Is The So-Called Student Loan Crisis One Big Exaggeration?

Hear that sound? It’s the collective freakout of students across the nation as it comes time for them to finally pay up on those student loans. But while student loan debt is a big issue, at over $1 trillion total, experts are telling everyone to take a deep breath and calm down, because it’s really not that bad.

Please, convince us, as we stare into the bottomless abyss of sending away chunks of change to various lenders every year for the rest of our lives! CNNMoney talked to a few smartypants people who say student debt won’t hit our economy as hard as say, the mortgage crisis. This, in contrast to other experts who warned that student loan debt is a ticking time bomb.

“I don’t think it’s a bubble,” said Mark Kantrowitz, publisher of Finaid.org, a financial aid website. “Most students who graduate college are able to repay their loans.”

Of course, plenty of us have issues with our loans — and student debt now tops credit card and auto loans. But while we’re taking on more student debt on average, and more than a quarter are behind on payments, more people are going to college, due to the economic downturn. In turn, more debt is created. Rising tuition costs are also prompting students to take on more debt.

Because some people have such high debt, that skews the average amount of debt per student pretty high — at about $27,000. That’s partly because of a high number of graduate students taking out private student loans. Really, only around 10% of students have more than $45,000 to pay off.

So even if it’s not as bad of a situation as some make it out to be, it’s still a serious business, as many can’t find jobs right out of college in the current economic environment. What it all boils down to is the payoff in the long run, says one expert, as those with bachelor’s degrees earn about $650,000 more over their lifetime than their peers who only have high school diplomas.

“It’s an economic investment,” said Sarah Turner, professor of economic and education at the University of Virginia, Charlottesville. “It’s not going to work for everyone, but on average, it has a high return.”

There is no student loan ‘crisis’ [CNNMoney]

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  1. u1itn0w2day says:

    Seems like a positive spin story. Student loans are doable and payable if you get employment that can handle those payment. I don’t see the current economy supporting the volume or dollar amount of many of these student loans.

  2. defectiveburger says:

    well this certainly makes me feel better about my 100K in student debt. Thanks, grad school.

    • bhr says:

      My friend will have close to 200k when he graduates next year, but will also have a DDS and the ability to work anywhere and pay it off relatively quickly. The amount is only bad when your projected earnings don’t match the amount you pay. Getting a degree on loan from an expensive private college in a career that tops out in the 40s-50s doesn’t make any financial sense.

      It’s why I think the Community college model makes a lot of sense for people who want to go into public sector jobs.

      • VintageLydia says:

        Except some community colleges are increasing tuition close to rates of regular state schools and they only cover gen eds (unless you go through a nursing program or other trade program if your school offers it.)

        • bhr says:

          I’m talking about doing 2-2. Knock out your gen eds at ~$100 credit hour and then do your major at a University. In the case of my local CC they cap tuition at 15 credit hours, so 16+ are the same cost (about 3600 for 30 credits in a year). Meanwhile my state school alma mater cost 6200/year for full time students, plus room and board.

          So, spend two years, spend 1/2 the money, live at home. Then go to Big State U or even Fancy Private U to finish, save a ton of money and have the same degree.

          • defectiveburger says:

            The downside is if you choose professional school like law/business/med/vet. Those are flippin’ expensive and there just aren’t community college substitutes. That’s my trap presently…

            I’m just really glad my debt isn’t going to a for-profit school. It seems like the real student debt issues are coming from for-profit schools and heavily advertised trade schools promising way more than their students can actually achieve, so if they keep growing, student debt absolutely could become the next bubble.

            Disclaimer: This is not an attempt to open a can of worms to debate about the virtues of for-profit education, nor is such debate valued :)

            • bhr says:

              ya, but a doctor/lawyer/vet will usually make a salary that allows them to pay back those large loans. The difference between paying back $200k while making $80k and paying back 50k while making $40k are night and day if you know how to live within your means.

              • VintageLydia says:

                Vets make very little money. My sister in law is applying for vet school now and she’s pretty much resigned to the fact she’ll have loans to pay off for a very long time as do almost all vets.

              • Ryno23 says:

                You have quite the misconception of the majority of law grads. Most of my classmates were making around 40k right out of school (in 2006).

    • alana0j says:

      Oh man I don’t even like to think about the dollar amount I will owe by the time I graduate…but it will definitely be worth it in the end :)

  3. gqcarrick says:

    I don’t think there will be a bubble. A lot of students can pay their loans off, but many won’t be buying a house or new car anytime soon if their payments are that high.

    • The Magic of Television says:

      It’s an indirect bubble, because all the (non-dischargeable) student load debt leaves people unable to spend money on other things, which will further hamper the economic recovery.

      • ElDiablo says:

        I won’t call you a liar, but that’s a hell of a way of looking at it. Not many are going to loan 18 year olds with 0 credit history and no income 6 figures if they can get their degree, immediately declare bankruptcy, and move on. It’s not an auto loan. The bank can’t show up and repossess the education.

        • OutPastPluto says:

          It doesn’t matter. It’s an insured debt. It should not be undischargeable. NO DEBT should be. That’s what allows bankruptcy to be it’s own sort of social safety net so that we don’t have dickensian style work houses and debtors prisons. People should have the option of starting over. Failure should not be feared to the the point of crippling our ability to make potentially profitable risks.

