Bryce Covert: Recession Has Lit the Fuse on Explosive Student Debt

Yves here. I’ve been surprised that student debt has not become more of a social issue, particularly given high unemployments rates among new graduates. Perhaps that time is coming soon.

By Bryce Covert, assistant editor at New Deal 2.0. Cross posted from New Deal 2.0

Troubling long-term trends have gotten even worse as schools, government, and families cut back and student loans skyrocket.

This week’s credit check: Average student debt can spiral up to $100,000 with interest and late payments. Room and board charges at colleges have doubled in actual dollars since 1982.

It’s no great secret that student loan debt is exploding. The total amount is set to top $1 trillion, more than total credit card debt. But accompanying that post-recession surge in student debt (as all other consumer debt is being paid down) is a surge in delinquencies. As The Wall Street Journal reports, “In the second quarter, 11.2% of student loans were more than 90 days past due and the rate was steadily rising, according to data from the Federal Reserve Bank of New York. Only credit cards had a higher rate of delinquency — 12.2% — but those numbers have been on a steady decline for the past four quarters.”

The rise in student borrowing is a longtime trend, but things have clearly gotten worse in the recession. A lot of it is because of decisions schools are making. In a recent Atlantic Monthly article, Andrew Hacker and Claudia Dreifus explain that higher tuition — paid for by student loans — “keeps most colleges going.” Private colleges Loyola University and Franklin Pierce see 77 and 85 percent of students enroll with loans, respectively. Historically black colleges, which tend to have lower endowments and a poorer population, are closer to 90 percent. Part of this, they report, is not because the actual education is more costly, but because “room and board charges have doubled in actual dollars since 1982 to enhance campus life.” That’s a long-term trend. But part of it is unique to the recession: As endowments tanked, priorities changed. They note:

Recent actions by Dartmouth and Williams, two wealthy schools, convey a lot about academic priorities. In the past, both schools announced that anyone they accepted would be able to enroll without having to take out loans. That is, the colleges would ensure all the aid that was needed to make attendance possible… That was before 2008. But when Dartmouth and Williams’ endowments tanked, hard decisions had to be made. Among the first was telling their needy students they would henceforward have to borrow.

The government has taken much the same tack in looking at its own shrunken budget post-recession. Back in March, President Obama proposed a budget that ended an experiment that gave Pell Grants for summer courses and eliminated a subsidy for paying interest on student loans for grad students. His plan was better than the GOP’s, which wanted to cut the maximum Pell Grant payment by $845, end funding to other aid programs, and kill AmeriCorps. This comes on top of a longtime trend in which student debt has come to replace grants. As Roosevelt Institute Fellow Dorian Warren reminded his host Melissa Harris-Perry on MSNBC, “When we were in college, Melissa, Pell Grants paid almost half our college in the 90s. Now Pell Grants barely cover a quarter. It’s all student loans.” Grants used to cover two-thirds of financing an education; now two-thirds comes from loans. Post-recession, the government is looking to shrink that even more.

Families have also reacted to the recession by, understandably, socking less away for college and pitching in less for tuition. As Hacker and Dreifus note, “Fully two-thirds of our undergraduates have gone into debt, many from middle class families, who in the past paid for much of college from savings.” Those savings have likely dried up. A typical family spent only about $2,055 on education last year. Only half of freshmen entering college said their parents had put anything aside for their education, and of those who had, half had saved less than $20,000.

With so many sources of aid pulling away either out of necessity or stupidity, students are left hanging at just the time they need more help. The College Board puts average debt at $27,650, but that figure can spiral up to $100,000 due to interest and late payment penalties, which are even more likely in a recession. This is on top of the bleak job market graduating students face. The New York Times writes, “The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008… Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007.” It’s hard to pay student loans when you don’t have a job.

And don’t forget, this debt isn’t going anywhere, no matter how little students are able to pay it back. Unlike almost all other forms of consumer debt, student loans can’t be discharged. Barmak Nassirian of the American Association of College Registrars and Admissions Officers told Hacker and Dreifus, “You will be hounded for life… They will garnish your wages. They will intercept your tax refunds. You become ineligible for federal employment.” They can also dock Social Security checks when you retire, he adds. No matter when the economy finally pulls out of this stagnation, students will still be saddled with a heavy load.

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  1. Jack Parsons

    The students have had “terrorist terrorist terrorist” brayed at them since the early teens. I live in a nation of p… wussies.

    1. bmeisen

      They’ve drunk the cool-aid. The typical student in the US truly believes that education, especially higher ed, is a personal choice. They believe deep down that the benefits obtained through a BA or higher are first and foremost personal benefits and should be dutifully paid for, like the donuts you buy at Walmart, that there are good donuts and bad donuts and that you have to pay more for the good ones. Educational achievement correlates furthermore with genetic coding. High achievers achieve more because they are genetically pre-dispositioned to achieve more. Law of the jungle – you can’t blame them for getting scholarships.

      Welcome to debtor’s prison American style.

      The key to Germany’s success as a manufacturer and exporter is IMO its educational system: education, professional qualification in Germany is a public good. The political culture determined that the country is doomed without educated citizens, i.e. all citizens. Wars and crazies provided the proof. Public education has been successfully defended from the elite, from the howlers, from the home-schoolers.

      1. Abelenkpe

        “The political culture determined that the country is doomed without educated citizens, i.e. all citizens. Wars and crazies provided the proof. Public education has been successfully defended from the elite, from the howlers, from the home-schoolers.”

        Sigh…..wish the US could say the same. :(

        1. Neo-Realist

          It’s ok with the plutocrats in the US if it is doomed as long as ignorant intellectually lazy voters continue to elect people that serve the economic interests of the plutocrats, e.g., Lewis Powell letter.

        2. KnotRP

          > “You will be hounded for life… They will garnish your wages.
          > They will intercept your tax refunds. You become ineligible for > federal employment.”

          Your thinking is not outside the box….

          I would predict, given how bad everything else
          is getting, on massive young person emmigration
          (i.e. what country wouldn’t welcome highly educated
          youngsters into their fold at the beginning of their
          careers? Kiss that bad debt — which does not enough income to make it work — good bye….it’s just not marked to market

          So don’t be too sure that Wall Street has AAA student
          debt securities on their hands….I would figure as soon
          as Wall Street realizes these student loans are going to implode, they’ll push them into client pension funds and retirement account investments as fast as they can dump
          the toxic student crap they are currently creating off their
          own balance sheet (just like they did with MBS and CDOs).

          Set your alarm clock…we’ll be talking about the graduate
          emmigration crisis and student debt bust, in a few years.

          Boomers are in for some real trouble…and they’ll deserve
          living in the future they’re creating now….but who knows,
          maybe they intend to emmigrate as well, and let the sack
          of shit burn on the doorstep of whomever’s stupid enough
          to still be in the US in 10 or 20 years.

          1. KnotRP

            But I have a feeling Boomers will be too broke, worthless, and expensive to care for, to escape…

            Youngsters with an education might be paid to emmigrate,
            in comparision.

      2. John F. Opie

        There are private universities in Germany, quite a number of them, that charge significant amounts of money. While this is a fairly recent development, it reflects the dissatisfaction of many Germans for the mass education of the state-sponsored universities, as class sizes are significantly smaller and the quality of professors reflects their competencies, rather than their abilities to exist within a stultifying bureaucracy. Professors within the state system are generally paid only moderately and are dependent on gaining external financing if they want to be able to afford paying their grad students.

        My daughter is at the University of Magdeburg, state-sponsored university, and her introductory courses had over 500 students. One of high school classmates went to a private university and there were 30 kids in her introductory courses, and many of her other courses are more like 1:1 sessions with good profs.

