When I wrote The College Degree Scam, I was describing an already disgusting situation that could only go from bad to worse. And that has occurred. The New York Times brings us up to date in Burden of College Loans on Graduates Grows.
Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so [graph left]
While many economists say student debt should be seen in a more favorable light, the rising loan bills nevertheless mean that many graduates will be paying them for a longer time.
“In the coming years, a lot of people will still be paying off their student loans when it’s time for their kids to go to college,” said Mark Kantrowitz, the publisher of FinAid.org and Fastweb.com, who has compiled the estimates of student debt, including federal and private loans.
Two-thirds of bachelor’s degree recipients graduated with debt in 2008, compared with less than half in 1993. Last year, graduates who took out loans left college with an average of $24,000 in debt. Default rates are rising, especially among those who attended for-profit colleges.
The mountain of debt is likely to grow more quickly with the coming round of budget-slashing. Pell grants for low-income students are expected to be cut and tuition at public universities will probably increase as states with pinched budgets cut back on the money they give to colleges.
All that is bad enough, but the most discerning quote came from Lauren Asher.
“If you have a lot of people finishing or leaving school with a lot of debt, their choices may be very different than the generation before them,” said Lauren Asher, president of the Institute for College Access and Success.
“Things like buying a home, starting a family, starting a business, saving for their own kids’ education may not be options for people who are paying off a lot of student debt.”
Lauren has succinctly described the "debt slavery" aspect of the college degree scam. See my post Student Loans — Gateway To Debt Slavery. I summed up how the scam works back in January in The College Degree Scam.
It is not an accident that I date the Empire's decline to the early 1980s. Even as the cost of college soars, it remains true that there are considerable advantages in having a degree in terms of earnings (see graph in original). If we look at the BLS unemployment numbers, Table A-4 indicates that in December, 2010, the seasonally adjusted jobless rate for those with a Bachelors degree or higher was only 4.8%. Clearly, there is significant advantage in having a degree if you want a job—any job, good paying or not.
All this leads to the exceedingly happy situation we have today, to wit—
- To get a job, any job, your chances improve significantly with a college degree
- The cost of a college degree has risen 439% in the last 28 years
- Obtaining a degree is far beyond the means of most young people
- To get a degree, and thus have any hope of getting a job, the large majority of young people must become debt slaves
If you're not outraged and disgusted at this point, you're probably among the walking dead. But wait, there's more! Some observers take a rosy view of the scam.
To be sure, many economists and policy experts see student debt as a healthy investment — unlike high-interest credit card debt, which is simply a burden on consumers’ budgets and has been declining in recent years. As recently as 2000, student debt, at less than $200 billion, barely registered as a factor in overall household debt. But now, Mr. Kantrowitz said, student loans are going from a microeconomic factor to a macroeconomic factor.
Susan Dynarski, a professor of education and public policy at the University of Michigan, said student debt could generally be seen as a sensible investment in a lifetime of higher earnings. “When you think about what’s good debt and what’s bad debt, student loans fall into the realm of good debt, like mortgages,” Professor Dynarski said. “It’s an investment that pays off over the whole life cycle"...
A good investment? Like mortgages? Over the whole life cycle? You better hope that college degree retains its value over the whole life cycle. And you better hope you don't drop dead before you've completed the whole life cycle. You don't want to go into foreclosure!
“College is still a really good deal,” said Cecilia Rouse, of Princeton, who served on Mr. Obama’s Council of Economic Advisers. “Even if you don’t land a plum job, you’re still going to earn more over your lifetime, and the vast majority of graduates can expect to cover their debts.”
A boatload of student debt is certainly a good deal for Princeton, or the University of Michigan, which get their money upfront. No debt for them! Just one outrageous tuition hike after another. As I discussed the other day, Mark Twain callled absurd rationalizations arising from self-interest corn-pone opinions.
In an important post called The Empire And The Boiling Frog, I explained how people gradually become accustomed to deteriorating conditions over time.
Why does the boiling frog story apply to people [living in a declining Empire] if not to actual frogs? The answer is simple. Human beings are built to adapt to new conditions. Generally speaking, they don't notice gradual change, they simply get used to it. People were designed by Nature to react quickly to sudden changes. They were not designed to notice that this year, and for many years before that, conditions got a little worse than they were the year before. Humans live in an eternal present. This observation is well-known to those who study such things.
The student loan situation is a case in point. The college degree scam has gone ballistic. In 2000, there were only $200 billion (200,000,000,000) in outstanding loans. This year, that number is expected to hit $1 trillion (1,000,000,000,000), a five-fold increase in just 11 years. In 2008, two-thirds of bachelor’s degree recipients graduated with debt, compared with less than half in 1993. And so on. Students are the new boiled frog. For them, the obstacles to success get steeper and steeper, and more and more outrageous. Mike Shedlock ("Mish") had some thoughts on the situation.
In Fall of 1971 when I started college it cost something like $250 a semester for an engineering degree at the University of Illinois. When I graduated it was something like $450 a semester.
That was a "good deal".
A college education is now a good deal for the administrators, the professors, and the football coaches who all make big salaries with enormous benefits, then have the gall to whine for more benefits.
Precisely. Most of us are getting boiled alive in contemporary America, but there is an important difference between students and those of us in Middle Age—the young have their whole lives ahead of them. Things are going to be bad enough for young people in the future even without the extra burden of student debt. I am going to end this post exactly the way I ended The College Degree Scam.
We live in a society that eats its own young. How sick is that?
Bonus Video
Many economists call it good debt. Perhaps many economists should be shot.
I was a precursor to this bubble. I was forty when I finally paid mine off. Also, as you know, bankruptcy will not relieve you of this burden and they will garnish your wages, just as the IRS will for back taxes and tax penalties. So much for Government-backed student loans. All that means is that the Government will enforce the collection of the student loan debt via wage garnishment laws and laws refusing to forgive the debt via bankruptcy.
Yeah, this fucked up society eats it young, but I would go a step further and say it eats itself, because if it eats its young, it's not long for this world.......praise the Lord, because the sooner this Beast is put to rest, the better for the Universe(s).
Has anyone else gotten their Bank Of America credit card statement? The one where they tell you they have unilaterally and arbitrarily changed the terms of your credit card contract and will now charge you 29.99% interest if you are late on your payments? How is that a contract if one party can change the terms at will? Answer...it's not a contract in the legal sense, because if it was, it means that since one party to the contract is no longer abiding by the original agreement, then the contract should be considered legally null and void. How about we counter with our own changes to the contract, and tell BOA, and all the other credit card crooks playing this same game the mafia plays, to take their credit card and the balance and shove it where the sun doesn't shine. If enough of us did it, there is nothing they could do. The courts couldn't handle it.
Posted by: Morocco Bama | 04/19/2011 at 10:00 AM