          The perversion of bankruptcy is a far wider problem than just student loans. That’s really the predator lurking to strangle our economy.

          • Not Given says:

            If they think everyone will graduate and immediately file for bankruptcy then they should put some limitations on it. You can’t buy a big screen TV and file bankruptcy the next day, either. I think there is a 2 year look back on ownership transfers, etc. so you can’t sign assets over to a relative.
            You should not have to die destitute, never owning anything, still owing student loans, there has to be some kind of out.

            It also needs to be impossible to get so much in loans for a degree that won’t pay enough to pay off the loans. That will cut down on defaults.

            • huadpe says:

              They used to have a 5 yr wait after taking out the loan before it was dischargable. That was changed to lifetime in the 90s I think.

        • The Magic of Television says:

          Not many would loan an 18-year-old with 0 credit six figures if they thought they wouldn’t be able to land a career that would allow them to pay back the loan. “You want to major in what obscure former Soviet Bloc nation’s literature? No I don’t think we’ll be financing that.” The non-dischargeability means absolutely no risk to the lender, so why not hand out student loans like candy? Which is what they did, and why we are where we are now.

  4. FatLynn says:

    Skyrocketing tuition costs are definitely a huge problem. Remember when states and the federal government used to help fund such things at a level that made it affordable for everyone to attend a public university?

    • Matthew PK says:

      States still do pay into their university systems. The problem is that the availability of federal dollars in loans *not* based on performance or credit-worthiness have driven up prices.

      • FatLynn says:

        There have been significant cuts to the amount that states give their universities in virtually every state. The universities are not raising tuition just for the hell of it.

        • TheMansfieldMauler says:

          A huge amount of money paying for colleges comes from investments. Millions of people have given money or willed money to universities, and that money is invested in stocks, bonds, mutual funds, etc. etc. etc. The University of Texas System’s Permanent University Fund is over $8.5 billion in investments as well as income from over 2 million acres of land – and that’s just one of several funds.

          The problem is that if the economy is in the crapper (the big evil corporations aren’t making their big evil profits), then that investment money is not producing income. And if that money is not producing income then students have to make up the difference. Funny isn’t it how many of those same students hate the big evil corporations and their big evil profits.

          • crazydavythe1st says:

            I think the big issue, which the PUF highlights perfectly, is that states are really no longer directly funding state universities in any significant way.

            However, 50 years ago they funded the endowments that are still generating some money – so you call them state supported, even though the state isn’t really doing anything for these schools anymore.

            Sometime in the future, I could actually see some of these state schools trying to shed their state “support” since the pittance they get from that “support” comes with so many strings attached that it isn’t worth it.

          • Tiercelet says:

            Mmmmm, nice try. But these kinds of institutional investors are typically very conservative, since they’d be keel-hauled if they blew the endowment on speculative funds. They’re typically AAA, bonds-and-real-estate types of investors.

            …in other words, exactly the sort of people who suffer tremendously under the ongoing zero-interest-rate policy (ZIRP) currently pursued by the Fed, as a backdoor bailout to re-capitalize the fraudulent big banks. Oh and also the sort of investors whose assets are going to be sacked to pay the mortgage settlement, and who investment banks routinely fleece as a matter of course (I think “muppets” is the usual term of art).

            So once again it’s the financial services industry that’s screwing over the rest of society. And then turns around and profits off non-dischargeable student loans guaranteed by the government even if unpaid (e.g. through Income-Based Repayment).

            Students protesting banksters are quite aware of the score.

      • FatLynn says:
      • Tiercelet says:

        It’s also that we’re paying into the system via loans, instead of subsidizing the public institutions. Yes, they still get money, but they’re getting less and less money every year — public institutions, even phenomenal ones like the University of California system, are massively underfunded.

        Note that a subsidy given to individual consumers, in cases where there are significant barriers to entry for new producers, tends to get captured in the producers’ bottom lines rather than lowering prices. (see https://rortybomb.wordpress.com/2011/04/20/on-public-funding-of-colleges-and-towards-a-general-theory-of-public-options/ )

        • Willow16 says:

          It amazes me that the UC system is still cutting. I graduated with a masters from UCLA in 1994 and, at that time, there were so many cuts. How much more have/could they cut? What sticks in my mind was that it could take seven years to get an undergraduate degree because the students could not get all their classes in the sequence they needed them in consecutive terms. Could you imagine paying year after year for a degree that should have only taken four years?

          They were going to close my school to save some money after I graduated but the school was able to convince the powers that be to merge it with the school of education so it still exists.

  5. catskyfire says:

    Perhaps we should also remember that the original purpose of college was not instant wealth, but to “round” a person out. That’s why one is required to take a whole lot of classes that might not be necessary for their major. (English for a science major, for example). To expose one to different things.

    In one of the Anne of Green Gables book, she’s about done with college. The housekeeper asks what the point of it was, all that time and money. Anne replies that it gave her an appreciation for the world. The housekeeper replied, that if she could learn it in 4 years instead of 20, it was a good deal.

    • aloria says:

      Having proofread many reports written by my collegues in engineering and the sciences, I must strongly object to your statement that English is not necessary for a science major. The ability to communicate well is essential regardless of what one ends up doing for a living.

