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Recovery threatened by runaway student loan debt [Newt: "Student Loans a Ponzi Scheme"]
The Florida Times Union - Jacksonville ^ | March 3, 2012 | Tom Raum

Posted on 04/03/2012 1:58:28 AM PDT by Cincinatus' Wife

Surging above $1 trillion, U.S. student loan debt has surpassed credit card and auto-loan debt. This debt explosion jeopardizes the fragile recovery, increases the burden on taxpayers and possibly sets the stage for a new economic crisis.

............. Newt Gingrich calls student loans a "Ponzi scheme" under which students spend the borrowed money now but will "have to pay off the national debt" later in life as taxpayers....

Lifting student debt higher and higher is the escalating cost of attending schools, with tuition increasing far faster than the rate of inflation. And enrollment has been rising for years, a trend that accelerated through the recent recession, fueling even more borrowing.

Mark Zandi, chief economist at Moody's Analytics, argues that government loans and subsidies are not particularly cost-effective for taxpayers because "universities and colleges just raise their tuition. It doesn't improve affordability and it doesn't make it easier to go to college."

"Of course, it's very hard on the kids who have gone through this, because they're on the hook," Zandi added. "And they're not going to be able to get off the hook."

..."Parents and the federal government shoulder a substantial part of the postsecondary education bill," said a new report by the Federal Reserve Bank of New York. And some of the borrowers are baby boomers, near or at retirement age. The Fed research found that Americans 60 and older still owe about $36 billion in student loans.

...."overburdened student-loan borrowers may fail to qualify for mortgages and "stay much longer in their parents' homes," Gault said. Young adults forming households have historically been the bulk of first-time home buyers — and their scarcity could dampen any housing recovery...

..........The reduced federal rate is now 3.4 percent. It the cuts aren't extended, it will rise to 6.8 percent....

(Excerpt) Read more at hosted2.ap.org ...


TOPICS: Business/Economy; Culture/Society; Extended News; Government
KEYWORDS: education; gingrich; gingrich2012; nationaldebt; newt; newt2012; newtgingrich; ponzischeme; studentloans

1 posted on 04/03/2012 1:58:36 AM PDT by Cincinatus' Wife
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To: Cincinatus' Wife
Of all of the things that ‘government ‘ pays for. Higher education is a valid talking point imo.
2 posted on 04/03/2012 2:01:02 AM PDT by allmost
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To: All; Cincinatus' Wife

What “recovery” are they talking about? Is there a “recovery” where you live?


3 posted on 04/03/2012 2:18:21 AM PDT by 2ndDivisionVet (Ich habe keinen Konig aber Gott)
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To: 2ndDivisionVet

I had to listen to five minutes of global warming diatribe from the over make-upped extra perky lady before she told the damn temperature this weekend. It’s not warm this week I guess because she shut the f up.


4 posted on 04/03/2012 2:23:46 AM PDT by allmost
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To: 2ndDivisionVet

Good point!


5 posted on 04/03/2012 2:36:27 AM PDT by Cincinatus' Wife
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To: allmost

The problem with the easy loans to students is that an artificial demand is created. More students going with “free” money makes the price go up. But hey, its just pretend money anyway.

Same thing that happened with the real estate bubble. The gov’t financing easy loans, folks buying homes they couldn’t afford with money they didn’t have. But hey, we’ll make it back when we sell the house - because real estate only goes up “they aren’t making any more land you know”. Same with the education - “I’ll pay it back after I get that great job as V.P.” I forget what the unemployment rate is for college grads - 28% or something?


6 posted on 04/03/2012 2:53:00 AM PDT by 21twelve
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To: 21twelve
Your point is valid. I lived it.

But,if I may ask what better money is spent than on the minds of ourselves. Abolish the NEA, send half the teachers to Canada where they belong. We need our intellects.
7 posted on 04/03/2012 3:04:25 AM PDT by allmost
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To: 2ndDivisionVet

Just seen that addressed yesterday;

http://www.freerepublic.com/focus/f-news/2866973/posts
http://finance.townhall.com/columnists/mikeshedlock/2012/04/02/bankrupting_public_unions
“While the economists have declared the recession to have been over for almost three years now, ...” said Bob Kurtter, ...Moody’s Investors Service.

The Worst Economic Recovery in History
http://www.freerepublic.com/focus/f-news/2867275/posts
http://online.wsj.com/article/SB10001424052702303816504577311470997904292.html?grcc=grdt&mod=WSJ_hps_sections_opinion


8 posted on 04/03/2012 3:14:44 AM PDT by Son House (The Economic Boom Heard Around The World => TEA Party 2012)
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To: 21twelve

No Problem, Democrats have authored and voted yes to make student loan debt part of the bankrupting of this country via the Unconstitutional (non)Affordable Heath Care bill.


