U.S. Students/Grads Carrying Over $1 Trillion In Debt 538
An anonymous reader writes "Time reports that American students and grads were carrying $1.08 trillion in student loan debt at the end of 2013. This compares to just $253 billion a decade earlier. Aggregate debt grew 10% in the past year alone. 'By comparison, overall debt grew just 43% in the last decade and 1.6% over the past year.' About 70% of students graduate with some amount of debt, and the average amount owed is $29,400. 'Delinquencies on student loans have risen dramatically over the past decade: 11.5 percent of graduates were at least 90 days late on paying back their loans at the end of 2013, compared with 6.2 percent delinquencies on student loans in 2003. Moreover, the Fed's figures on delinquencies hide more stark data: nearly half of all students with debt aren't currently in repayment thanks to deferments and forbearances and the fact that students are not expected to pay while they're in school.' An attached graph shows an alarming spike in delinquent loans that looks a bit like mortgage delinquencies did at the beginning of the sub-prime crisis."
Tell me again... (Score:5, Insightful)
Easily available loans (Score:5, Insightful)
The problem is that anyone can get a loan, even people who definitely have no prospect of paying it back. With guarenteed loan money, schools can charge whatever they want and you'll just have to take out a bigger loan. And of course 18 year olds fresh out of high school don't understand the power of compound interest, they just know that they "have" to go to college to get a good job and they'll get a better job if they go to a fancy private school.
While you can't get a bachelors from our local community college, it only costs $2,500 a year in tuition and you're getting credits that can transfer to any state school. Why can a community college offer actual college classes for that little, but a 4 year school can charge $10,000, $20,000 or more for largely the same education? Its just insane.
Re:Lessons Learned (Score:5, Insightful)
No. It's not the borrowers who get bailouts -- it's the lenders.
Re:Post Bush (Score:5, Insightful)
But in 2005, Congress and the Bush Administration clamped down on bankruptcy filings, placing hurdles in the path of Americans trying to file and making it more difficult to discharge debts. In particular, the 2005 law made private student loan debt, like federal student loans, impossible to discharge in bankruptcy except under a difficult to meet hardship exemption. Today, bankruptcy allows for the discharge of credit card debt and auto loans but not student loan obligations. At the same time, the law permits judges to modify loans used for commercial real estate, vacation homes, and even yachts, but not a family’s primary residence. Two of the largest investments Americans make in order to enter the middle class – in their homes and their educations – are thus excluded from the relief offered to other debtors.
If Evil exists, this is it.
Re:Easily available loans (Score:5, Insightful)
Why can a community college offer actual college classes for that little, but a 4 year school can charge $10,000, $20,000 or more for largely the same education? Its just insane.
I agree with most of what you have to say, and its borne out by the massive increase in the price of undergraduate educate over the rate of inflation, during the last 40 years as more and more loan subsidies and grants have been created.
That said to some degree the community colleges can afford to what they do because the other schools exist. Lots of community college staff is part time, there academic involvement begins and ends with teaching. They are not creating the texts and such that get used. Professors at more traditional institutions usually also do things like conduct studies, author texts or articles etc. Some (although very little of) of the higher prices at the traditional schools goes to subsidize the costs of these other academic efforts, without which there would be little to talk about in the CC class room.
Not to say that Community College is not a really great option for lots of people, or that its role is not important or even that it should not be expanded.
Re:Easily available loans (Score:5, Insightful)
Because their parents don't either. At 12 they might have understood. They forgot by 18. Just look at the number of adults with mortgages for 20+ years. Better yet, ask someone "how much interest are you paying on your mortgage". If you ask me, I'll say $12'000. It's a $450'000 purchase, a $230'000 mortgage, I'll pay an average of 3.5% interest per year, I'll have paid it off in 10 years.
But ask anyone else, and in my position they'll say 3.5%. They forget the "per year" part of that entirely. So they take 20 years, or 30 years, instead of my 10 years, and instead of paying $12'000 total interest on $230'000 total loan, they pay closer to $100'000 total interest, or 40%!
The most frustrating part is that I didn't make it up. Even at the bank, when I applied for or renew my mortgage, they give you the year-by-year breakdown of interest and absolute dollars. All you need to do is to look at the bottom line of the chart. On mine, it says $242'000 repaid. On their, it says $330'000 repaid.
They don't need to understand compound interest, and doing so isn't actually sufficient here. They need to understand the concept of units of measure. In a loan repayment, that unit isn't "percent". As my mother would ask: "percent of what?!". It's "dollars per year". If you understand units of measure, then you understand that dollars per year doesn't tell you how many dollars.
And if you understand marketing, then you understand that smaller bi-weekly doesn't make the dollar amount smaller than normal monthly payments.