      • catskyfire says:

        It could be argued that from a purely ‘what is needed for what I’m studying’, English isn’t needed for Science majors. -Writing- may well be, or composition, but the ability to explain the themes in Great Expectations probably isn’t.

      • Shadowman615 says:

        English in terms of literacy, writing ability, etc, yes. In terms of Elizabethan Poetry (possibly obscure kevin bacon reference?) not so much.

      • Not Given says:

        I had an English teacher that passed around copies of a math class syllabus just to ridicule it.

    • longfeltwant says:

      Perhaps, but as with so many ancient institutions, universities have evolved from a costly playground for rich scions to “round themselves out” into an essential caboose at the end of the train of education, which carries a person through a lifetime of earnings and participation in modern society. The original purpose for higher education hasn’t been the modern purpose for a heck of a long time.

  6. Matthew PK says:

    Is this article basically saying we shouldn’t worry about debt serfdom because people *are capable* of being debt serfs?

    • Doubting thomas says:

      You obviously didn’t waste your money on a history degree. Serfs were bound to the land and owned like property. They could not move to a more favorable place, had no say in their government, and could not legally make any attempts to improve their lot in life.

      • Pants O Doom says:

        And massive debt, where I can’t move because my credit is so shot because I can’t make the outrageous loan payments, nor can I find a job because of willfully missinformation from the institution isn’t serfdom?

      • veronykah says:

        You obviously missed the point. A “debt serf” would be bound to their lender and basically owned by them. Since student loans can not be forgiven or discharged (except in extreme cases) you ARE basically bound and owned by your lender. And move to a more favorable lender? Please, after consolidation, tell me how to do that.

    • Cosmo_Kramer says:

      People who are “debt serfs” probably shouldn’t have gotten a degree in the first place. People need to recognize that some people are not college material, and that you can earn a very respectable living by learning a trade.

      Now, there is a class of young people right now for whom college was the right decision, but the economy is preventing them from taking advantage of their education. Those people are in an unfortunate situation because of the economy, but it will get better. This has happened many times in the past, and it will happen in the future.

  7. longfeltwant says:

    Rest of our lives? My single mother, a public school teacher, sent me to a top-cost college and I paid off my resulting debt in nine years, the best money I ever spent. My education would be worth five times the amount of debt I incurred.

    • Tiercelet says:

      Mmmkay. How old are you? I’m assuming you graduated at least 9 years ago. Are you aware of the trend that’s happened in the cost of education since you went to school? Let’s look at U Mich Ann Arbor (arbitrarily selected as a big state school).

      Full-year 1999 in-state tuition: $6300 (in-state UG, “literature, sciences, & the arts” division) [1]
      Full-year 2012 in-state tuition: $12,400 – $14,000 (for two terms)

      Keep in mind this is in-state tuition for one of the largest public institutions in the country. The tuition has doubled, at least, since you went to school.

      You do not appreciate how bad it is now.

      • longfeltwant says:

        I graduated in 2012, ten years ago, from an institution which at that time cost $42,000 a year, and now costs $49,000 a year. The amount of debt I had when I graduated was approximately six months of marginal income compared to what I made before college, or maybe even less. Do you need any more details?

        Anyone who is complaining about $12k in tuition is an ass. That cost is NOTHING compared to going without the education. Even if you paid cash, received no scholarships, didn’t have a student job, and took 100% in loans, then the $48k in debt would be, what, three or four years of marginal earnings. Sorry, no sympathy to people who want to live the live of a highly educated person (and trust me, this life is sweet!), and not pay the paltry entry fee. If you are so beefed about it, try being ignorant, and see if you like that better.

        • GJaunts says:

          Time traveler!

          But on a serious note, you graduated in 2002. Compared to 2012, the employment market in 2002 was all rainbows and sunshine and lollipops and bacon. You can’t just ignore that.

          • ElleAnn says:

            I graduated from college in 2002, and I can tell you that it wasn’t all sunshine and roses. Maybe compared to the last 5 years, but at the time it was the first recession since 1993– when those of us graduating that year had barely been in middle school. It was hard to imagine, going into college in 1998 at the start of the tech bubble that 4 years later we would be graduating with limited job prospects. I can only imagine what students entering in 2004 felt like. At least everyone starting college post-2008 knows that the their job prospects might be poor upon graduation.

        • Tiercelet says:

          My point is not the absolute figures, my point is that even the in-state tuition has doubled. Never mind the change to cost of living in the meantime. It’s paradigmatic — you’ve seen massive tuition increases every year across the board. You can’t raise a price 4-8% yearly without eventually getting to some real money — as someone once said, the greatest failing of the human race is our inability to understand the exponential function.

          At this point, for many people a career in the trades (e.g. electrician) might well be more financially rewarding — especially when white-collar jobs (such as my own job at a university) are increasingly under pressure. $48k in tuition plus another $30k (let’s be nice and conservative) in living expenses, books, health care, etc. — graduating at about $80k in debt, and then paying interest on that for a decade — you don’t think that’s a pretty hefty burden to put on the shoulders of people competing for stagnant-waged educated-class jobs? You don’t think the loss of all that aggregate demand might have something to do with our ongoing economic crisis?

