to New Zealand oder Deutschland.

  29. Jessica6 says:

    Very similar to the regulations and so on in Canada, including no right to refinance – I was stuck paying out 12.5% while prime rates dropped below 5%. Glad it’s history. Tax refund withholding is the same too.

    In the early 90s I also worked a summer at Human Resources Development Canada – the governmental body that oversaw student loans. They were in the midst of doing away with bankruptcy discharges for student loans as well – in part because defaults had spiked due to the absurdly high interest rates in the late 80s/early 90s. Some recent grads were saddled with rates of 22% going into a recession so of course, the “logical” solution was to change the rules to make it impossible for them to walk away from the loans. And eliminate grants too.

    One of the higher-ups was quite candid with me and said point blank that it was to make money off students – not to help them. She didn’t agree with it, just that that’s how it was.

    The European model makes much more sense – allow only the brightest to get in, and pay them a stipend for basic living expenses. The rest go to trade schools.

  30. Marc P says:

    I’m left wondering why anyone chooses to go to a private school these days. It’s one thing if a kid knows exactly what they want to do, no chance of changing majors, and that career would benefit from the specifics of a particular school. You’re a chemistry prodigy from Fresno and you want to go to Standford instead of Berkeley? Your choice of whether the extra $100k is worth it. Instead I see kids (and parents) making obviously nonsense choice, such as liberal arts majors choosing to go to mid-level private schools (read: all small, interchangeable curricula and professors, and expensive). What’s the point?

    At the same time, I think it is very unfortunate that the middle class is getting priced out of the college market, even the public school market. It’s a shame. Despite those commenting above that a college education isn’t necessary, my view is the opposite. I would not want to be a person 25 years from now trying to make a living without a college degree.

    From America’s point of view, our college system has become yet another time bomb. America has become the land of the impossible economy: $80,000 legacy assembly line jobs, $25,000 Wal-Mart jobs, and few college grads. The functional illiteracy rate in Detroit is 45%; the NYT recently reported that in some parts of NY 80% don’t graduate from high school. How America will compete in the world 25 years from now is beyond me.

  31. Rescission says:

    Georgia offers free tuition to Georgia state schools for any high school kid with a B average.

    I went to college on school loans, and could not have attended without them. Yes I also saved and worked a job while in college, but that is not enough. Simply saving and working won’t get it done.
    Of all the debt I had to pay when I graduated, the one check I never complained about was the check I sent to College Foundation every month.

    It allowed me to get a degree in Accounting and get a good, well paying job out of school and off to a good career. Perhaps part of the problem may be people who shuck their responsibilities of paying their debts.

  32. willid3 says:

    add the costs of books
    College Textbooks

    In 2010, the annual in-state cost for the typical state university soared to more than $15,000, and private colleges now charge an average of $35,600 a year. As if college kids (and their parents) aren’t financially drained enough, there’s yet another inflated price they face: college textbooks. College students pay an average of $900 a year on textbooks and other supplies.

    College textbook prices have skyrocketed by 186% since 1986, and these expensive volumes of knowledge now account for 26% of the overall cost of college. Unfortunately, broke college students are required to purchase these costly books for their classes. At least they can try to sell their books back to local book store at the end of the semester – for a few measly bucks.

  33. BrentFletcherMD says:

    At Curmudgeon: Medical costs have become over-inflated for many reasons…including reimbursement discrepancies between procedures and other physician services. However, I ran across a few “trained monkeys” at the NIH. When you decide to volunteer your own ears for that experiment, let us know how it turns out.

    More seriously though…I will never forget our last meeting with my medical school’s chief administrator for financial affairs. He talked down at us for a long time about how he could not figure out why our student loan debt was so much higher than years past. When I had listened to a little more than I could take of being scolded for our collective shame of having borrowed so much money, I reminded him that tuition had almost doubled from five years ago (comparing 1997-98 to 2002-03) and asked how he thought this contributed.

    (I did two years of research between second and third year of med school. There was only one other person in the room who had started paying tuition in ’97 rather than two years later. )

    He almost immediately took on an apologetic tone and backed off his scolding, but seven years later I am a irritated at how he was blaming the students because the school had raised prices.

  34. willid3 says:

    it used to be that college was good deal in that for the most part you were likely to make more than those that didn’t go to college. now days, it might be true or not. to many of the entry level jobs have been exported, reducing the incomes of those who went to college. and with the great job situation we have, a lot of college graduates are living at home. because the jobs they can find (part time, fast food etc) don’t pay enough to live on. and they probably have to help paying their loans off.
    companies used to be really interested in helping their employees go to school.

    not so much any more

    but the cost of college has sky rocketed.

    along with books! fees! etc!

  35. spencerh says:

    How to “fix” the higher education system. A few prerequisites:

    1) Universal health care system. No one should be worrying about this, especially while they’re trying to
    get an education. At the very least, you should receive free health care while you attend school.