        Of course, German state universities don’t have the excess baggage of ethnic and identity studies and pay their professors relatively little money: tenure is also increasingly rare (Privatdozent or private lecturer is what many end up doing, where your pay is dependent on attendance, i.e. adjunct work). I did my graduate degree in Germany and while some aspects were fine, others sucked. In far too many ways it is like a university run by the DMV.

        1. Stratos

          Actually, John F. Opie, ethnic and so called “identity studies” are a drop in the bucket compared to the flood of cash squandered on varsity sports teams, which function as farm teams for professional sports franchises.

          Even a free or inexpensive DMV education is preferable to student debt peonage as the students of Chile have discovered. Education is a tool like a hammer or shovel. Its use is dependant upon the intention, skill and experience of the user. Last I checked, a hammer is still a hammer, whether purchased at a garage sale or from a yuppie mail order catalog.

          1. Hal

            In general, any college degree with the word
            “studies” in it is worse than useless, not only do you pay for it but it is brainwashing and destructive of society. i.e. “Ethnic Studies”,
            “Gender Studies”
            and the biggest howler of all,
            “womens studies”.

          2. Stick

            Destructive how? Or is this just right-wing dogma bubbling up to the surface of your consciousness?

      3. svaha

        I don’t know if they’ve drunk the cool-aid so much as been dropped into a world with very few choices.

        Usually, only math-jocks and olympic athletes know who they are at age 18, for most of us it’s still murky and overpowered by hormones.

        For every high school grad that becomes a successful entrepreneur without going to college I can assure you there are thousands that don’t make it further than sales clerk.

      4. oliverks

        I can’t see why the home schoolers are destroying the public education system. The vitriol displayed towards them in this country is slightly alarming.

        1. abelenkpe

          Perhaps this is why:

          My mother home schools my sisters children despite living in a prosperous neighborhood with one of the best school systems in the nation. Why? Public schools served her own children just fine. However FOX news informed my mother that public schools were indoctrinating students teaching them dangerous things like evolution and to be concerned with preserving the environment. So to spare her grand children such horrors my mother, who is a high school drop out home schools her grandchildren. These kids spend all day every day in her basement while she cruises soaking up every fringe conspiracy theory essentially ignoring her charges. She might stop to clean her gun or rant about Muslims and immigrants between puffs on a cigarette but hey it’s a free country and she’s sparing those kids from thinking recycling might possibly be a good idea. (And from having any friends.)
          You tell me who is indoctrinating her grand kids?
          Now I’ve been told there are well educated well meaning parents out there who home school but I’ve yet to meet one that didn’t have some nutty religious or political reason for keeping their kids at home. That is why some people (myself included) have such strong reactions against home schooling. Perhaps that will change if I ever meet a family that home schools and isn’t completely insane. I’m certainly open to such change.

          1. oliverks

            I am having trouble following your argument. As far as I can see, the grand children are perhaps been cheated, but why is this destroying the public education system?

            While the views of your mother might be objectionable to you, I don’t think sending the kids to school will solve the deep seated anti intellectual bias that much of the country holds.

            In fact, given that the vast majority of the adult population in this country went to public schools, the results would suggest the current public education system is not shining light on the dark recesses of our childrens’ minds.

          2. Dan_in_KC

            To Oliverks:

            Perhaps you are not following abelenkpe’s argument because you fail to see that abelenkpe is addressing “..The vitriol displayed towards them in this country is slightly alarming…” when he begins “Perhaps this is why…”.

            Furthermore – I think your assumption that the majority of adult American’s are anti-intellectual is in error. While I believe the many of Fox-news/Rush Limbaugh listener’s might be spouting such views I would hesitate to claim they represent the majority view of All American adults otherwise the demand for a college education would plummet regardless of the price.

            The vitriol towards parents who home school their children, however, is primarily reserved for those parents who grew up in the public school system, are presently successful/healthy adults yet now claim that the public school system is poisoning their children’s minds regardless of the fact that the lesson content is essentially the same as that given when THEY went through the public education system. I am sure there are parent’s who chose to home school for different reasons (perhaps because their local school system is woefully underfunded) than those spouted through numerous right-wing propaganda channels – and they might even be in the majority – but the vocal contempt expressed towards the public school system by the former class of home schooling parents is what draw the ‘vitriol’ you find so alarming. Is it alarming to you because it hits too close to home???

          3. oliverks

            To Dan_in_KC,

            I am afraid you are not following the argument very clearly either. The point that started it was,

            “Public education has been successfully defended from the elite, from the howlers, from the home-schoolers.”

            I argue once again no one has managed to offer a credible explanation of how home-schoolers are destroying public education.

            Now to address your point that America is really not anti intellectual, I offer as evidence that Bush was elected (as was Reagan). You can argue that Bush didn’t win the popular vote but he was within spitting distance. Reagan won by a landslide. This would support the theory that the country has a strong anti intellectual bias. Credible surveys also show a majority of Americans do not believe in Evolution, and most Americans score very poorly on international science tests. How can this not be anti intellectual?

            Once again, what is wrong with parents taking their children out of school, if they so desire. How does this hurt public education. Perhaps your comment about it being “too close to home???” is really an anguished plea on your part. A feeling of guilt, maybe that your children are not getting the best education they can?

        2. abelenkpe

          O and to be fair, it’s not just home schoolers with a right ward bent like my mother. A co-worker and his wife home schooled as well. Really, it was at the wife’s insistence. She was well educated herself but chose the non schooling method for bringing up her kids. She also was extremely religious and worried that public school education would introduce her kids to ideas not in line with her religion. Again I am open to the possibility there are kids who are home schooled by well meaning intelligent parents. Just haven’t met any yet.

          1. Alex

            Hi. I’m Alex. Now that we’ve met, let me tell you about home schooling our kids. We’re pagan/agnostic, and don’t have any interest in teaching our kids anything much different than a good secular school would. Unfortunately, our local schools are crap, and our son is so far ahead of the local schools – he’s 12 and he knows who the Finnish generals were in WWII, and he’s decided to reread Sun Tzu before reading Rommel’s book so he can see whether Rommel violated Sun Tzu’s rules of war – that it would be ridiculous to send him to a standard 7th grade history class. And yes, he’s getting math and science, including evolution, and a very liberal introduction to politics, thanks very much.

  2. Bill G

    Sounds like the benefit is less than the cost so people may not be willing to pay as much for college. Self correcting no?

    As for the folks that decided to take on the debt I’m sympathetic but that is not a public problem.

    As for not being able to escape the debt through BK,isn’t that part of the bargain for making education so affordable for everyone (sarc)?

      1. Bill G

        As long as it’s a peaceful demonstration that’s great. They should learn not to support government policies offering subsidies to an industry or to be willing to accept the inevitable downside (high cost of service/education/health care/etc.).

        1. Foppe

          “They support government subsidies to industry” < Sorry, but where did you draw this conclusion from, exactly? Does it follow from the fact that they don't vote out incumbents? Because I don't believe it does.

          "As long as it’s a peaceful demonstration" < I love the double standard. White collar, distributed damage is fine, but demonstrations need to be "peaceful" to be "legitimate".

        2. attempter

          I like effective demonstrations. If non-violent (I don’t know what “peaceful” means; effective non-violence is often very assertive and confrontational) demonstrations work, then they’re best. If they don’t work, than the insistence upon them is worse than worthless, it’s collaboration with the enemy.

          1. Binky the Bear

            If the populace doesn’t break the state’s monopoly on socially mediated violence, do they have any leverage in bargaining with the powers that be? Did Operation Pink stop the Iraq War, or did urban riots in the 1970s stop the Vietnam War?

            Motor City’s burnin’…

        3. bmeisen

          The US government spends more on higher education, “subsidizes” it more, than any other government in the world, and the results are very similar to what has happened in US healthcare: profound inefficiency and injustice.

          The bubble of subsidies (i.e. financial aid) associated with for-profit universities is a splendid example. Students borrow substantial sums, receive handsome aid packages for virtually worthless degrees from companies that provide lavish rewards to their managements at the public expense.