          That’s not to mention that there’s 14% headline unemployment (more like 26% real unemployment when you consider workforce participation rates) in the 20-24-year-old bracket. [1] So generously 1 in 6 kids can’t find jobs? With their best-possible-case $80k student loan debt?
          …that doesn’t seem like a potential problem to you?

          [1] http://danielamerman.com/articles/2012/WorkC.html — excellent information, analysis goes off the rails at the end when he gets into the delusion that government budgets need to balance for some reason; if you have “lots of unemployed people” and “retirees needing services” you have two problems which are each others’ solution…

      • yabdor says:

        http://www.bursar.vt.edu/tuition/

        VA Tech only wants $5852.50 currently for a full year. In state of course but still. Tech is quite a well reputed school. (At least for geeks anyway) You could goto school for 4 years and still incur less debt than buying a none too fancy new car. I’m just sayin….

        • VintageLydia says:

          Read your link again. That’s per *semester*, not year! It’s over 10K per year, so you’re over 40K in by the time you graduate, much more if you lived on campus (Blacksburg is pretty isolated. Almost no one commutes in!)

          • yabdor says:

            Woops…. my bad. You’re quite right. But even so I don’t think it invalidates the point that a 4 year education doesn’t cost anymore than a lot of cars. And your comment about the isolation of Tech is simply wrong. A college like Salem (WV) is isolated. Tech plays nationally ranked sports and can almost be seen from the interstate. It’s a stones throw from Roanoke which has an international airport. Tech has plenty of commuters and satellite campus’ all over Va. And I’m not clear on what any of that would have to do with what we’re talking about even if it weren’t so.

            • Serrinatta says:

              Six months of marginal income? What amount is that? 15k-20k a year isn’t going to cover it in six months.

              I think it isn’t the debt that’s the problem but being able to get into a job that can pay it off. With a lack of jobs for college graduates (when they can pay a high school graduate less for the same job), most of them cannot pay them off. I graduated and with my full time job at a newspaper I can’t even afford regular housing, I get “low income” housing.

  8. Reading Rainbow says:

    How about the fact that you can’t bankrupt out of student loan debt but you can out of mortgages?

    • AcctbyDay says:

      They take the house to do that, no one can take the degree from you.

      • fortymegafonzies says:

        They can effectively take mine. A pharmacist who has defaulted on student loans cannot work in any facility that deals with Medicare — for all practical purposes that means one cannot work at all. It’s a really bizarre rule when you think about it ….you can’t afford to pay your loans, so we forbid you from working.

  9. Herbz says:

    I graduated last year (May 2011) and am able to pay it off this month.

    Granted, I am an engineer, so I make a little bit more than most graduates (and there are actually jobs out there for engineers).

    • Herbz says:

      For anyone interested I had about the average in debt ($27,000).

    • Tiercelet says:

      That’s great for you — no, really, it’s awesome that you’re not burdened by debt — but even headline unemployment among your demographic is 14%. The real situation is worse than that. How are people to pay loans when they can’t get jobs and the wages for those jobs are stagnant?

      “Study engineering” is like saying that everyone can win at musical chairs if they’d all just run a little faster.

  10. Blueskylaw says:

    “I don’t think it’s a bubble,” said Mark Kantrowitz, publisher of Finaid.org, a financial aid website.”

    A self-fulfilling prophecy is a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior.

  11. Free Legal Advice! says:

    I finally brought my student loans below $100,000 last year. Law school ain’t cheep. Neither is failing in love with a government job.

    • Free Legal Advice! says:

      Cheep! Cheep!

      (Dang birds distracted me…) I still think the debt was worth it. I wish I’d been able to get one of those high-paying lawyer gigs, but life got in the way and a mortgage, husband, and two kids later I’m pretty happy with my lot in life. I went in to school knowing how much debt I would be in when I got out and I’ve always been able to pay. However, I should be out of student loan debt sometime around when I pay off the aforementioned mortgage.

      • tsukiotoshi says:

        Man, I graduated 2010 and was desperately trying to find a low-paying government gig, since public service was why I went to law school. But alas, so was apparently every other lawyer in DC.

        Now I just want out of the whole damn profession. At least I only made it out with $10k in debt thanks to scholarships. Most of my friends are well into six figures worth of student loans and are either still doing temp or doc review work or otherwise in psuedo-legal positions that don’t pay well. I havent decided yet whether it was worth it.

    • Cat says:

      If you have $100,000 in student loans, you may want to reconsider that whole “Free Legal Advice!” thing.

    • Stickdude says:

      Neither is giving away Free Legal Advice!

  12. Anachronism says:

    “Most students who graduate college are able to repay their loans.”

    Sounds exactly like what people were saying at the peak of the housing bubble: “Most borrower’s buying houses are able to repay the mortgages.”

    The underlying concern here is the same as the housing bubble- mortgage balances and payments are increasing, yet the income for the borrower’s stayed the same. The result? Epic disaster.

    With student loans, the cost of schools and amount of student loans are increasing, but the expected income is actually decreasing vs. 5 years ago. Furthermore, there seems to be an increasing disconnect between the degrees that are in demand and pay well (healthcare, engineering) and the degrees people obtain (forestry comes to mind).

    I’m not saying we are heading for a bubble- I don’t know enough about the industry to say.

