Skip to comments.Don't buy myth of student loan 'crisis'
Posted on 09/30/2012 10:14:23 AM PDT by SeekAndFind
Some myths are harmless. The myth of President Barack Obama's Kenyan birthplace is annoying but harmless.
Some myths are not harmless. The student debt "crisis," sometimes known as the "bubble" or "bomb," is a myth that is inflammatory, misdirected and mischievous.
You might have seen dramatic stories in the media about students who borrow $200,000 and wonder how they are going to repay their loans. Fact: One-half of 1 percent of all students borrow that much, according to the College Board. Much less newsworthy are the 43 percent who borrow between $1,000 and $10,000 or the 30 percent who borrow between $10,000 and $25,000. Truly boring are the 33 percent of all college students who graduate with absolutely no debt. The average student debt at graduation is $20,000.
But what about the accumulated student debt the "bubble," the "bomb" that threatens the American economy like mortgage defaults do? Currently outstanding student loans total $876 billion a lot, to be sure. There is $22 trillion owed on mortgages, with $8 trillion lost in defaults since 2008. If all students defaulted on their loans, the impact on the economy would be only one-tenth that of mortgage defaults. (One student in six is currently in default.) The student loan bubble is simply alarmist hyperbole.
Are there real problems with student financial aid? Of course, just not the ones the media want you to believe. Student aid pays for tuition, which has gone up dramatically in inflation-adjusted dollars in the past 30 years: 181 percent for private not-for-profit institutions and 268 percent for public four-year schools. Public tuition has gone up so much because state and local support has gone down so much. In 1965, public funding covered more than 50 percent of costs; now it covers barely 30 percent. Public institutions have had to raise tuition to the point where private college tuition is a relative bargain. An out-of-state student pays $22,440 tuition to attend the University of Missouri; she pays $17,950 at Columbia College.
Why is higher education more expensive than in the past? Increased student aid is a factor. So is new technology for instruction and research, necessary if the United States is to remain the world leader. So are all the staff positions that have been added at colleges and universities in all sectors because of increased regulatory burdens and unfunded mandates from governments at all levels.
And there is one sector of higher education whose students bear a disproportionate debt burden: for-profit schools. Half of all student loan defaults are by students who attend for-profits. They leave school with, on average, 50 percent more debt than a private college student and 80 percent more debt than a public college student. Furthermore, for-profit college students graduate at about half the rate of students at public institutions and about 40 percent of the rate of students at private schools. Too many dropouts from for-profit institutions have the worst of worlds: big debt and no degree.
When I went to school in the 1960s at a nearby private college, my parents took out a personal loan to pay for part of my tuition. It was unthinkable for me to borrow enough money to allow me to live in a fancy off-campus apartment, buy a nice car and take exotic spring breaks. Times have changed, and today student loans pay for many things, some of which have little to do with getting a good college education.
Maybe the student loan crisis is not economic. Maybe it's cultural.
Terry Smith is executive vice president and dean for academic affairs at Columbia College.
Terry Smith is executive vice president and dean for academic affairs at Columbia College.
Maybe the student loan crisis is caused by colleges over paying useless and supernumerary bureaucrats.
“Currently outstanding student loans total $876 billion “
Whenever people try to trivialize something I know they are also trying to be dismissive of it no matter what other words they speak.
This article was attempting to trivialize nearly a trillion dollars of student loan debt by comparing it to other debt amounts.
Examples of such things:
College president's $1M salary.
College football coach's $2M salary.
Elizabeth Warren's $350,000 salary to teach one class a year.
The really fancy new dorms.
The really fancy new cafeteria.
The really fancy new sports arena.
None of these things really contribute to a good college education, but due to the ease with which students' can borrow money, colleges find that they can spend all kinds of sums, and just keep jacking up the tuition to pay for it all.
“Terry Smith is executive vice president and dean for academic affairs at Columbia College.”
So Mr. Smith is pissed that these students are pissing away their student loan money on frivolities, rather than wastefully giving it to him.
I suggest Mr. Smith simply contact the CFO of his institution and see how much trouble he’s really in.
What Mr. Smith will learn is that from his perspective he’ll find a crisis is when fewer students apply to his institution because they do not care to take out loans, and he is unable to lower his standards enough to make up the difference.
THAT will be a crisis, won’t it Mr. Smith?
Health insurance....same thing.
Bingo...that is where we need to start cutting first! Sick of paying these Marxist professors so much money. Same with the government bureaucrats. Time to put a lot of them in the unemployment line! We also need to stop handing out free college to everyone and their brother. They need to stop requiring new textbooks every semester too. I use to buy used books when I was in school to keep down my costs but colleges don’t have many of those anymore because they change textbooks several times a year. It’s crazy.