          A lot that goes down in the US is at the public expense, ironically little for the public good.

          1. deep6

            “‘subsidizes’ it more…”

            Link? Seriously.

            Break down federal and state spending on student loan programs, appropriations to public universities and state moral obligation backing of public- and private-school debt issues, and then we’ll have a starting point for comparing US vs. foreign govt subsidies.

          2. bmeisen

            Post-secondary expenditures by GDP per capita in selected OECD countries:


            USA tops the list.

            Public spending on primary, secondary, and post-secondary education amounted to about 3.7% of GDP in 2006, or 10% of total public spending, totalling about $600 billion:


            This is more in absolute terms than any other country, according to my calculations. Your points are well taken and I’ve perhaps inappropriately called it a subsidy.

          3. zadoofkaflorida

            I’ve seen the pell grant students on campuses. Most are in “remedial” reading programs because their skills are not even at college level. The parking lots are jam full at the start of the semester. By mid term, half empty. The pell granters couldnt make a half semester. They buy sun glasses and music CDs at the campus bookstore with pell grant money. There goes your tax funded pell grant money.

      2. Neo-Realist

        I have a feeling too many of them believe that demonstrations won’t make a difference, plus, it’s tough to get the youth away from super mario and halo.

  3. attempter

    The whole notion that we all need to go to college at all costs is a joint government/bankster/university fraud, and is part of the general ideology of how education needs to keep Americans “competitive” at all costs. (I saw a whole argument based on that Big Lie in one of the other threads.)

    But all of this is fraudulent.

    higher tuition — paid for by student loans — “keeps most colleges going.”

    There’s the basic corporatist scam, an ongoing government bailout. But it’s far worse for the targets than with subprime mortgages, since these are indentures they can’t discharge.

    It’s good that there’s increasing skepticism about the alleged worth of the college credential (don’t call it a “degree”, which is generally a meaningless term conveying no information about the thing’s purpose). I wonder what the government will try to do if people start refusing to take out these enslaving loans for this worthless purpose, like the way they’ve been choosing non-participation over buying worthless health insurance politices. What kind of forced market would be the college bailout equivalent of the Obamacare Stamp mandate?

      1. rjs

        …long term debt, be it mortgage or student loans, is just a stealth way to put people into indentured servitude, not much different than the company stores that the appalachian miners ended up owing their souls to…why should young people have to go into debt to the banksters for dozens of years & be forced to work off the debt in order to make a contribution to the future of the country? in what we can now clearly see coming, the people’s wages are driven down to below the level needed to service the debt, and the plutocracy succeeds in reducing the people into virtual slaves, which they look to do whenever the prevailing politics change to support such a system of mass debt bondage…the lybians may now be free, but not many americans are…

        1. TimOfEngland

          Debt is a claim by the bankers on your future labour, profits and time.

          That is the only thing people and especially students need to really understand.

  4. Middle Seaman

    A modern nation must offer free education and free health care to its citizen. Sadly, we are far from being modern.

    1. akaison

      Progressive labels with right wing economic thought.

      The sad part is that I had to read through the multiple right wing comments above just to get to someone who actually is progressive on education.

      I am sure many here think they are on the left. They spout right wing dogma without even realizing they are doing it. Thank God someone gets it. The problem is that education cost too much. Not that people shouldn’t get an education.

      1. citizendave

        I had a similar reaction. In my ideal society we would have universal education and health care. Imagine what our politics would be like if our entire population were educated. We heard stories growing up that educating an American slave was a serious offense. With education they could free themselves.

      1. Fíréan

        I often see in all media as to the benefits of liberating non industrialized and third world nations that they may be all educated, women and children alike, that the country and people may prosper. If so the benefits to those societies then surely why not in the industrialized west too ?
        I fear that some western countries maybe regressing to a state where ALL education will be available only to the those who can afford it, or maybe a tier system whereby the quality of the education will be relative to fees paid. A civilization on the decline.

  5. decora

    what’s the problem? these securitized student loans are quality investments.

    also, if you are interested, i have some credit default swaps against them. meet me out back after closing time.

  6. Mike M

    Very much connected to the housing bubble. I’d like to see the figures on how much HELOCs contributed to the inflation of higher education costs over the last twenty years. Now, as we all know, that source of funding is long gone.
    Poor kids. Like they’re going to be able to afford a house carrying 30+ grand of debt into adult life from their education.

  7. PaulArt

    Anything that starts as a public good is slowly usurped away by the Fat Cat Crony Capitalists in the name of “Free Market” nonsense. So we went from Pell Grants to Student Loans to permanent indenture- all to put money in the pockets of the Fat Cats.

    1. attempter

      Yes, and as the piece says, under a true free market, almost all these colleges would have to shut down, since the people don’t actually need this “credential”, nor do we need the corporate “education” colleges instill (in erstwhile students the colleges themselves call “consumers”), nor do we need the globalized command economy the colleges help prop up.

      Since we’d be better off and have a more truly efficient economy and society without all these things, a true free market would do away with them all.

      That’s why the whole system, including its Free Market ideology, is dedicated to eradicating all true free markets.

      1. akaison

        You try to rebutt a comment about the public good with an argument about the “free market”?

        let me ask you- do you consider yourself a left leaning or progressive person?

        Better question: Why is it that other countries have a cheap or free college education system?

        Those might be questions you want to consider while endorsing the right wing arguments.

          1. Jane Doe

            I am not going to click through to a site in which you babble on about your theories.

            What I said- which you are calling nonsense- is that education should be cheap or free.

            Agree or disagree?

            Or do you argue as the idiot does below that such an idea is fantasy, which b.s. when someone actually compares the US educational system to the cost of going to college abroad.

            I can back up my statements. You can link me to your own writings, which I will not support by clicking through.

          2. attempter

            I am not going to click through to a site in which you babble on about your theories.

            Thank you. I’m sure you’d do nothing there but continue to babble.

            (And how telling that you’re offended by my trying to carry on the discussion the only way available. With that wonderful “education” of yours, your reading comprehension must be good enough that you saw the part where I said: “My response wouldn’t post”, no?)

            Meanwhile, I do indeed want education to be cooperative, and, I suppose, “free”, whatever that would mean post-money.

            It’s a technocrat like you who wants it corporatized, monetized, ruled by elites, and yet still somehow “free”. The very fact that you fetishize the term “free” highlights your money-based mindset and support for an economy under money’s dominion.

            Why shouldn’t everything be free, meaning freely available to those who actually produce all wealth? I have a reasonable suspicion about why such an idea’s threatening to you.

            No, I don’t see how it’s possible to babble more incoherently or in a more self-contradictory way than a corporate liberal like you.

            Too bad you’re scared to read my “theories”, i.e. truths according to any moral, rational, or practical measure. Then you might lose confidence in whatever your particular scam is.

  8. gs_runsthiscountry

    The next bubble, education! I have expressed my thoughts and personal experiences here in the recent past, about the students I know.

    The college gradutes “new normal”, no jobs prospects, a higherlevel degree in which you enter the world of bartending, driving a taxi or waiting tables (this is supposed to get you though college, not be a career). And, if you are really lucky, you get 2 part time jobs that don’t add up to a full time job (x-health care).

    With all due respect to the author of this article, Bryce, it really sugar coats the issue of college debt and doesn’t get to the heart of the issue.

    If Yves and readers will indulge me dropping a link, I think this is a much better depiction of the severity of this issue, by Malcolm Harris, and titled: Bad Education

    Lastly, burdened with debt, where will the economy be in 5, 10, 15 and 20 years. While the death of the consumption society is discussed on this blog often, you have to acknowledge this is another nail in the coffin of the consumption society.

    With increases of wages negligible into the future, part of that next home purchase, or car, or ? will be diverted into the university coffers instead via debt pay down. Staring into this abyss i see only one way out, large scale loan forgiveness – aka default and write-downs.