    But I know damn well that just saying tha loans are getting paid now has zero relevance on what will happen in the future, even if nothing gets any worse than right now.

    • Deep Cover says:

      Agreed, but there is one more problem. How many banks are selling derivatives with student loan debt as the underlying asset? The derivative along with using LEVERAGE to purchase these instruments is the problem…not necessarily the fact that 10% of the market is at risk for default.

    • Jevia says:

      Exactly. Not to mention that yes, while most students can repay their loans, the fact that said loans are increasing (along with tuitions), while wages remain stagnant and benefits decrease (i.e. more workers have to pay for their own health care insurance), are that said former students will have less money for other items, such as cars, down payments for a house and other smaller consumer-type items that keep the economy going.

      So a bachelor’s degree earns $650,000 more over one’s working life. You realize that said 50 years of “working life” works out to an increase of $13,000 per year. Now consider not having student loans, or perhaps much smaller student loans for learning a trade and how much of that extra $13,000 is going towards student loan payments, and its clear that some should perhaps rethink the automatic ‘must go to college’ mentality.

  13. D007H says:

    Wonder how much of the debt/blame is associated with all of those scammy for profit colleges like Everest. They’ve really been stepping up their advertising and activities in the last few years.

    • chatterboxwriting says:

      I will rail against for-profit colleges for the rest of my life after working for one. I quit after five months because, no matter how much I needed a paycheck, I couldn’t keep telling misguided people that they should come spend $19,000 on a program that would lead to a job making $10/hour, especially when the local community college offers the same program for a total of $1,500. They used some VERY sleazy tactics in the admissions department. My “favorite” was the one where they would print out stuff from the Bureau of Labor Statistics and strategically highlight positive things. The admissions reps were ONLY allowed to show the highlighted text. So you might have an admissions rep show a prospective student a paper that says “People with this career can expect to make $47,000 per year”…completely ignoring the fact that the end of that sentence (not highlighted) was “if they have a bachelor’s degree.” They tried to make people think that coming to the school would lead to careers with big money.

  14. Booboobunnygirl says:

    Makes me wish I was a smarter 16 year old, who only wanted to go to art school and learn animation. Now I am stuck in a call center job and living at home trying to pay off my $100,000+ in student loans. Hind sight is 20X20 and no one told me that an animation degree was probably a bad idea, not sure I would have even listened to them if they had. I wouldn’t have gone to art school if I knew then what I know now.

    • lawnmowerdeth says:

      Art school costs over $100,000????

      • longfeltwant says:

        No, it doesn’t, he’s making it up. Also, people with animation degrees go to work doing animation, and there are a metric ton of animation jobs out there. He might have been a poor animator, or he might not have finished, or he might have made some other bad decisions, or some exceptional circumstance might have prevented him from getting the kind of job that his fellow art students got. Whatever the case, his story is atypical.

        • D007H says:

          Some of the more reputable art schools can cost a lot. I think CalArts is $37k a year for tuition alone. Maybe she went for a masters or some higher degree. I wish there was a metric ton of those kinds of jobs in my area. The only thing available are technical, manufacturing, and customer service ones. That’s why I’m back to school learning IT. Didn’t know that “Booboobunnygirl” is a “he”. Isn’t that a girl’s screen name?

          • Booboobunnygirl says:

            exactly, Thank you! Unless you live in Vancouver or you wanna move to the Philippines there aren’t many animation jobs out there.

            ahahaha

        • dwtomek says:

          I want to live in the same world you live in. It sounds dreamy there.

        • Booboobunnygirl says:

          Not really the case where I live, also I’m a girl my user name even has GIRL in it.

          Animation jobs don’t pay more than $40,000 a year and most are contract based and do not have benefits. I certainly could get an animation job, i in fact was one of the better animators in my class and right now I supplement my meager income after paying my $1250 monthly loan payment with commissioned illustration pieces. I cannot support myself on an animation job. I have plenty of friends working in animation, but their parents paid for their $40,000 per year tuition. I was unlucky and my parents are middle class so I had to take out HUGE loans to cover my schooling. Please don’t make assumptions about my life. thanks.

        • calicopaisley says:

          You know nothing and your various comments in this thread prove you know nothing.

          I went to the same art school as Booboo and I’m in the same case.

          Them’s the breaks, and it sucks, and we’re working hard toward pulling ourselves up by boot straps, but you have no cred at all to tell us we’re making this up. This is our generation. Deal.

  15. Alan says:

    It won’t be a bomb that goes off, but more of a ball and chain. Between my wife and I we have about 17k left of student loans. (ages 28 & 30). Yes, we both have OK jobs and can afford a house / cars / stuff, but that 300 or so a month student loan payment could really go back into boosting the economy.

    • ElDiablo says:

      You know that that money “came out of the economy” when the bank paid for your tuition, right?

      • OutPastPluto says:

        No. When that money was loaned out it was probably completely invented. Probably added to the real inflation rate (versus the bogus official number) too.

        Money is nothing more than bits in a computer anymore.

  16. Ansuz says:

    The biggest problem, as I see it, is that the marketplace has evolved but the education system in this country hasn’t.

    Fifty or so years ago, very few people went to collage because the number of jobs that required a college degree was much smaller – you didn’t need college to work in a factory. Thus, college cold afford to take a more rounded approach to education because the jobs on the other side were high paying enough to support it.