Re:Tell me again... (Score:5, Insightful)
See America’s Education Deficit and the War on Youth [monthlyreview.org]
Re:Tell me again... (Score:1, Insightful)
Re: Tell me again... (Score:2, Insightful)
BS. A degree is not required for a job. College is a systematic theft of future wages. There were decent paying jobs that required no degree.
Re:Tell me again... (Score:5, Insightful)
Re:Easily available loans (Score:3, Insightful)
Just look at the number of adults with mortgages for 20+ years.
That is simply wrong.
1. If I lived in the US, I would have taken out the 30-year fixed-rate mortgage up to last year.
2. sometimes you have to understand the other interest rate, inflation.
How can you not take out a 4% mortgage where historical spikes of inflation are much above that? Unless you are betting that inflation will be kept in check for 30 years!
Re:Tell me again... (Score:5, Insightful)
Because every time the price goes up some politician has the brilliant idea to either 1) make loans more available or 2) make more "free money" (i.e. grants and subsidies) available.
Since neither of those is "building new colleges" or "training new professors" the existing colleges snap up this money through higher fees. This eventually may result in some increased build-out, but it seems to go slowly enough that they can keep the prices rising faster than inflation.
Worse, one of the ways in which they have "made loans more available" was to legislate that student loan debt cannot be discharged through bankruptcy.
Re:Tell me again... (Score:3, Insightful)
It costs so much because people have been conditioned to be willing to pay anything for it, believing it is essential for future success. And if they can't afford it the government ensures that they can borrow for it. There's no way tuition can possibly go but up until this scenario changes.
Re:Easily available loans (Score:5, Insightful)
I don't think you understand this as well as you think you do. The person who gets a 30-year loan at a 3.5% rate is almost certainly doing much better than you, despite having to pay more total interest.
Let's look at some numbers. Your plan requires a monthly payment of $2274 every month for 10 years. Their plan requires a monthly payment of $1033 every month for 30 years. If they put the $1241 per month saved into an investment that gives 4% NOMINAL returns per year (which is quite a low rate of return historically speaking), then after 10 years, here is how their finances compare to yours:
You: No mortgage, no additional assets
Them: A debt of $178,082 and an investment worth $185,947.
As you can see, if they then pay off the principal, they end up almost $9000 ahead of you. If you factor in inflation, or assume annual returns better than 4%, the situation swings even further in favor of the 30-year mortgage. For example, using the 9.5% historical annual returns of the S&P 500, the person with the 30 year mortgage ends up $54,000 ahead of you after 10 years.
Note: In reality, banks charge a higher rate for the 30-year mortgage for exactly this reason.
Re:Tell me again... (Score:5, Insightful)
Re: Tell me again... (Score:5, Insightful)
This is this generations fight (Score:5, Insightful)
2) Bust your tail and do well in college.
3) Be unable to find any job coming out of college.
4) Be unable to work a minimum wage job because it won't even pay off interest on your loans.
5) Now what?
Education isn't first reason for going to Harvard (Score:4, Insightful)
The education you get at Harvard or Yale isn't first on the list of reasons why people want to go to those schools (or maybe even second or third).
The big reasons are the cachet of a diploma from those schools opens doors at grad schools and employers, and maybe even more importantly it's the people you go to school with are the economic elite. You get to rub shoulders with the rich and make contacts with them.
Other schools may offer equal or even better educations, but they don't offer access to those people.
Re:Post Bush (Score:2, Insightful)
The Democrats support a vicious cycle of poverty, terrorism, and welfare.
Re:Tell me again... (Score:5, Insightful)
Re:Tell me again... (Score:2, Insightful)
So what you're saying is because you're one of the unicorn-rare minority of people who actually got enough scholarships and grants to go to school the entire rest of the nation must just be making shit up to cover for their laziness and greed? Yeah, great argument there dumbass.
Re:Tell me again... (Score:5, Insightful)
An overwhelming majority of students go to local state community colleges and universities, once again your argument basically boils down to the circular conclusion that if someone wasn't as lucky as you it MUST be some kind of personal failure. You're starting with a conclusion and working backwards to justify it.
Re:Tell me again... (Score:4, Insightful)
There are plenty of other options, although none of them involve getting everything you want on a silver platter.
Yeah, you could sign up to kill brown people in the sand for the profit of US corporations. That would certainly save you some money, and it would only require you to live without rights for four or more years, maybe a lot more if you're subjected to a euphemistically-named "stop-loss" program (aka slavery.) You could then face the >90% chance of being sexually assaulted as a female, or the apparently also very high chance of it happening as a male, and you could get discharged with inadequate medical care for a condition developed while in the service. What a fantastic and moral deal!