9 posted on 04/03/2012 3:17:17 AM PDT by Son House (The Economic Boom Heard Around The World => TEA Party 2012)
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To: Cincinatus' Wife
If we could get people like these off tenure, fired and replace them with professors teaching employable skills, it would probably go a long way to solving the problem. U of O professor Norgaard makes wastes $89,000/yr base pay plus benefits.

Kari could then spend more time writing books like:

Norgaard, Kari Marie. 1999. “Moon Phases, Menstrual Cycles and Mother Earth: The Construction of a Special Relationship Between Women and Nature,” Ethics and the Environment 4(2): 197-209.


10 posted on 04/03/2012 3:18:53 AM PDT by expat1000
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To: allmost

I imagine some of our intellects aren’t going to college now because of the high tuitions. At the Univ. of Washington they are turning away local valedictorians (sp??!! - I ain’t one!) in place of more out-of-state kids because they can charge the higher out-of-state fees.

It isn’t about education to many of the schools, it’s the money.


11 posted on 04/03/2012 3:21:10 AM PDT by 21twelve
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To: 21twelve
Good post. The bigger picture, from the broader economic standpoint, is this:

Suppose I borrow $1 to pay for "higher education" and then find myself in a position where I can't repay the loan. If I eventually default on it, did I ever really spend that $1 at all? A single case like this may be simple to understand, but keep in mind that my $1 "purchase" had already been reported in the nation's GDP figures.

Multiply this simple case by potentially hundreds of billions of dollars in unpaid student loans, and trillions of dollars in mortgages in default ... and you can see why so much of the U.S. "economic growth" of the last two decades was completely fictional.

12 posted on 04/03/2012 3:35:50 AM PDT by Alberta's Child ("If you touch my junk, I'm gonna have you arrested.")
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To: 21twelve

We need the minds. This mess is...


13 posted on 04/03/2012 3:44:13 AM PDT by allmost
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To: allmost
Of all of the things that ‘government ‘ pays for. Higher education is a valid talking point imo.

It is? Why? Why is higher education any different from, say, mortgages, or health care, or "green" energy, or anything else that government messes up when it starts subsidizing said thing?
14 posted on 04/03/2012 3:48:46 AM PDT by Oceander (TINSTAAFL - Mother Nature Abhors a Free Lunch almost as much as She Abhors a Vacuum)
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To: 21twelve
It isn’t about education to many of the schools, it’s the money.

Some colleges are actually extended vacation resorts in disguise. Their primary mission is to give unemployed vacationers the time of their lives on the taxpayers dime.

15 posted on 04/03/2012 3:52:51 AM PDT by Reeses
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To: 21twelve

“More students going with “free” money makes the price go up. But hey, its just pretend money anyway.”

I would think that some schools would have closed in the past few years if those loans weren’t available to the students; on a positive note, I think kids will be much more reflective now on what kind of job market awaits them at graduation.


16 posted on 04/03/2012 3:54:01 AM PDT by kearnyirish2
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To: Cincinatus' Wife

The communists that run “higher” education are applying the Cloward-Piven strategy to break the private system so the government can step in, ala Europe, and be a single payer for university education. It is all planned out. No other explanation makes sense


17 posted on 04/03/2012 4:18:16 AM PDT by central_va ( I won't be reconstructed and I do not give a damn.)
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To: Cincinatus' Wife

Its not so much the traditional four year universities. Its the for profit schools like University of Phoenix, Kaplan, and Strayer that are driving a lot of the debt.


18 posted on 04/03/2012 4:36:26 AM PDT by rbg81
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To: allmost

This country has to get over the “everyone needs a college education” thing. Education is great, but indebting yourself to get one is insane. People used to get education, but they worked their way through college. Those are the ones who want an education so bad they are willing to do what it takes to get one and then they use the education they receive to actually accomplish something in life.

Education is like anything else, what you are given for free you don’t appreciate.


19 posted on 04/03/2012 4:47:13 AM PDT by McGavin999
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To: Oceander
It would be prudent to branch off onto another thread. I like smart people around me, the smarter the better.

Do you disagree?
20 posted on 04/03/2012 4:56:26 AM PDT by allmost
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To: expat1000; All
Gov. Rick Perry has been introducing 7 Solutions to other governors and getting positive feedback.

One good part is separating research from teaching so you can see which is productive and where the money is sunk.

Research (LIBERAL think tanks that have been shaping social and political policy with studies) is sucking huge amts of money (and continually demanding more) for tenured Sixties gray pony tails and those they've taught and brought into the "teaching" fold (and who have never lived or worked in the real world).

Teaching: neglected and often taught by teaching assistants -- and more than likely LIBERAL indoctrination.

What Are Texas’ Seven College Solutions? [snip] 1. Measure quality — The plan would calculate a cost-benefit analysis for professors. How much are they paid? How many classes do they teach? How many students? How do students rate those professor? The data would then be compiled into rankings, which students could review before choosing their instructors.

2. Recognize and reward teachers — This is merit pay for professors. The plan calls for the top 25 percent of professors to earn a bonus. Top bonuses would be $10,000 per class.