    Now, so many jobs require advanced training and so many people go to college that the salaries just aren’t there for many fields anymore. The college experience needs to adjust for that; career which need advanced training but that have lower salaries need to have accelerated lessons which eliminate the “liberal arts” education and focus on practical skills – more like a trade school.

    Education has morphed into a means to provide more specialized pre-employment training and colleges need to adjust for that.

    • RandomHookup says:

      True, we need more people with technical skills, especially specific technologies/skills, but that market has mostly been filled by the for-profit players. Companies aren’t willing to train people any more, so there end up being tons of jobs for java developers and DBAs, but not many for secretaries and production supervisors.

      • SmokeyBacon says:

        Sad to say it but almost every secretarial job I have seen posted has stated that they want someone with a Bachelor’s Degree. They don’t seem to care what it is in, but they want that degree. So you have to go into massive debt just to get a job that pays like $12/hr.

        • RandomHookup says:

          As a recruiter, I understand that. They ask for it, because they can (though I know several 6 figure exec assistants — who work crazy hours).

  17. kathygnome says:

    How can there be a bubble when the government has already agreed to guarantee the loans. They are pre-bailed-out.

  18. Wawa says:

    The secondary effects of high student loan debt are interesting. Short term ones are obvious. Long term there’s all kinds of subtle effects that won’t be measurable until many years down the road.

    #1 Living longer with M&D after entering the work force.
    #2 Delayed purchase of first house/condo.
    #3 First car post-college will be used and/or more modest than many of their coworkers.
    #4 Delaying marriage and having kids – or having only one child instead of 2 or 3.
    #5 After joining workforce not going back to for Master’s degree unless employer pays.
    #6 delaying saving/investing for retirement.

  19. BelleSade says:

    It might not be a bubble per se, not like the mortgage thing was, but it certainly affects the economy; students with debt can’t easily buy cars, houses, etc because of said debt.

  20. GJaunts says:

    There’s some incredibly fuzzy math in that article, especially the $650,000 figure. At some point in time college graduates made $650,000 more than their degree-less peers, but we’re concerned about the folks graduating yesterday, today, and tomorrow.

    First, the price tag for an education is growing exponentionally (I’m in for $120,000, first check due in 8 months! Though that counts law school.). When the initial price is higher, so is the interest, which makes matters even worse. Second, there are so very, very, very few jobs, and what jobs exist pay less than they used to (comparatively, and maybe not true for all industries), and almost definitely promise less upward mobility. Combine these two very important factors into the algebra and that $650,000 number takes a big hit.

    For example, in the legal world the number of entry level positions in big firms is shrinking rapidly, and partner track doesn’t exist anymore. So everyone gets pushed into the middling, $30k-50k, little-room-for-advancement jobs. That might not sound awful, but when you’re $100,000 in debt, your net worth is no better than if you didn’t go to law school, any maybe even undergrad, in the first place.

    tl;dr version: WE SCREWED.

    • WhoLikesPie? says:

      Let me correct this…
      tl;dr version: you’re screwed.

      or

      tl;dr version: Law School students are screwed.

      I’m an engineer, left school with ~75k in debt. I found cheap rent and cook for myself often and make about 60k pre tax… 14 of which goes to student loans, which means these loans are down to about 40-45k within only 3 years.
      The (software) engineering path turned out to be a good one! Sure the first 7-8 years after college will be filled with cheap housing and lots of free activities, but soon after my loans are paid off my disposable income will increase 5 fold.

      • drjayphd says:

        (grumble grumble in the wrong line of work)

        And you wonder why the journalism industry’s hurting. I just interviewed for a job where the starting salary, in an obscenely expensive part of the country, is $28,000. That’s MORE than I’ve made at any of my jobs in my seven-year career. Stupid sexy decline of print media.

  21. TravelWithDignity says:

    wow, and I thought my ~$8k in loans was a lot of debt.

    Then I bought a house…..

  22. chatterboxwriting says:

    I honestly wish I had never taken out my student loans. I own my own business, but what I do does not require a degree. I could have taken classes to shore up my business/management knowledge and skipped the $23,000 in loans.

    • corridor7f says:

      I wish I had done this as well. I can honestly say that real-word experience taught me a lot more than college. In fact, the standards were so low and the environment so aggravating, I dropped out. I should’ve known better, but pressure from parents / society / friends was too much. High school sucked why would college be any better? Well, it cost more, that’s about it.

      There isn’t one way of educating yourself – college is one, but it’s not the be all and end all of “making it”. The “bubble” being referenced – to me, that’s the ignorance of recent high school grads who don’t realize how much money they’re going to owe and how it’s going to affect them – they’re being told that college is going to guarantee success and it’s the greatest thing ever.

      It’s not.

  23. OutPastPluto says:

    I’m really curious what the great tragedy is supposed to be here. This area is already heavily subsidized and insured. I’ve always though that student loan companies were being given free money from the government because of that. That’s especially true given some of the high interest rates you can see on student loans.

    The whole system seems like a whole lot of corporate welfare already.

    If people default, what’s the real problem really? So some funny money disappears. It’s not like you are going to have neighborhoods blighted with a lot of abandoned homes. It’s not like you are going to see the entire credit market crumble because everyone realizes that ratings agencies are a bunch of liars.