    2) Universal jobs program. After you graduate, there may be no jobs in the private sector. Until you can find
    one, you can work for the government for minimum wage.

    Ok, the new system:

    Fully publicly funded, mostly distance learning program. Everything than can be done remotely/via software
    should. The only time you should have to go to a physical location is for labs and such (these could be
    rented by the government on an ad-hoc basis or in a few small campuses across the country). This will keep the
    cost of the program low since there will almost no space to rent/own, and no physical textbooks. Those who need it would be given free public housing, nutritious food meeting certain USDA guidelines (for calories, etc.), and
    free utilities (electricity, water, Internet access); tuition would also be free. A similar program would be created
    for more traditional vocational skills. All you have to do is show up for class, and not take on any additional expenses (or you’d get thrown out of the program, and be on your own.) This means no drinking, drugs, gambling,
    or having children; everyone would get periodically audited. If this restrictions seem too onerous, you can simply not enroll and pay your own way at a traditional college.

  36. S Brennan says:

    Yeah this is me all right:

    “…baby boomers are whistling all the way past the graveyards as they watch their children being trapped into a lifetime of serfdom while they boast about how little they themselves paid…”

    …gotta keep those generational wars going. Group hate, it’s not just for fascists anymore.

    FYI, I’m 52, went back to school, worked my way through City College, joined the Army at 31, borrowed money [GI is not enough], worked PT, finished University, luckily got a got a 27,500.00/yr job as an Aeronautical – Engineer, a lot less than I was paid as a union carpenter…with 470.00/month payments on 1800.00 take home I was really screwing the next generation. Truth be told the guys who went to Iraq & Af-Pak to pay for school had it much worse, but those folks comprise less than 1% of “their” generation…the least shared sacrifice of any generation.

    But now, I have it good on easy street…just read how good.

    http://techcrunch.com/2010/08/28/silicon-valley%E2%80%99s-dark-secret-it%E2%80%99s-all-about-age/

    Really, if you don’t know the difference for HS grads between 1963 & 1975 could you stay away from the subject of generational wars?

  37. ACS says:

    Two of the areas where the government is most involved in “helping” people, health and college, have seen costs rise far out of pace with the rest of the economy. Gee, I wish I could figure that out.

  38. S Brennan says:

    Really? Didn’t the US Government just spend trillions buying up financial notes on housing? Barry could you put a chart up for this guy.

    France’ government is far more “involved” in health care than the United States…and guess what, it costs about a third as much. Take ideological blinders off. The German government is far more involved in manufacture than the US government …and guess what, it kicks ass in manufactured exports.

    Sometime the government is better, sometimes private enterprise is better, it depends if and how competition results. Think lying is always evil? How long would you last as a cold war spy? One size fits all does not work…and ideologies are just that. Snap out of it.

  39. John Personna says:

    I didn’t assume they did. I’ve long been arguing that it was a critical wrong-turn when we went from cheap tuition to cheap loans.

    In my day (late 70′s) California State Universities could serve up a full semester of classes for less than $100. Basically my parents only needed to feed and house me as “college costs.” I certainly wasn’t asked to graduate University with a debt load.

    Why did it change? Incentives, obviously. Everyone down the line got a bit of the kids’ new debt burden.

  40. machinehead says:

    ‘Two of the areas where the government is most involved in “helping” people, health and college, have seen costs rise far out of pace with the rest of the economy. Gee, I wish I could figure that out.’ — acs

    What you subsidize, you get more of. What you tax, you get less of.

    Thus the vast overcapacity in housing and academia, but at prices that remain excessive thanks to subsidies.

  41. hammerandtong2001 says:

    I took an informal poll in Montauk, NY this past weekend. At the Marine Basin, in fact.

    Drive straight in and go the end of the lot. There are 15-20 35ft-40ft sportfishers lined up there, docked next to the parking lot for easy access — prime spots, all.

    About 5 of them are owned by white collar business types. The remainder by self made blue collar guys: plumbers, builders, etc.

    Jus’ saying…

    .

  42. mbelardes says:

    I am currently about $120,000 in debt due to law school and I fully intend on pursuing B-school and plan to borrow for that too, guessing I’m in for $300,000 total plus interest. But I consciously made this decision believing the following:

    It’s simple economics.

    From day 1 in school it is drilled into our heads that if we don’t go to college we won’t become anything of substance in life. When you get to high school they start mentioning that you might need grad school and in college they practically now tell you “College today is like high school 20 years ago, you better go to grad school.”

    On top of that, we are told to try and get into a top school but if you don’t get into a top school, you might as well go to the best you can get in to. They term these as “reach” schools and “safe” schools to apply to.