    1. carly

      The indebted will not only be unable to buy a home but worse, be unable to start a family, what with both spouses burdened by student loans. Middle class, educated people, that is the very ones who should be procreating for the good of the country.

      This may sound retrograde but let’s not kid ourselves. The middle class is the backbone and the future innovators of the US.

      1. gs_runsthiscountry

        Well, makes you wonder then, why the republicans are trying to over turn child labor laws and turn back the hands of time to the 1860’s eh?

        When mommy and daddy are already otherwise financially stretched, little Johnny and Suzie will have to work?

        The funny thing is, I used to joke [emphasis on sarcasm] with co-workers years ago -“There is no money, work-hours or bodies left to supplement income, so what is next, put little johnny and Suzie to work”?

        It was some years later I stumbled upon Liz Warrens “Two Income Trap.” I never read her book, however, I did watch her hour plus lecture and Q&A on youtube – the cliffs notes version if you will. There is a reason she has a following, SHE NAILED IT.

  9. alex

    From the article: “Room and board charges have doubled in actual dollars since 1982 to enhance campus life.”

    To “enhance campus life”? An assertion made without much evidence. From where did this demand to “enhance campus life” (regardless of cost) come? Do students have a choice in how much they’re willing to pay for “enhanced campus life”? And how has it been “enhanced”? Oh, the article tells us:

    “Bowdoin’s menu features vegetable polenta and butternut soup”

    They don’t mention what vegetables, but basic polenta is, despite its trendy status, one of the cheapest foods around. My Slovenian ancestors ate it when they couldn’t afford luxury foods like bread. And butternut squash has suddenly become an expensive vegetable? What next, eating lobster because you can’t afford pumpkin?

    “while Penn State provides legal downloads of music numbering two million songs a week”

    OMG, students now get Internet bandwidth? We all know how expensive fiber optics have made that commodity. Of course in my day there was some controversy over giving students those newfangled electric lights.

    1. gs_runsthiscountry

      I have had some contact with Texas Tech. How you might ask, via hounding, marketing and requests for virtual and in-person tours – all via my current University Email address no less.

      Did they try to sway me with university professors, no. Did they try to sway me with University programs, no. Did they try to sway me with quality, no.

      They did however send me this:

      and this:

      and this:

    2. Yves Smith Post author

      You need to get out and visit college campuses; A lot has gone into amenities that don’t add to the quality of education, like pretty upscale exercise facilities.

  10. monday1929

    At the Union busting (and the Union was as corrupt as the management) NY Medical College in Valhalla NY, while they were cutting my benefits, a team of “desk polishers” arrived at the Administration Office to, yes, polish the ornate desks of the Great Leaders.
    I would Short that Institution if it were Shortable. Some Great people work there, but who do you think makes the big bucks?

    1. monday1929

      Oh, and the Socionomics Institute has a free analysis showing Five completed Elliot Waves up in higher education since the 1600’s. Colleges are in for some rough times, many will vanish. Letting people with the mindset of Larry Summers run their endowments will hasten their demise.

  11. Impeach President Bankster

    Consider the horror of realizing there are no jobs available after graduation. Then the jobs that are available are mind destroying bitch work. Checks are obediently written each month to get the monkey off of your back. Years and years of paying off an education to work in some lame corporate hell hole. You have no rights at work, management knows this, they also know you’re in debt up to your eyeballs, it really crystallizes the fraud of the ‘Murican dream. There must be something better.

  12. M.InTheCity

    Actually there is one way to essentially discharge the debt – leave the country and never go back for employment purposes. Credit scores don’t move between countries. It’s, uh, quite the hardcore strategy, however. Of course, this presumes that the person can move to another country…

  13. Publius

    Of course student debt is “dis-chargeable.” All debt is a human construct, and all human constructs are subject to decay, evolution, or outright extinction.
    What is going to happen is that students who are being hounded and garnished enough will realize it is rational to drop completely out of the formal economy. They will work under-the-table or live in parallel economies or even in farms and urban or rural communes, sometimes off the grid. What cannot be sustained will not be sustained.

    The sentiment of “Bill G” above, that this is not a public problem, epitomizes the worse nihilism of the deracinated middle-class corporate serf: as long as it does not affect me, it’s OK to rape and pillage the rest of the citizen-slaves of my economy.

    Unfortunately, this problem will become very public when students rebel by creating their own debt-jubilee, and the government goes hog-wild with military-type SWAT raids on student debtors. Wait… that’s already started happening, as I recall from a recent article about a SWAT raid on a student debtor that resulted in children being terrorized by armed paramilitary commandos. This nation is far sicker than most commmenters here realize.

    1. aletheia33

      “Of course student debt is “dis-chargeable.” All debt is a human construct, and all human constructs are subject to decay, evolution, or outright extinction.
      What is going to happen is that students who are being hounded and garnished enough will realize it is rational to drop completely out of the formal economy. They will work under-the-table or live in parallel economies or even in farms and urban or rural communes, sometimes off the grid. What cannot be sustained will not be sustained.”

      i agree. this is already going on. as states and local municipalities run out of revenue, certain ones will become more hospitable to such intelligent, resourceful refugees, and barter and time trading will become the norm during Great Depression II. these educated exiles from the usual scene of their advancement–the big cities–will quietly, gradually go about conceiving and creating the next viable form of our society. smart communities will try to think of ways to attract them. relying on local agriculture and energy sources, people will keep body and soul together.

      we can’t know what will emerge, but surely there are some pretty ugly normalities we now live with that are going to become untenable and fall away.

      1. bill

        Are students really unable to discharge these debts? A good approach would be to keep an outstanding credit score while in school, pay off the student loans with credit card, small business, and signature loans, and then file for bankruptcy. 100,000 is likely to large a number to abolish this way, but 40 or 50k could be discharged.

        1. Bhikshni Lozang Trinlae

          That is very interesting and sounds like the perfect answer to ObamaFedSachs.

          Another consideration in this topic is who are at the bottom of this higher education food chain…I dare say it is the theology school students, many of whom, we might argue, are expected (by self and others) to be the ones serving as chaplains and counselors and social workers to the disenfranchised poor and vulnerable, and thus are to be punished for taking the discarded safety-net souls rather than making any new widgets for S&P.

  14. Abelenkpe

    I went to graduate school in the mid nineties and even then my classmates were graduating with up to 100,000 in student loan debt. Schools would offer academically successful students a scholarship in the first year then less for the second and third basically baiting students into taking on loans to finish their degrees. Those with debt went on to get good paying jobs but had to pass on things like buying a home.
    I find it troubling that many are forgoing a college education. Those without a degree are having a much more difficult time surviving in this economy than those who have a degree.

  15. akaison

    Right wing framing of the discussion.

    What’s interesting here is that one goes from discussing the problem to immediately framing the issue in right wing terms. Rather than discussing the public good of education, and, therefore, let’s make education cheap to obtain, we get this frame that we must obtain more loans or cheaper loans.

    So long as we allow the right to control the debate, these things will only get worse. Other countries have free or cheap public college systems. Why don’t we?

    For example, even if one wants to go to a community college these days, it now costs thousands of dollars to attend to obtain basic degree.

    Finally, there point that people are making above about college not being required is delusional at best, and lying at worst.

    Have any of these people read the help wanted sections?

    Admin Assistant jobs now requires some college education. When they are speaking of non education jobs- please list them. How much they are expected to pay, etc. No, the problem is not that one can avoid obtaining an education to get a pass into the work force. The problem is that it cost too much and the work force requires that one obtain the education.

    The whole fixation on student loans while ignoring the rest of the system that produces the need (not just want) ignores why people are going to get these degrees. The work force is saying we will not hire you without them.