    Some funny money goes poof and that’s about it. Some banks might post losses. Given the improved condition of the citizenry, it could be considered a net gain even in the worst possible case.

    “Student Loan Crisis” is just mindless hysteria.

    Although student loan debt is a big fat sucking leech feeding off of young professionals and displacing other economic activity. Though that’s true if we are in a “crisis” or not.

  24. lifeispunny says:

    Student loans are something I thought I would be paying until I was old and grey… enter a good budget based on FPU and they’ll be gone in under 2 years!

  25. c_c says:

    If medical school loans are part of that average, then it definitely is skewed.

  26. pythonspam says:

    “Most students who graduate college are able to repay their loans.”
    But those who don’t graduate are stuck paying off classes that may not help them at all in finding or keeping their, especially if they attended a for-profit barely-accredited institution.

    Another reason unpaid student loans are considered a bubble, they are impossible/unlikely to be discharged upon a bankruptcy.

  27. axolotl says:

    “I don’t think it’s a bubble,” said Mark Kantrowitz, publisher of Finaid.org, a financial aid website. “Most students who graduate college are able to repay their loans.”

    haha!
    No kidding! That’s because they HAVE to! The only alternative is death!

    • axolotl says:

      I think if you could get out of your student loans via bankruptcy you would see a LOT more people not paying them off.

  28. John from Huntersville says:

    So – Folks with very large loans went to very expensive schools, and usually those expensive schools were not local, so they also had to borrow money for room and board. They opted for those schools because?

    In some cases, the chosen school was one of only a few offering the courses that they wanted to take in order to be schooled for the profession they chose. However, that profession is often not one that has many jobs available. Sometimes the only real use of some chosen professions is to be a teacher of that profession. It was a personal choice to chose the schools and courses. Doctorates in art history seem to provide little job training in a real
    world. Golly! Who’d a thunk it?

    So, most student loans are the direct result of a person’s personal decisions. For anyone trying to get out of those loans, it sounds like another instance of “no personal responsibility” that seems to be epidemic.

    Hey – pay the loans, get rid of the new car, the smart phone, the designer clothes, eating out, a new house, and any other unnecessary expenses until the loan is paid off. Can it take a long time even then? – sure, but that was the choice that was made when the folks got the loans.

    • iblamehistory says:

      Pay the loans… with what income? My husband’s income that he makes washing dishes with his bachelor’s in psychology?

      I finished my master’s in social work last May. Became licensed. Still no job. Why? The 1200 hours of internship experience was, and I quote, “not preferred over actual employment experience.” I also got one interview where I was brought in just to be mocked and asked why I’d apply for something I was so overqualified for (required only a bachelor’s degree). I’ve also been told to apply to Target by leaving ALL post-high school education off of my application.

      What new car? The newest car we have EVER owned–a 2009 Kia station wagon. Oh noes. Our only car, too! I have never driven and never plan to. The smart phone? The ones my parents still pay for because even though we are 26 they know we can’t afford it because we chose to waste our time in college as opposed to just work retail out of high school and therefore guarantee us a managerial position long before now? What designer clothes? Good luck trying to find “designer” clothing to fit my fat ass. Besides, it all looks terrible. I look for the clearance signs at JC Penney and pick from there a couple times a year. My husband and I each buy one pair of jeans–on sale–and only buy a second pair when the first pair is literally unable to be worn anymore. Eating out? Oh, you mean Chipotle a couple times a month. New house? My husband and I will absolutely never be able to afford to own a home. Any kind of home, any age of home. It will never happen. But at this point, we want to be able to pay our bills–owning a home isn’t even on our radar, nor will it ever be.

      Thank god I qualify for Income Based Repayment, and I wasn’t stupid enough to take out private loans that wouldn’t be covered by IBR. The grad school I went to was expensive because it was the only one that would grant me admission given my “lack of experience” (I was apparently expected to work in the field–requiring a master’s degree–before being able to study FOR my master’s degree. Cool.) The “room and board” I had to pay for was for MY APARTMENT WITH MY HUSBAND. You know, the whole “being a married adult” thing and living 5 hours from your parents? Yeah, you tend to live on your own at that point. I knew specifically that a job in social work would not earn me 6 figures–I was fine with that, as I only had the desire to pay my damn bills while working a job that I liked.

      So now, here I am, 26 years old and literally no job experience because I have spent my time going to school full time. Oh, I tried to get jobs while in school, but that only happened during undergrad when my stepmom got me a job in the office she’d been with for 20+ years. During grad school, everyone preferred either fully graduated students, or undergrads who “wouldn’t complain.” Speaking of complaining, when our friend suggested my husband for his current dishwashing job, the manager asked our friend “He’s white? Can’t you give me a Mexican? They complain less.”

      There will be no “college pays off in the long run” for us. Having no jobs and only educational experience now means we are royally screwed for the rest of our lives. So no, I won’t be paying those loans back, which I do not feel bad about if all I am told is “education doesn’t count as much as work experience does.” I busted my rear in school thinking it would give me the power to be hired for a decent, acceptable job; but no, my only option now is to apply at Target, leave off any mention of what I’ve done for the past 8 years, and hope they don’t care about my complete lack of retail experience. Now, I’ll pay what I’m required to pay, which based on my income and family size, is likely to be a whopping $0 a month for a very long time.