3. Separate budgets for teaching and research — This would allow colleges to better evaluate what kind of bang for its buck professors are providing. Splitting the pots of money would make it clearer how and why professors are paid.

4. Require evidence of skill for tenure — This would set easily-defined goals to earn tenure. For instance, a professor would have to earn a rating of 4.5 on a 5-point scale to be eligible for tenure. Likewise, a professor might have to teach at least three classes a semester, with at least 30 students in each class, for a set number of years before becoming eligible for tenure.

5. Results-based contracts with students — This amounts to a mortgage good faith estimate for students. Students would have to sign a document outlining the school’s class sizes, teacher evaluations, SAT scores of incoming students and other data that would allow them to make a better informed decision.

6. Funding in the hands of students — This proposal would take out the middle man in public funding. Some public money is given to schools as a tuition subsidy for student. The Texas Public Policy Foundation argues students will make the best decision if they get the money directly. Critics contend this creates a voucher system for colleges.

7. Create results-based accrediting alternatives — This proposal would gradually move schools away from traditional accrediting and create a national body similar to the Securities and Exchange Commission to evaluate college claims and actual results. Colleges that can not fulfill their recruiting pitch could be investigated for fraud. Establishing new accreditation would make it possible for more schools to enter the market. [snip]

21 posted on 04/03/2012 5:09:50 AM PDT by Cincinatus' Wife
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To: rbg81
Its not so much the traditional four year universities. Its the for profit schools like University of Phoenix, Kaplan, and Strayer that are driving a lot of the debt.

Many state universities have been raising tuition like crazy because of state budget cuts.

22 posted on 04/03/2012 5:12:36 AM PDT by EVO X
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To: allmost; Cincinatus' Wife

Here’s a newsflash...this thread isn’t about the value of higher education.

The article is about the cost of it continuing to go up and up and about young people’s futures being ruined because they can’t afford to pay back their student loans, and just the fact that they owe this vast sum is causing their credit rating to tank.

It quotes Newt Gingrich calling the Federal student loan program “a ponzi scheme”.


23 posted on 04/03/2012 5:20:14 AM PDT by txrangerette ("HOLD TO THE TRUTH...SPEAK WITHOUT FEAR" - Glenn Beck)
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To: Alberta's Child

Except under the current law, you can only default if you die. Student loan debt can not be discharged in bankruptcy.

Think about that. We have millions of kids with over $100K in debt and no jobs with no way of ever getting rid of that debt.


24 posted on 04/03/2012 5:24:43 AM PDT by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: Alberta's Child
Yes, also add Gov't debt to the fictional growth that we had and the picture is clear that our productivity was an illusion and that future growth will be as well.
25 posted on 04/03/2012 5:24:57 AM PDT by Theoria (Rush Limbaugh: Ron Paul sounds like an Islamic terrorist)
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To: EVO X

Believe me, it is not the for-profit institutions that are driving the debt. All the colleges have been raising tuitions because the money is there, and there are no tangible restraints. The money from raising tuitions at the college where I taught did not go to faculty salaries: I can testify to that. It seems to have gone to ever-expanding administration, including huge salaries for officials and their staff and offices.

At the time, as I watched this, all I could thought was: I think I know where the next bubble is going to be.


26 posted on 04/03/2012 5:26:21 AM PDT by docbnj
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To: EVO X

Trust me, they’re still a bargain compared to the for-profit schools.


27 posted on 04/03/2012 6:33:59 AM PDT by rbg81
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To: EVO X
Many state universities have been raising tuition like crazy because of state budget cuts.

Bingo! You'd be amazed at how many unfunded mandates are imposed on state universities by the state legislature.

28 posted on 04/03/2012 7:50:52 AM PDT by CommerceComet (If Mitt can leave the GOP to protest Reagan, why can't I do the same in protest of Romney?)
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To: docbnj
The money from raising tuitions at the college where I taught did not go to faculty salaries: I can testify to that

Worker bee employees and faculty members haven't been getting pay increases. You have to be a rock star to get those in this environment.

29 posted on 04/03/2012 5:09:49 PM PDT by EVO X
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To: rbg81
The estimated cost for an in state student at the university near me at is $130K+ and $190K+ for an out of state student. That is if they can finish in 4 years.
30 posted on 04/03/2012 5:27:31 PM PDT by EVO X
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To: Cincinatus' Wife
a) there is no 'recovery'

b) but if there were, this pØs would be its main threat:


31 posted on 04/03/2012 5:35:32 PM PDT by tomkat
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To: redgolum
I think it's pretty safe to say that the law will eventually be changed to allow all of that student debt to be discharged. A big part of the problem is that a recent graduate with an enormous pile of college debt has no real incentive to get a job -- or at least to get a job "on the books."

The U.S. government knows full well that it can't squeeze money out of someone who has none.

32 posted on 04/04/2012 2:24:11 AM PDT by Alberta's Child ("If you touch my junk, I'm gonna have you arrested.")
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