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."
Re:Tell me again... (Score:5, Interesting)
The same reason health care costs so much: the more money that's made available, the higher the price that can be asked.
In supply and demand terms, prices rise to balance the supply of education services with the demand for those services until demand is restrained or supply is increases.
What's happened in education and health care tells us that supply isn't keeping up with demand and so we have rationing based on price to match supply with demand. High prices keep some out of school or out of the doctor's office so that the available services match those able to pay for them.
The Bubble Behind the Mortgage Bubble (Score:5, Interesting)
My theory: This "student loan bubble" is actually the bubble that caused the mortgage bubble. For the past 30 years, college loan professionals have been convincing 18 year olds that 5-digit debt is ok. We were "broken" (as in horse context) by the time we borrowed for our first car, our eyes glazed when buying our first house. We were trained to be numb by rationalizations worthy of drug pushers. The first thing a young person does at 18 is sabotage any hope of compound interest savings accounts, as every penny that would have been put away is spent on compounding interest in the wrong direction.
Ok, my college experience turned out ok. But I circumvented work-study and doubled my working hours (food service). If you DO borrow to go to college, it may turn out ok, but be sure to work in a few economics and accounting classes.
Where all that money went (Score:5, Interesting)
Re:Easily available loans (Score:4, Interesting)
Mixture of things:
1. In many states, the community-college system is still heavily subsidized, while the flagship schools have been moving towards a "user-pays" model. For example, the state of California has cut its per-student subsidy to the University of California system by about 60% in real terms over the past 30 years, but has cut their per-student subsidy to the community-college system by only about 20%.
2. Community colleges typically are looser in who they'll hire to teach classes: no PhD required, can teach part-time, no research expectations, etc. Like with any field, if you have lower requirements, you can get staff for lower salaries, e.g. hiring C++ programmers vs. web designers.
3. Prestigious universities have suffered more administrative bloat, I guess because it's where the prestige is, so attracts empire-builders. Community colleges don't pay their President $500k/yr, or have an army of Assistant Vice Chancellors.
4. To be a "top school" there are higher expectations of the other resources provided besides the actual classes. A community college typically has a small or no library, while UC Berkeley is expected to have a full-coverage research library. UC Berkeley is also expected to provide good laboratory and computing facilities, dorms, security and healthcare for an on-campus resident population, etc.
Re:Easily available loans (Score:2, Interesting)
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.
not necessarily. I did that and some of my classes weren't transferable because there wasn't a compatible class at the state uni. -at that time. Also, there's a minimum grade ( usually) for transfer - 'C'. A 'D' will allow you to get your associates if your average stays above a certain level, but it won't transfer.
The problem is that anyone can get a loan, even people who definitely have no prospect of paying it back.
What I advise kids these days is that unless you're going for CS or Engineering (or medicine) AND you think you can keep your grades above 3.0, then don't bother with loans at all. Find some other way.
We are brought up that education is always a good investment. And the more the better. Many of us took loans to get graduate degrees (MBA, JD, MS) during the bust because we were under the erroneous impression that the extra degree would improve our employment prospects or allow for a career change.
I was told by a hiring manager that my graduate work shows him that I went to school because I couldn't get a job (the economy sucked!) and that if I were any good, then I wouldn't be unemployed.
Ouch. $48,000 debt (from a state school) Ouch! I blew through my savings while I was out of work - this was before there were decent unemployment. And even then, if you're unemployed - especially long term - you become unemployable. Career change can't happen either because no one hires entry level people anymore. Entry level is now 2 years of experience and with gray hair, it's even harder.
So, what we need to do is get over this 'more education is better', and if we as a society want folks are are educated in humanities, then those programs need to cost MUCH less.
But the thing is, just about every profession is hurting. (A 3%ish unemployment rate for software developers is HORRIBLE! if there was a shortage, it should be MUCH less - even with the national average being above 7%. ). New college grads are having a hard time in every field - some worse than others. And this student debt is going to be a drag on the economy for decades.
My car is falling apart ad I can't afford a new one and it's already 19 years old.
That's a car sale and financing that won't happen because I'm paying for a worthless degree.