      Also, I have no undergrad debt. I went to a local school and my parents WANTED me out of their house, so they paid for room and board, which was very inexpensive compared to other schools I have seen. Between scholarships and money my parents had saved up (something I’ll never be able to do for my kids), my undergrad education was paid for. The only loan existing from that was one that my parents are now paying because they admitted to making me take it out so I could be saddled with debt when I “flunked out of school” which they expected me to do. Boy weren’t their faces red when I carried a 4.0. So, when undergrad did nothing to help me find a job in 2008, my only choice was to go to grad school after 6 months of desperation.

      • tiatrack says:

        Sorry, no I don’t feel badly for you. Social workers are notoriously underpaid. That isn’t a suprise to anyone. You CHOSE that field, knowing that you’d never make a lot of money. Why should I feel badly for you? Have you tried looking for jobs in places other than your current town? I work for the research arm of a large mostly west coast HMO, and we’re always looking for people with MSWs for our research projects. Entry level is about 50k, which isn’t bad. Maybe if you stopped looking at things with such a bad attitude you’d have better luck finding a job.

        • tiatrack says:

          Also, it’s the fault of no one but yourself that you don’t have work experience at 26. I had my first job at 16, working after school and on the weekends. I worked 20 hours a week on a great research project during college. During grad school (I have an MPH) I worked full time while going to school full time. Yes, my program required 1000 hours of internship as well. I’ve never been unemployed ever (I’m 30), which is a fair accomplishment for someone in my field since I’m entirely paid off of grant funds.

      • John from Huntersville says:

        “So, when undergrad did nothing to help me find a job in 2008, my only choice was to go to grad school after 6 months of desperation.”

        You couldn’t find any jobs in your field after getting your bachelor’s degree, so you borrowed more money to get further educated in a field with no little to no job prospects. Huh?
        Did you or your husband look at job prospects in your respective fields before choosing those courses of study. I’d guess not.

        A 2009 Kia? Our new car is a 2004 Toyota that we’ve had for 8 years now. You have smart phones (we don’t). It sounds like you feel it’s ok to have them if someone else is paying for them?

        Have you considered getting training for something useful that actually might have job prospects where you live? Welding, plumbing, HVAC, beautician, or some other trade?

  29. Buckus says:

    Also, student loans are not normally dischargable in bankruptcy. Mortgages and credit cards can be. Also, you can walk away from a house, but you have to die yourself out of a student loan.

  30. shaqfu says:

    “I don’t think it’s a bubble,” said Mark Kantrowitz, publisher of Finaid.org, I don’t think Mark Kantrowitz or his employer Finaid.org are very impartial observers. Just go to the site and look at the advertisers and look how it makes it’s money. Instead of downplaying that 25% of all college loans are behind in payments, I think it’s a shockingly high number. The CNN article is total spin.

  31. SoCalGNX says:

    The thing that has always impressed me most about students loans is how people with huge incomes are always slow to pay them off. Give me a break. Don’t want a student loan, don’t go to school.

  32. Snip says:

    Meh. This is academia in denial. It’s going to get worse before it gets better.

  33. Cycledoc says:

    In addition to weighing on the careers and lives of graduates, students who don’t finish school–the majority for many of the online Universities–have major repayment problems.

    These low quality online institutions, diploma mills, make it part of their recruiting procedure to have students to apply for loans. Recruiters in many instances are paid a bonus for each new student. U of Phoenix gets 90% of it’s tuition fee paid by federal student loan funds (http://abcnews.go.com/TheLaw/profit-education-abc-news-undercover-investigate-recruiters-university/story?id=11411379)

    It’s a slow motion disaster for the individual and perhaps our economy.

  34. pot_roast says:

    It’s hard to tell. I don’t have any friends complaining about paying their student loans, except for one.. who is now on her Masters. She has barely held down any sort of job in almost 10 years except for a few contracts here and there (that never translated to full time work) and she has been in some college class or another this entire time. She’s pretty much been living on student loans for *years* now.

    Naturally, she’s really happy about the loan forgiveness plan that’s in the works….

  35. aleck says:

    “This affects only a small portion of the borrowers, called ‘subprime’ market. The vast majority of mortgage holders will be able to repay their loans” – 2007

  36. impatientgirl says:

    My husband’s ex got $10k last semester to go to community college part time and is expecting to get another $10k next semester and each after. She hasn’t worked 6 months since they divorced 10 years ago and instead has lived on the child support. (And no we’re not rich so its not a huge amount). There are MANY things wrong with our student loans system.

  37. anti09 says:

    Mark Kantrowitz is a damn dirty liar… or at least a decent spin doctor. First of all, “most” students being able to pay their loans back could mean 51%. Second, being “able” to pay loans back is a pretty vague description for a potentially 6 figure repayment. Finally, students pay their loans back because they HAVE to not because they can or want to – they’re non dischargeable. So yeah, most students pay their loans back eventually. Says NOTHING about their affordability.

  38. PortlandBeavers says:

    I think it’s being built up into a crisis because some people would like it to be the next bailout.

  39. soj4life says:

    Well part of why lenders are safe is because you can’t have federally backed student loans included in bankruptcy.