    1. MIlitary Industrial Educations

      Corporations won’t hire you unless you’re an indentured servant, or their is evidence that you’ve “paid up” or that your credit score is good. That doesn’t have much to do with a Bachelor’s degree in Sociology.
      Corporations don’t want you “smart” either, they’d prefer you were in debt and compliant. College is becoming a relic of the American experience: Gone is affordable housing, collective bargaining, health insurance, a fine motor car , ,regular pay, and Democracy- the belief at one time was that going to school gave you a better chance at what was believed to be (and was in comparison to the rest of the world) a more comfortable life. But not now.

    2. JTFaraday

      “Rather than discussing the public good of education”

      The reason that higher education in the US is not a public good is that US “citizens,” who don’t value the public sphere (unless they think there’s something in it for them, like a Pell Grant or some other government bailout), see the end goal of their educations as strictly careerist and their careers as private goods.

      Yes, there is much about US society that forces parents and their offspring into that self defensive posture, but remedying the culture is going to require a lot more than just filling the Pell Grant accounts and telling everyone to STFU about the economy already.

      And you are the one with the unacknowledged right wing framing. The whole idea that, and the deliberate creation of a society in which, only the highly educated can make a decent living is a deeply, deeply conservative idea. One that has the demonization of (these days, centrally planned) surplus labor at its basis.

      After a decade of hard selling (conveniently expensive) elite educations as the only solution to “staying competitive” in a declining real economy, the move to credential skepticism on the part of a snookered working public is a necessary step in the right direction.

      “Education as economic cure-all” and means of flogging the less successful into submission has got to go.

      1. Jane Doe

        It takes a special talent to write the “I know you are, but what am I argument” of claiming someone wanting cheap or free public education is pushing a right wing frame.

        1. JTFaraday

          I see no concern in the poster’s comments for the public good with reference to publicly provided education, merely with the private good of the educated individual. If education is solely regarded as a means to attain private ends in the form of employment, then it is a private good and I see no reason for it not to be paid by the individual receiving the good.

          There may be other ways of looking at the issue of publicly funding higher education, but this poster–who accused others on the site of utilizing a right wing framework–did not even gesture in any direction in which we might locate the public good (however remote, and when an explanation is offered, it usually is remote).

        2. JTFaraday

          Well, the other right wing aspect of complaining about the cost of education is the way that’s currently used to undermine the pay and status of the education workforce, but I didn’t assume they were working for Scott Walker.

          1. Jane Doe

            REASONS FOR INCREASING TUITION In public colleges, state appropriations cover the majority of costs, with a smaller share of revenue coming from the student in the form of tuition. A small reduction in state support may result in a large increase in tuition. An example helps clarify this point. If a public college receives anaverage $5,000 per student in support from the state and each student pays $1,000 in tuition, a total of $6,000 is spent on the student’s education. However, if state support erodes by 10 percent, or $500, tuition go up by 50 percent to compensate. Small cuts in state support may thus result in large relative increases in tuition. State support of higher education often drops during recessions, which either means wrenching cuts in higher education operations or painful increases in tuition. Most public colleges do both.”


            We must remember that the tax cuts are not merely federal. They are state. These state cuts have an impact on what people are paying, and the money being used to cover an infrastructure that was once a shared burden and that infrastructure is becoming more and more expensive.

            Here’s some links regarding the technical infrastructure


            Basically, there are not the tax dollars to cover the infrastructure.


        3. attempter

          No, people here are simply arguing in terms of the kleptocracy that actually exists, rather than the delusions of your good civics textbooks and the fantasyland policies (all, of course, maintaining centralized capitalism and concentrated wealth, but just “better”) you spin from those delusions.

          Looks like I and others rousted some “credentialed” (and probably indebted) liberals who tremble for their own dreamt-of positions higher up in the creative class hierarchy, hmm?

          But all the actions of your kind demonstrate how all your happyland talk of “universal free higher education” is a scam. Your real complaint involves your fear that the ladder’s being pulled up before you get to climb it. The ladder-pulling as such you’re fine with.

          Therefore you attack, not the criminals, but those of us who want to demolish the hierarchical structure itself, ladder and all.

          “Right-wing” – and who, praytell, is here running interference for collegiate debt scams?

          I see no concern in the poster’s comments for the public good with reference to publicly provided education, merely with the private good of the educated individual.

          Yes indeed – corporate liberals are bourgeois in the most literal and vile sense of the term.

          1. Jane Doe

            So, the educational systems of Europe and other advanced countries are a fantasy. While arguing for low cost education is supporting Kleptocracy? You are not at all full of shit.

    3. bluntobj

      The inflation of the cost of education, along with massive debt loads used to finance it, also leads to a surplus of individuals with degrees chasing an ever smaller pool of professional jobs. This results in those individuals spilling out into the labor market searching for whatever work they can. Employers, offering scarce jobs and flooded with applicants, raise the requirement standards to filter the stampede. It’s like a derivative “collar;” filter those with no degree, those with too much education, older workers, long term unemployed workers, etc. Pretty soon it’s a scene out of the “Grapes of Wrath.”

      Solution: Education, like health care, must be paid for in cash. No loans, no insurance. Without the heroin of credit inflation the prices on these goods will rapidly fall to match what students can pay. “Free” educations offered by governments, like “free” healthcare, only last as long as the tax revenue or debt issuances last.

      I would wager that if you put “Big Education U” up against the military industrial complex, Sickcare/big pharma, wall street etc., in the swag distribution fight in times of rapidly declining revenue, B.E.U is gonna get creamed.

      1. Jane Doe

        The solution can e found in Europe and other non-right wing arguments over education. But hey, I am the right winger for pointing out education should be cheap or free. And you are all the left wingers for pushing far right ideas about how there should be an ability to pay only rule to education. That won’t help or aid the wealthy alone at all. No it won’t. No, not at all. I like this site, but I can see the same kind of non-thinking that occurs on other sites occurs here.

        1. JTFaraday

          Americans wouldn’t know a non-right wing argument about “education” if it plotzed on their head.

  16. rps

    2011-2012 Federal unsubsidized stafford loans at 6.8% for undergrads. Subsidized at 3.4%. Loan origination fee 1%. Burying 18yrs under a mountain of debt/interest payments

  17. Out of the Frying Pan

    It’s become an Education-Industrial complex. Easy credit led to unsustainable massive cost increases.

    What needs to happen in the retrenchment:

    – Too many colleges. Some will need to shut down.

    – Too many and too high-paid administrators. Some must go.

    – Too many superfluous areas of study. Fluffy subjects will have to be pared back. Focus on the core.

    – Basic liberal arts, humanities, and non-career courses can be handled through televised courses (in classrooms) taught by many fewer – but the very best teachers in each subject. Those tapes can be distributed nationally as lectures to be used in classrooms in a widespread manner. Grad students can be used for these class discussions, test administration, and grading in those classes.

    – Other selected courses can be self administered through the internet if needed to round out the education, on a limited basis.

    – Basic bachelor’s degree in non-intensive liberal arts majors should be cut to 3 years. Hard sciences and engineering continue as 4-5 years undergraduate. I certainly did not need 4 years worth to learn the liberal arts basics.

    – Career oriented classes continue to be staffed by fewer, but in person professors teaching an assisting in classrooms.

    – Costs are thus reduced significantly and savings passed on to students. Colleges, teachers, and administrators that cannot survive this may have to close down or look for other opportunities, and students will have to bear larger class sizes for the cost savings as a tradeoff.

    – Other shorter duration, more intensive vocational higher education programs can evolve for specific training – perhaps in conjunction with private industry support who need the labor assistance (if one day jobs start coming back….)

    1. JTFaraday

      What a great plan! Definitely a college education every American can afford to skip.

      Now we’re talking.

    2. attempter

      selected courses can be self administered through the internet if needed to round out the education

      Why, other than the system’s need to herd students through corporate toll booths and the students’ alleged need to purchase the corporate credential, can’t this item suffice, and we drop all the rest?