Re:Tell me again... (Score:5, Interesting)
In some ways, it is, with online courses and such. But universities have a very long tradition, and have a guildlike system of prestige and accreditation, so it's very hard to shake them up
Re:Post Bush (Score:5, Interesting)
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.
The lead-in for this, which made it possible in the first place, was the 1999 Gramm–Leach–Bliley Act, signed by Bill Clinton, which is what allowed the merger that led to the legislation. This effectively turned credit card debt for students who shouldn't have been offered credit cards in the first place to be non-dischargable by bankruptcy (effectively turning uncollateralized loans into collateralized ones).
http://en.wikipedia.org/wiki/G... [wikipedia.org]–Leach–Bliley_Act
Frankly, there's no difference between the parties; they both work for the banks.
The same root cause (Score:1, Interesting)
As much as people try to explain it away all of the economic problems we are seeing in the news have the same root cause: Money is simply a stand-in representation for resources so it can be shared amongst the populace. If the amount of resources stays roughly the same (which it does) but the population grows exponentially then there is simply fewer resources to go around as time progresses.
Yes -- we may occasionally stumble on a more efficient use of resources but fundamentally the earth is a pretty closed system. While there is a small minority of people who go to school in the genuine quest for knowledge and understanding the vast majority are doing so for a realistic gain in the future: a better job. And why do people want a better job? More money. More resources. It boils down to our basic physical needs: to eat, to reproduce, etc. These needs drive people to consume resources and there are more people and the same amount of resources. Expect the future to look more and more dystopian unless some major changes happen.
People who focus on the current upswing of the stock market and certain limited segments of the economy are completely missing the point: The long term trend is progressing in a pretty clear direction. There is also some snowball effect. Most of the improvements of modern life were made in part because people were well educated and didn't have to worry every day about survival. That's how our civilization formed, after all: a food surplus drove civilization. Expect the intellectual output of the human race to suffer greatly when smart people are occupied with how they are going to eat today and not busy creating the future. If drastic action isn't taken (globally) our population climb is going to have a very, very predictable outcome and it will take a great deal of time for civilization to repair itself -- if it does.
Re:Finland (Score:5, Interesting)
Similar in Norway - university is basically free (except the 100 USD/year mandatory student union member ship), and you get a subsidised (i.e. no interest before you graduate, (much) lower-than-market interest rate after that) loan for up to ~7 years. This loan works so that when you pass your exams for that semester, ~half of the loan is turned into a stipend. Don't pass your exams and you have to pay it back.
On top of this, you have access to subsidised housing in "student villages" - these are apartments where you get your own room, and share a kitchen/bathroom with ~4-10 people - accomodation standards depend on how much you want to pay, but it is in general affordable within the budget of student loans. You can use the apartment year round, i.e. if you have a summer job in the city or you are a last-year masters student working at the university over the summer, no-one will kick you out. It's like a normal apartment, just cheaper, and everyone else in the same block are also students. There are also possible to get two-person apartments, i.e. for people who want to move in with their S.O. - with no strings attached about marriage etc.
And on top of that, you do of as a citizen get access to healthcare (hospitals are free to use, normal doctors appointments and medicine are cheap up to a certain limit after which is it free, the dentist you pay out of pocket but it's usually not that expensive and there are often student discounts available) and disability insurance.
I like our system :)
Re:Tell me again... (Score:5, Interesting)
University Industrial Complex is Ridiculous (Score:5, Interesting)
Very.
I have worked with CS degre'ed people and industrially educated people in I.T.
I have been trying to understand whyt here is such a huge difference between CS Degree;ed people, with BS/MS degrees and Industrially educated people.
I have come to the conclusion that:
1) Industry educated people love their work far more than CS degree'ed people. Daddy didn't pat for their education, they come to work everyday because they want to, not because they have loans to pay off.
2) Industry educated people are far more motivated than CS Degree'ed people. The reason why this fits my observations is the typical CS degree'ed person wants someone to teach them, which is why they went to school anyway. Industrially educated people see education more as their responsibility.
Carefully looking at resume's, I found industrially educated people who do nat have CS degree'es statistically have more independant/free lance work on their resumes. (i.e. They know how the technology works to the extent that, they do not need someone to hand them a check every 2 weeks. They really can develop solutions themselves and sell them.)