    But not everyone can pay for school out of their (or daddy’s) pocket. If everyone had to pay out of pocket then not everyone could afford school and schools would have to lower prices (read: Tuition).

    Ah, but you can BORROW!!!!!!!!!! And anyone without a drug conviction can borrow as much as they need up to around $250,000. It’s SUBSIDIZED!!!!

    This creates almost unlimited demand for higher education, especially for people that shouldn’t really go.

    At the same time, there are finite seats.

    So what happens? The cost of education outpaces inflation by about 400 basis points every year, on average.

    Can you Fing believe that?

    This country is tying a debt noose around young people with the student loans. I’m not worried about my loans because I work full-time for a company with places to move up to and I save half my paychecks with the expectation to draw down those savings to pay my loans (in a worst-case scenario). But I know for a fact that many of my classmates are starring down the gun barrel of high debts, low wages, higher taxes, and higher costs of living.

    It sucks. I look at some of these people and know they should have become plumbers or auto mechanics or small business folk but here they are, mired in debt and pushing through grad school because they were told to go to college instead of trade school by some “Career Counselor” earlier in life and their parents didn’t realize that the costs of education would go up %7 every year for the 18 years before college started.

    My concern is that many of these people would be great at business but aren’t locked in on the “book smarts.” So they get decent grades and miss out on scholarships while in school and miss out on top jobs right out of school BUT they are mired in debt. So while this person might have been an entrepreneur, now they are stuck with some shit job because they have to pay back student loans and other debts. This is not a way to build a future economy.

  43. TheInterest says:

    So now we know why school tuition goes up so much each year.

    It isn’t because of what NPR says: http://www.npr.org/blogs/money/2010/09/02/129607849/why-is-college-so-expensive

    No, it’s that everyone is a debtor. Just like anyone who can fog a mirror could get a mortgage. But what’s worse is now this debt cannot be defaulted on. Just think, you’re a banker and everyone is a customer, no questions asked. Guaranteed money with NO risk. Oh, and that board over at the local University you sit on, well you’re just doing your civic duty helping out your local school. The schools are in bed with the banks on all of this too. It’s all for the kids you know.

    Someone asked about how to short this? Short the for profit schools: http://motherjones.com/mojo/2010/05/steve-eisman-big-short-michael-lewis This charade will come to an end.

  44. Ambiance says:

    The graphic nails it. Student debt is offered on some of the worst terms imaginable and education has done nothing but increase in cost for decades now (it’s one of the few things that actually outpaces healthcare costs). I’d like to see realistic controls on text book pricing and issuance schemes. Digital textbooks are starting to become an option, but they’re still far more expensive than they should be. Publishers and book retailers screw the college student over pretty hard, I see more and more Barnes and Nobles handling school bookstores or opening up small on campus shops (the price for all goods they sell are inflated).

    I think education is suffering from a lot of the same problems we’re seeing in healthcare, it’s deemed a public priority so lawmakers see fit to let a lot slide for any business working in the industry. Some of the online or “chain” colleges really exploit the hell out of people. They market very hard to get enrollment, qualify people for government backed loans and then tend to provide a substandard education and degree that doesn’t go far for most job seekers.

    I also agree with some of the sentiments about mid range private colleges being a complete waste of money. My sister just started her first semester at a nearby state school. Her favorite school that she had been accepted to was a $42k/year private college without much to it’s name, the state school costs roughly 25% of what the private one would. I can see paying that sort of premium for a school where the name and networking will go far (Ivy league, stanford, etc.) but it’s ridiculous for a middle of the line college in my opinion.

    I have another friend who’s currently in med school and aiming to be an orthodontist. He says he probably won’t be able to pay off his debt until he’s into his 40′s and I believe it. People wonder why medical expenses are high and a fair part of it has to do with student debt and it’s compounding.

    That said I don’t know that the solution is to pump more money into the system. I do think there’s a lot of evidence that we simply need more schools, especially at the community college level. Yet this is one thing that there’s very little public effort to get behind. We’ll spend billions on housing credits and bank bailouts but most of our representatives would vote down a 4 billion dollar community college funding and expansion bill in the blink of an eye. Clearly the debt structure needs to be reformed, there’s no reason every college student should be treated that poorly. If default rates are really that high and the government is bearing the brunt of it anyways then increase aid and scholarships and reduce credit availability if it is indeed that risky.

  45. Mike in Nola says:

    I don’t think the article mentioned that some lenders try to get relatives, e.g., parents, to co-sign so they get stuck with an undischargeable debt.

    F411 – I don’t believe forgiveness applies to private loans which is what a lot of professional students wind up with because of restrictions on the government loans.

  46. Imelda Blahnik says:

    Look, there’s a simple solution if you have lots of student loan debt. All you have to do is refinance your house (or get your parents to refinance theirs), use the proceeds to pay off the student loan, and Voila! Dischargeable debt. And since real estate never goes down…..