      The bulk of the education we can also achieve for ourselves autonomously and cooperatively. Nary a toll booth or rent extraction needed anywhere.

      Except, of course, by the criminal parasites who tend those booths, and by their flunkey supporters, like several in this thread.

  18. sticks

    Another exhibit (in an unending queue) demonstrating how profoundly wrong our society is, and the plain meanness we harbor for American children and young adults. Perhaps education is a human right, and all who desire to attend university should be able to do so at no cost to the student. Instead, we prefer to subject our children to the prospects of low wage service jobs, cannon fodder in the armed forces, or debt servitude, except of course, for those scions of privilege, the sons and daughters of Wall Street. Dismal and getting worse…..

    1. waerden

      You forgot forced labor in human-rights violating prisons.
      We’re expecting that sector to grow to be 10% of the economy
      and 20% of its citizens.

      1. sticks

        Prison labor (so admired by Chinese capitalists) complements the open air (but as confining in most material ways) prison of debt servitude, and the US has the largest. Indeed, debt as an instrument of class and social control is as powerful as the more overt and crude forms of totalitarian rule in other less sophisticated and developed societies. And why do young Americans take all this without nary a protest? Bruce Levine, rogue psychiatrist, posits meds have done this generation in. Big Pharma, fascist tool. The hall of mirrors that is the US today is the freak show for the ages.

  19. rps

    From Additionally, it is often in the financial interest of the lenders that students default. Large lenders derive income from not only lending and servicing operations, but also from collection assets (and even guarantor assets in the case of Sallie Mae) owned or controlled by the company. This leads to the common situation where a loan is defaulted by a lender, becomes vastly inflated with unverified and unchecked collection costs, and then becomes a revenue stream for the guarantor and collection company…all potentially owned (or controlled) by the very same lender! A defaulted loan clearly can produce far more revenue for the system. It is obvious that this structure gives the lender/guarantor/ collector entities a perverse incentive to default loans rather than providing customer service aimed at helping the borrower avoid default.
    Indeed, Sallie Mae’s own annual reports provide compelling evidence of dramatic profiteering from defaulted loans: In the 2003 annual report, The Sallie Mae CEO brags to shareholders in the opening remarks that the company’s record earnings that year were attributable to collections on defaulted loans. The company’s “fee income” increased by 228% between 2000-2005, while their managed loan portfolio grew by only 87% during the same time period.

    It is a matter of record that lenders actually defaulted student loans without even attempting to collect on the debt! In 2000, Sallie Mae paid $3.4 million in fines as a result of the U.S. Attorney’s office discovering that the company was invoicing for defaulted loans where the borrower was never contacted.

  20. Hal

    Have to link to this comment on Kunstler’s blog:

    Small portion here:

    “From the perspective of actual education, this sort of debt crash may be a good thing. A lot of what goes on at our colleges and universities isn’t education but disingenuous bottomfeeding and fraud. The for-profit schools that advertise on TV are the most notorious (“I’m the director of nursing at the Mayo Clinic, and I am a Phoenix”), but they’re far from the only brazen, disgraceful ones. My Alma Mater, which straddles the second and third tiers of small liberal arts colleges, has about $100,000 in endowment funds per student. Normal, decent people would show some gratitude for the ability to defray several thousand dollars’ worth of costs per student annually just from interest and dividend income. My Alma Mater’s administrators, however, treat this amount as grounds for an inferiority complex relative to the likes of Swarthmore, which has more $400,000 per student, and greedily demand more from everyone within earshot. Even their betters at Swarthmore are pikers compared to Williams, whose endowment has over a million dollars per student.
    For institutions whose avowed purpose is cultivating in their students a life of the mind, they engage in incredible shows of smoke and mirrors and make incredibly brazen, hypocritical demands of their students to suspend critical thinking for sales pitches. It’s to their great discredit that with almost no exceptions they play the games encouraged by US News and World Report, whose hackneyed bullshit quantifying the unquantifiable has pathetically become the gold standard for most prospective students and their parents in the US. (Reed is the only competitive college I can name offhand that doesn’t play this brainless game.) These schools have all the grace of an insecure twit sulking because his Lexus is older and cheaper than his neighbor’s Lexus…”

  21. Jean Paul Marat.

    Give it time. There are many scambloggers spreading the word. When students get the bill; others realize that IBR will leave them with tax bills exceeding 200K, and all realize they have no chance at retirement, no ability to have children, no family life. Its revolution time. Given that the USA has failed to pay its revolution insurance (Social Security, Health care programs) for so long. I predict a return of the gillotine.

  22. ep3

    Yves, I haven’t started reading yet but right off the first sentence I had to reply. It is so easy to avoid paying student debt and then they extend terms for 30 years on some loans. So it’s easy to manipulate your payments to avoid the reckoning. And remember, you don’t have to start paying back until you are not in school. So the easy thing to do is keep borrowing to keep taking a class every semester just to prolong actually having to make payments.
    Back to the article.

    1. carping demon

      Yeah. How about, dragging yourself by tooth and claw towards some faint shadow of the left that can still be noticed in your peripheral vision if you don’t try looking directly at it.


      1. attempter

        Why so bitter? Is your fundamentalist corporate liberal ideology letting you down?

        (He stamps foot and carps even more demonically, but unfortunately what’s more a squeak than a roar: “Prosperity IS TOO going to trickle down! My Hopiate Leader told me so! At least for we who still hold faith at the altar of good government and Better Elite Leadership!”

        Now that’s some good “leftism” and “progressivism”. Meanwhile the those with eyes see where we’re progressing with it.)

  23. Praedor

    New college graduates in the USA, I would like to suggest a little something to get back at the greedy banksters and corrupt politicos who serve corporations. I suggest that you graduate with huge student loan debt, leave the country with your degree and put it to work in SE Asia, the ME, etc, and intentionally default on your student loan. Do NOT pay it back and take your higher learning to other countries. Don’t file US income taxes, just stay away. Let the monsters who are stealing from the real people (people who work for a living) to feed CEOs and other non-humans suck the dirty end of the shit stick.

    You owe the USA and its corrupt government NOTHING but the rearview mirror. Until the US govt is overthrown an all the corporatists and banksters are 100% purged, there is no reason to have any loyalty to the USA. It is kleptocracy every bit as much as is Russia. Screw it. Screw it all to hell.

    1. Gunnar

      Too late. They offshored the job you were going to get five years ago. Now some Indian who is smarter than you is working it and has 5 years of experience as well.

    2. Jesse

      My goal is to eventually emigrate to another country. (New Zealand, Australia,Canada, etc…) I do NOT want to contribute in ANY way to this country.

        1. oligarch Jones

          No Kevin, only you contribute. You are the keystone of our society and get to call out these young whippersnappers when they threaten mutiny.

    3. Stratos

      Praedor, you are forgetting that the IRS has field offices in over 80 countries. Uncle Sam will always get his cut first, no matter where you move.

  24. Linus Huber

    This is the result of another government program. If there would not be any student loans, study fees would be lower. It is the same if there would never been a homeownership program, house prices would also not have reached this levels in 2006.

    Whatever the government promotes, just increases the problems down the road. It is similar here in switzerland. It just seems a good thing at the time but at the end there will always be problems when things change back to normal. With less government interference in such things, we are all much better off.

  25. ep3

    And Yves, I can’t wait until the banksters can pass those types of laws (“You will be hounded for life… They will garnish your wages. They will intercept your tax refunds. You become ineligible for federal employment.” They can also dock Social Security checks when you retire, he adds. No matter when the economy finally pulls out of this stagnation, students will still be saddled with a heavy load.) onto other forms of debt. Garnishing SS (if it’s even there) for a medical debt for a trip to the ER when a person was 20 years old.