But, that may be due to the fact that some jobs require CS degrees and industrial educated people find that if they want to eat, they have to do it all themselves.
So they are much more resourceful and typically better business people.
3) Personally, looking at the education of a typical CS graduate, I am not convinced a university degree in the age of the internet is worth $120K.
My house for example, is worth $150k. I don't have a degree, but I own a house. I think it was a much better investment.
I still am employed in the I.T. world though, so in my opinion if you are doing hardware or software in the engineering department, or selling solutions, you can do a University program for 4 years, but you are at an EXTREME disadvantage compared to a person like me, that leverages a internet connection, does a few free lance jobs to get your career going.
Plus you typically get to stay at home rent free while you figure this stuff out.
By the time compare a 4 year tour through a university, you will most likely already have references, no debt and may even be employed.
However, Universities do have their place in education, but not at the $120K level for years anymore.
I could go back to school and would, but I would probably pay about $15K for a university degree for 4 years.
I don't think it is worth more than that, in my opinion as both a 25 year veteran working in the computer industry, and hiring and firing many of you out there with CS degrees.
Re:Tell me again... (Score:5, Interesting)
So why isn't supply responding to the glut of money? It's had decades.
Accreditation is a legally-sanctioned cartel.
I followed a small startup school for a while in the mid 90's - they tried for years to get accreditation as college and ultimately folded because they could not get it. The education was fine, but they dared to allow students to take classes online (c.1996) which was seen as too much of a threat to the cartel.
A degree from a non-accredited school is maligned, so without a marketable service they had to go out of business.
So: "because the politicians want it that way" is the actual answer to your question.
Re:Tell me again... (Score:5, Interesting)
No kidding.
I was working at OSU (Oklahoma State University) about 4-5 years ago when the annual raises came out.[1]
The 'President', Hargis got a raise of a little over $150,000.00 a year. He was already making a 7 figure salary, while the faculty got a 2-3% raise, and the staff got none.(again, after not getting a raise for 3 years previously)
[1] I had been working there several years at this point, and still work there, but no longer(as of Feb. 09, 2014) as an OSU employee, they subcontracted out the dept. I work for(Custodial and Housekeeping) to save money, Pres. Hargis has recieved a minimum of 5% raise each year, while staff and most faculty salaries remain frozen, or 2% maximum.
When I was hired, they had to give me a raise within 2 months due to the minimum wage going up from $6.90/hr to $7.25/hr. As of the Feb. takeover, I was making $8.25/hr after almost 6 years there.(before everyone started leaving due to the 'takeover', I was only making $7.65/hr-my pay had only gone up $0.40/hr over 5+ years there. After a lot of people started leaving, they gave us remaining fools a substancial(compared to what we were used to) raise to encourage us to stay.(I got bumped from $7.65/hr to $8.25/hr then) We have been at %50 (or less) of req'd. manpower since mid-May 2013. We(OSU) just completed a several million dollar 'campus beuatification' upgrade, amid a lot of other new multi-million dollar construction projects, including the new Boone Pickens Stadium that made news(even front page on slashdot!) recently for being 'unfriendly' to scouts and media.
Re:Tell me again... (Score:3, Interesting)
No, if you think it is a forced choice, then you're just an idiot. I graduate this May, and haven't accrued a single red cent in student debt, and the only work I've done is as a paid intern during one particular summer.
What's stupid is I've often had both the government and the university encourage me multiple times to pick up the student loans (which would have given me $9k in cash per year) and all I had to do to receive them was not uncheck a little box on an online form. Yes, they were quite literally opt-out in my case, and every time I had to renew my university grants and uncheck that box, I would always get numerous emails for months afterwards warning me that my student loans are unclaimed.
As a matter of fact, the FAFSA and University grants were both in excess of my tuition and books costs by about $1,500 every semester, so I effectively got paid to go to school. Most of my peers however are taking out loans...why they do this is beyond me, especially when here in Arizona you can live rather comfortably on $400 a month and don't spend all of your money on stupid bars and clubs.
In fact, I'd love to see a study done on what people actually spend this loan money on, because I'm betting that tuition and books don't figure into it in most cases. In fact I wouldn't be surprised in the slightest if a lot of it is spent on "partying," which in maintaining a 4.0 GPA myself I've never found the time to do.