  47. ToNYC says:

    So it came to pas that anyone who could fog a mirror was set up to join the Uni bubble by having it drilled into each child’s head that Education was a good thing. Fair enough. What got delivered as Education was not Critical Thinking but Plantation education for the Corporate plantations. You get to learn the language of rationalizing all the self-serving thought circlejerks that prop-up the simple scams that fail Physics 101
    I got my “job” by jumping the shark of someone who would pay me regularly one-third to one-tenth of what my work is really worth. Now you may want to sell me for what I think I’m worth and buy me for what you think I’m worth to you; but you’ll need to get a job-seeker and take your chances.
    The Federal Reservers watched this one take place and and let the games proceed. You see it was all about the Bank club making big money on the game using t7he clueless and self-aggrandizing school administrators as natural enablers.
    The claim is that taking control of money and credit creation out of the hands of Congress is to ensure against Politicization; in fact they have and use the power to contract credit and destroy Presidents. Is that considered Politicization?
    It’s OK to believe in repealing the FRA of 1913 and in the process stuff the serfdom of student loan schemes up their collective orifices.
    Just maybe one won’t be allowed to graduate from elementary school the correct answer to, “What do you do when someone offers you something too good to be true?” or the simple fact of Physics 101, that the only FREE! lunch is the Sun.

  48. impermanence says:

    I knew that once my teenagers began getting credit card applications (early 90′s), that the gig was up and they were going to seriously go after the children. It’s hard to say what the greatest dis-grace of this past forty years have been, but, allowing America’s youth to come under the thumb of finance capital, might be the most horrible legacy we Boomers leave behind.

    How will history judge a generation that sold-out its own children?

  49. ToNYC says:

    Corporations now have the right to a voice in Election funding according to a recent SCOTUS decision.
    The next SCOTUS decision ought refine that simple concept to ensure that one Corporation, one US Citizen donation limit.
    The inescapable reality is that instead of bailing out Banks which are stuffing cash against the deep hull gashes of underwater houses priced for fake unsupportable FED CREDIT; the wise path would be to bailout the set-up-to-be-underwater, economically-challenged by design, next generation of workers rather than suffocating them AND their withered continuing Demand in the economic swamp left for them.
    One would say that self-satisfaction was the game of the Boomers.
    You can see it in their drive for owning bigger and more expensive manufactured goods and thinking “toss out” when done rather than expressing their individual art and talent with simpler ingredients and thinking about re-purpose and re-use.
    The survivors are lining up and getting it; things will de-lever with or without the government’s fixing it until it is broke.
    I venture the judgment of history will be harsh, impermanence.

  50. Marc P says:

    I learned something very interesting today. In 2009 government now has set up an “Income Based Repayment” plan for government student loans (isn’t this Sallie Mae?). See http://studentaid.ed.gov/PORTALSWebApp/students/english/OtherFormsOfRepay.jsp

    The idea is that payments are based upon what the person can pay, the payments last for 25 years, and then any remaining balance is canceled. There is a handy calculator in the link above.

    Here is where it gets interesting. Enter $160,000 of student debt into the calculator. For a single person making $30k, then $50, then later earning $100k, the payments will be $170, $420 and $1025 per month on a 6.8% interest rate. Anyone handy with a loan calculator will see that the loan negatively amortizes with a payment of anything less than a $1000/mo payment. In other words, unless those bachelor-degree grads are making at least $100k, these masses of students will leave billions of debt on the heads of future taxpayers.

    BR, there has to be a follow-up story here.

  51. ashpelham2 says:

    impermanence: Thank you for your comment. I was a teenager in those early 1990′s, and started to college in 1994, having to borrow a little money to do it. I went in to college knowing what the costs per semester were, and knowing what my “desirable” limit to borrowing was. I reached that limit a couple semesters before I graduated, so those had to be “paid” for. Graduated with a debt situation that was totally manageable, in a career field that was growing and paying (accounting).

    Now what I see is not only the legacy of those halcyon days of borrowing on a whim to finance an education of Widespread Panic and recreational bong sports, but increasing credit card financing for things like $400 cell phone and related contracts and playing video games until 2:00am. It makes the partying I did for 3 years seem like joining a monestary in comparison. And I ran my butt off, hitting the computer lab, because I couldn’t afford my own, working a 20 hour a week job carrying boxes of copy paper up three flights at the Aeronautical engineering building on campus, and chasing skirts the rest of the time.

    I do blame the Boomers for a little bit of the malaise that will remove the USA from the list of superpowers. But I also blame my peers (now aged 25-35) for just flat out being lazy.

  52. pirateguillermo says:

    This is an appalling story and reinforces my allergy to debt. It’s a pity about all the apostrophe’s, though.