    1. Kevin Murphy

      Please explain to me why a student who takes out a loan for housing, food and education is not responsible for repaying said loan. Why is this the fault of the banks? Perhaps we should simply not allow loans at all because our children should not be exploited? They can then begin to pay for themselves at age 18 instead of 22-23.

      1. attempter

        For starters, this is the kind of thing simpler times used to call FRAUD:

        Telling a prospective borrower to take out a loan with the promise of great benefit (in this case, a good job) later down the road, even as you’re simultaneously abolishing that benefit and know it won’t exist in the future. The banksters who dangled that promise were the same banksters who were both demanding that all real jobs be offshored or otherwise liquidated, and organizing out the liquidations themselves. The government and the universities were full, conscious collaborators in this process.

        In fact, human beings still call that fraud.

        That exact same scam on the part of the banksters is part of the reason all mortgages since the latter 90s were fraudulently induced.

        1. Kevin Murphy

          Are you for real? My daughter has student loans and is a college student. No”bankster” has solicited us to take on such a loan. No “bankster” has enticed her to pursue a college education. I fully expect her to pay these loans back.

          1. Kevin Murphy

            I do not think that $25,000 in debt at the end of college is being a “debt slave”. That is hyperbole. Have you never taken out a loan? Have you not bought a new car? I am talking the cost of a new car here.
            You implied that my daughter was somehow coerced by “banksters”. She was not. You imply that she will graduate with no hope of a job: we do not agree. I take it your experience with your children was different? Were they coerced into a college education? Did you not provide guidance? Or are you in fact nowhere near any sort of real world decision making on matters pertaining to the education ofd a child that you are completely out of touch?
            And I don’t know WHAT to make of your statement that all mortgages since the late 90s were a fraud. Mine sure wasn’t.

          2. Greg Colvin

            Kevin, are you not aware that unlike every other kind of loan a student loan cannot be discharged in bankruptcy? That is the evil that risks turning our students, including your daughter, into indentured servants.

          3. Brick Morgan

            Your daughter will never be an indentured servant because Daddy will always be there for her if anything goes wrong. Not everyone has a daddy like you.

      2. mucho giusto

        Hey Kevin,

        Maybe kids starting at age 5 should take out loans to pay for their school lunches. You could make a pretty good business of being the playground loanshark.

          1. Kevin Murphy

            Oh and by the way “brick”. It sounds like you feel your parents shortchanged you. Don’t feel bad you are not alone. I too didn’t have a daddy like me. That said, I expect my children to pay their own loans off without my help. Dear god, they aren’t helpless.

          2. Brick Morgan

            No “Kevin.” You are being obdurately thick. You can’t run a society where people are expected to get jobs to pay off their loans when there are either no jobs to be had, or the jobs that exist aren’t remunerative enough to pay off the loans.

            This is not the 1950’s. America is hemorraging jobs while piling on student debt. There is just no way to get out of debt for the majority of college students, your exceptional children notwithstanding.

          3. Kevin Murphy

            Never said my children were exceptional. That’s your words. I assume that since there is “no hope” of paying off their loans that the student default rate will go to 100% soon. I don’t think that it will be an “exceptional” feat to pay off student loans for most. That is at the level cited in the article by the college board ($27,000 or so). That’s about $300/month or so.

  26. rps

    Remember when there were many good paying jobs that required the ability to learn on the job. Today, employment is captured by the EIC; educational industrial complex. No synthetic skin equals no access to the the job market. College graduates desperate for employment are forced into minimum wage jobs and/or internships due to the students are in survival mode and have the overhang of student debt. Frankly, all private educational institutions should pay taxes as they are for-profit. They receive donations “gifts” that are written off by the giver as well as tax-free income for the schools. Too many freebies on the backs of students and taxpayers.

  27. Kevin Murphy

    $27,000 in average debt does not seem excessive to me. What I have seen (as a parent of a college student) is more competition for the spots in state schools with their far lower cost.

    1. Freude Bud

      I’m curious as to why I haven’t seen anybody discuss the possibility of a blanket consolidation of federal student loans to levels close to the fed funds rate. It seems to me that this would be stimulative and wouldn’t require the assent of the GOP in Congress. Given that consumption is restrained by student debt, such a restructuring could have positive effects in terms of consumption. It would reduce Federal income, but it would be appropriately counter-cyclical, no? Am I missing something?

  28. Cynthia

    College costs are spirally out of control, largely because college loans are guaranteed by the government, which gives lenders the incentive to fork over tens of thousands of dollars to students with no credit check or questions asked. If students fail to pay their loans back, the government will step in and pay lenders the full price of these loans, which adds another layer to the moral hazard problem in the consumer lending industry.

    This is what happens when an industry such as the college industry — or the healthcare industry, for that matter — gets the best of capitalism and the best of socialism, all rolled into one. Allowing colleges to straddle the fence between socialism and capitalism is what’s causing college costs to far outpace all other consumer costs — excluding healthcare costs, of course. So to fix this problem and get college costs back in line with other consumer costs, e.g., gas and groceries costs, colleges should be totally subsidized by the government, or they should be thrown into the free market and made to survive without a single dime from Uncle Sam. And I’ll bet money on it that in this particular case, socialism will win out over capitalism with hardly a fight.

    1. Kevin Murphy

      You are saying that all colleges should be fully funded by the federal government? Seems a bit radical to me. I do think you are correct that the costs are out of control and some of this is due to govt. guarantees. Many kids going to college have no business doing so. We should, instead have more people going into the trades. In addition, I think that the “arms race” in non-academic costs (full service dining halls, really nice dorms, fitness centers) needs to (and will) come to an end.
      That said, I don’t think that coming out of school with basically a new car loan worth of debt (per the College Board cited above) is all that egregious.

      1. Cynthia

        If students are saddle with a college loan that is equally in size to a car loan, then they’ll have a mighty hard time purchasing a car, much less a home. How can we continue to dependent on consumerism to fuel our economy if the consumers who are just entering the workforce are very limited in their ability to consume?

        1. Kevin Murphy

          They could buy a used car. I didn’t own my first new car until I was 27 and it was entry level. As far as a home: are you kidding? I didn’t buy a home until I was in my 30’s. They can rent for goodness sake. Frankly, taking out some loans and having some “skin in the game” is a good idea for a student. My daughter will have roughly $20,000 of loans when she graduates which is not too far of the Collegeboard median and I don’t consider this unacceptable.

  29. KFritz

    Here’s hoping that some brave legislator (Hello Bernie Sanders!) proposes a change to the laws, allowing discharge of student loans. The howls of our fiendly financial institutions will reverberate into deep space.

  30. David Rockefeller

    Home owners now much more strategic about paying mortgage debt, including doing the jingle mail thing.

    I know not in today’s environment, but I wonder if we’ll ever see parents taking equity out of real estate to pay college tuition? Instead of kids owing on student loans they can’t service, parents would have a debt that can be discharged in BK or otherwise renegotiated.

    Mom and dad will take the hit to their credit rating. But their kids skate. No problem with law licenses, background checks, federal unemployment checks, garnished paychecks and seized tax refunds and all the rest.

    Just thinking out loud here. It’s a bit too strategic for the average person. But what’s to stop someone from doing it?

    1. Kevin Murphy

      You do realize that parents already take home equity loans out to help pay for college? I assume you do not have college age children or am I not understanding what you said?

  31. Elizabeth

    I was just observing last night — to my 24-year-old roommate, whose eyes glossed over when I mentioned the Obama/Schneiderman standoff — that none of this meltdown has meant much to Generation Millennium. Why in the world would any of them suspect Obama as being on the wrong of side of this? “I guess I’m just an idealist,” she said. Idealist for what? Not for home ownership, for one. These kids can’t even imagine owning a home. Why, indeed, should they care about forecosure fraud? I’ve never heard a single one mention it, let alone respond to a discussion about it, and yet it will define their generation’s whole economic experience. Obama-speak fits right in with that: “Change” and “hope” and saving the freakin’ whales or something. I hate to say it, but he’s like their generation — all talk, no action — only he’s in my generation — a total sellout.