“Now, all ya students ought to be happy that Massah University Administrator and Massah University Professor haven’t run yo lazy behinds off de University Plantation and leave you starve in de woods. You jes pays yo tuition an be happy you got Massah University Professor to let you have de crumbs off’n his table.”
A LONG while. Talking with execs at financial instuttions, the money is there but investors are very reluctant to spend it. They still see massive regulatory and financial hardships that will not go away with Romney simply being elected.
“Loan crisis??....Just another excuse for all loans becoming government loans.”
Exactly. Obama already took over the writing and administration of student loans, eliminating the banks. By defining student loans as a crisis, Obama’s administration will be able to determine who gets loans and who doesn’t. And who doesn’t have to pay back their student loans, and thereby get a free college education courtesy of the taxpayers. And who gets admitted to any college in the first place. What liberal courses must be taught to every student at college so they receive their full indoctrination and a little red book. etc.
Meanwhile the mostly liberal professors get to receive increasingly high salaries for teaching just one or no classes each year, using nothing but TA’s attending college with a free ride from a free student loan. Did I mention free Obama phones?
College has become so much more expensive because of student loans. Colleges know they can simply pass along the added costs of inflated professor salaires, fancy dorms, etc. Any industry who’s customers have access to unlimited cut rate financing, with minimal credit hurdles will see prices inflate much more than the real rate of inflation, whatever that is. I would venture to say that public colleges’ staff started from a much lower salary level than private colleges. Therefore, with the escalation of government salaries, these public college parasites got their chunk too.
Don’t leave out the plethora of USELESS majors that have sprung up in the last four decades: ethnic studies, black studies, women’s studies, queer studies and the like. The students who are dumb enough to choose one of these majors and who manage to graduate find themselves with bleak job opportunities. They quickly find that it is hard to make a living, as well as make payments on their $40,000 student loan debt, while they are working at the check-out counter at a grocery store or performing some other minimum-wage job..
If a student graduates with 50K or more in loan debt and can’t find a job because of this economy.Then that is a big problem for them and for society.
The root problem is that loans are not subject to bankruptcy protection and thus the banks have no real skin in the game.
The risk and rates for an Engineering major are far different for x_studies major.
Put some risk back for the lenders and this situation will self correct.
Maybe it's both. It will be a long time before some of these young people get to live as high on the hog as they do while in college. The idea of being a "starving student" is unthinkable by many (even by the government, which now gives food stamps to college students).
Eating Ramen and boxed mac and cheese builds character and makes you want to work harder. Living large on loans builds a sense that you've already "made it" and sets you up for real disappointment when you graduate, the $ comes crashing to a halt and the bills come due.
I'm sure we can all safely agree the student loan bubble is all just a myth invented by the right wing conspiracy. /s
“Maybe the student loan crisis is caused by colleges over paying useless and supernumerary bureaucrats.”
Maybe? There have been studies for the last 25 or more years that show that the cost of tuition is related to administrative costs not faculty salaries. By the way our General Counsel drives a Bentley Continental GT and were in a financial crisis which may require faculty layoffs. You can find lawyers these days for pennies on the dollar...wonder why she got her job. It is amazing how the rolling stock improves on making associate dean or health club manager.
1/2% + 43% + 30% + 33% = 106 and 1/2%
i guess somebody skipped school the day they taught arithmetic
I just have to brag about my granddaughter, she started college just over a month ago, lives in the dorm and has a meal plan. Her parents gave her a hundred dollars and she hasn’t asked for more yet.
Furthermore, the debt curve is increasing at a much higher rate as the costs of higher education are exploding upwards at an every increasing rate, unlike property values in most US areas.
Finally, student debt cannot be discharged through bankruptcy or simply walking away from it, thus shackling an ever-growing number of US citizens with an ever-increasing burden that remains with them no matter what they do.
Combine these factors with the horrid job prospects in many many areas of occupation and geographical dispersion, and you do have a fundamental breakdown situation that will come to the fore over the next decade or so.
My kids escaped undergrad debt-free, but between their grad school loans and their spouses loans they average about $50,000 per person. It will be a struggle for them to ever pay them off - until inflation cranks up their pay while holding the interest payments fixed.
It’s a crisis for someone if you are unemployed with a useless degree and unable to pay off your debt.
Their grad school degrees don’t enable them to make $10K more a year than if they hadn’t gone to grad school?
One yes and three not right now (or probably ever - but one dropped out of law school, so at least cut losses.)