    They might wake up slightly when they realize the impact of these student loans. They’ll just all default as a matter of course — and then it will be everyone’s problem.

    1. Kevin Murphy

      I suspect that buying a home would be the last thing on the mind of a 24 year old. But, if she does want to buy, prices are much lower now:). As to student loans, I suspect most of the bad debt is from “for profit” colleges and community colleges both of which are the “subprime” of education. I think that the government is looking into the use of student loan guarantees at the for profits. Maybe they will shut them down.

      1. John Deutsch

        Home prices are not “much lower now”, then they were only 10 years ago. This is part of the disaster, all those hedges on housing prices. Housing prices are insane still.

        1. Barton Logan

          Not only are they still insane, but try getting a mortgage two years out of college in this cautious lending environment even assuming you have a great job. After all, you could lose it tomorrow.

          1. Kevin Murphy

            Buying a home two years out of college is a bad idea. They are lucky they can’t get a loan.

    2. Stratos

      There is a terrific organization,, that describes how Banksterers and their lackeys in Congress and the state legislatures dismantled citizen protections such as bankruptcy laws and usury laws to create debt peonage for students and other borrowers.

      A mass refusal to repay this odious debt would be a very effective way of resisting this debt yoke. If borrowers stopped paying, it would affect the banksters and their lackeys much more than the average citizen.

    3. Damian

      these kids will all wake up sooner or later just like the mortgage slaves –

      we are going to 25 million mortgages underwater and then the tide will go out with strategic defaults being normal course of action rather than pay the mortgage

      the schneiderman fiasco so out in front — is demonstrable that they have no shame and dont care what the citizens think – strong arm the NY AG on the steps of St Patricks Cathedral – amazing ! the fraud is momumental

      the kids eventually will thru facebook wildfire have the same enlightment at the same time and they will go AWOL massively.

      the entire system is corrupt anyway – so chaos will bring it all down as sector after sector recognizes it is useless to protest any other way

      TBTF will only be eliminated – if the people destroy the system

  32. Publius

    It is about prestige, not education. Take the MBA. The prestige of Harvard or Stanford or Wharton and the Alumni network are what you are buying, not an education. The educational system is bankrupt but this is because the nation also is bankrupt. Our college graduates could have this college education in high school if they went to a decent school. My mother in rural Kentucky went to a one room school house and was able to read and write the English language better than many college graduates today.

    1. Jane Doe

      Except that’s not true. The cost of education even at community colleges, where I counseled my family members to go, is also rapidly increasing.

      Most people have no idea what they are talking about and settling on right wing frames.

      Want to know the single biggest reason education is increasing in cost?

      Government is cutting its contribution to education so that individual students are having to take up the cost. The result if you look at the research is pretty clear. Say the government in some state cuts education contribution by a billion. For students, that could represent a 10 percent increase per year cost in their education.

      Student loans are a symptom of a deeper problem.

      1. Foppe

        A nice book about this is Academic Capitalism (1999), describing the move towards a more “competitive” university system. (I believe the same authors have since written 1-2 more books on roughly the same topic.)

        1. Jane Doe

          Here’s some info that I have read on the subject

          REASONS FOR INCREASING TUITION In public colleges, state appropriations cover the majority of costs, with a smaller share of revenue coming from the student in the form of tuition. A small reduction in state support may result in a large increase in tuition.

          An example helps clarify this point. If a public college receives an average $5,000 per student in support from the state and each student pays $1,000 in tuition, a total of $6,000 is spent on the student’s education.

          However, if state support erodes by 10 percent, or $500, tuition go up by 50 percent to compensate. Small cuts in state support may thus result in large relative increases in tuition. State support of higher education often drops during recessions, which either means wrenching cuts in higher education operations or painful increases in tuition. Most public colleges do both.”


          We must remember that the tax cuts are not merely federal. They are state. These state cuts have an impact on what people are paying, and the money being used to cover an infrastructure that was once a shared burden and that infrastructure is becoming more and more expensive.

          Here’s some links regarding the technical infrastructure

          Basically, there are not the tax dollars to cover the infrastructure.

          So, the student loan bubble is a product of changing education from a public good to a commodity.

          1. JTFaraday

            Well, then it looks like someone’s toll to participate in the predestined to shrink American liberal free market economy just got bigger, didn’t it?

            Okay, I’m going to try one of those Deep Economic Thought experiments.

            Let’s say I’m a weak president who doesn’t think. (You can call me Barack Obama). And I take direction from His Holiness Jamie Dimon while doing smack in the Oval Office with the Timmy and the Treasury Boyz from Goldman Sachs.

            So, teh Boyz come to me and they tell me that a couple years down the road, I’m projected to have a handful of good jobs and bunch of McCrappy jobs and whole lot of slots in my future Favela on a Hill:

            Since I come in at the end of this process (I’m a weak president who doesn’t think, after all) I get to figure out who goes where.

            Considering that I am myself the premier product of this very same liberal system of education and considering that I ought to support those in the higher education community who have faithfully served as my especial enablers all my life,
            why wouldn’t I charge the parents and students who have single handedly determined that they are among the Chosen Few destined for my handful of good jobs, a nice fat premium for the especial privilege of admission to my new jobs casino?

            When you can answer that question, check back.

            Oh, okay. If it bothers you to call the weak president who doesn’t think “Barack Obama,” you can call him “Ronald Reagan” instead. You can even pretend it’s 1980.

      2. KnotRP

        Easy money student loans drive up the competition for slots at a school, which drives up the price.

        No different than going from a one-earner society to a two-earner society….we all end up with the same purchasing power, but work twice as hard. It’s a prisoner’s dilemma or perhaps a coordination problem…defect, and you live half as well as everyone who doesn’t defect.

        But I think incomes are going to end this game,
        just like it ended the housing game…but not until
        a lot of looting has occurred.

        1. Jane Doe

          You and the other right wing ideologues are transparent.

          You don’t bother to discuss how government cutting of subsidizing educational institutions is causing the hyperinflationary costs- you simply regurgitate a right wing talking point about loans, which is really a right wing talking about about how education is unnecessary. The argument is basically a free market argument that education is like buying a car or a widget and should be treated as such.

          Its transparent that its not about education at all but instead to advance free market fundamentalism.

          THis is not just happening at the college level. You use the same arguments at the high school level as well. Anyone who follows education is familar with the exact same arguments for high school worded differently to make it about “performance” and paying teachers too much.

          1. Jane Doe

            A lot of people call themselves “left” or “left of center” but all they really mean is “not far right winger.”

            In short, I don’t care what you call yourself. It says nothing about what ideas underpin your analysis.

          2. KnotRP

            > A lot of people call themselves “left” or “left of center” but
            > all they really mean is “not far right winger.”
            > In short, I don’t care what you call yourself. It says nothing
            > about what ideas underpin your analysis.

            Would it surprise you if I said I think the next
            generation is too important to load them down
            with debt? You seem to be under the mistaken
            impression that I don’t want these kids going
            to school….when my point is that they shouldn’t
            be tied to a debt anchor that will sink them.

            Now what am I?

  33. JamesW

    Did I miss any mention of the principal cost driver or has my reading comprehension taken a dip???

    SECURITIZED student loans, anybody??

    Securitization has been, and remains, the primary cost driver.

    1. carping demon

      Well, most folks haven’t grasped the destructive power of securitized mortgage loans, yet, either. It’s not that hard, but TPTB don’t really want to talk about it. Heaven forfend it is involved in student loans, too.

  34. Psychoanalystus

    Don’t worry, my friends. Rick Perry has a plan to solve the country’s education crisis. Namely, he’d extend the student loan program all the way down to kindergarten, so that children everywhere can partake of the benefits offered by the free market system and attend the charter school of their choice.

    Go Rick!

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