Thursday, November 3, 2011

School Loans

They say the mind is a terrible thing, and I couldn't agree more--particularly when it results in massive student loans! Back in the old days when you could make a living as a cobbler (maker of shoes, rather than the delicious kind) you just had to apprentice out for a few years until you learned the trade enough to do it yourself. No debt required! But these days, it's normal for people to enter the working world already in as much as six figures worth of student loan debt. And these loans are, for the most part, not dischargeable in bankruptcy.

A new poll shows that 66% of people oppose forgiveness of student loans. Now, I'd have to consider myself part of the 66%--forgiveness of the loans would mean substantial costs to the U.S. Treasury, which already is trying to decide just how much heating oil our Social Security recipients should be able to live with and just how few cops can be on the street before muggings turn into full blown riots. Plus, these are not unexpected hardships--when you sign the loan documents you know full well you have to pay them back, and you chose to take the loan out anyway. This isn't the same as the guy taking out a loan to pay for his wife's uninsured cancer treatments--this is adults signing up to pay for what is frankly way overpriced tuition with the hope that the degree they're going to get will pay off much more over their lifetimes.

I do sympathize with these borrowers though--the conventional wisdom thrown around for decades (by government, school administrators, the previous generation of parents) was that a degree was going to be worth all the money, even if it meant massive loans. The fact that the unemployment rate for college-educated people is and has been a lot lower than that for the non-degreed also weighs heavily. And I remember from my own experience of graduating with massive loans the fear that unless I made enough money out of school I would be crippled by financial hardship. At certain levels the monthly loan payments are greater than your rent payments.

I was fortunate in finding well paying work after graduation, but that's obviously not going to be the case for everyone. And so obviously a lot of people are going to default, and the lenders (and federal government) are going to have to work through that one way or another. It doesn't help that the loan infrastructure only encourages schools to keep increasing tuition way beyond annual inflation, and still offer courseloads that make the graduates uncompetitive.

I fear this will get worse before it gets better.

4 comments:

  1. Great post; I couldn't agree more.

    Time Magazine had a fantastic article in last week's issue on the number of people graduating with crushing debt and no job prospects to pay it off:
    http://www.time.com/time/magazine/article/0,9171,2097386,00.html

    (Sorry, a subscription is needed for the full article.)

    There's also a good description of how astronomically fast college tuition has been growing lately here:
    http://www.anengineerindc.com/2010/07/state-of-education.html

    It's just not sustainable, sadly.

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  2. Engineer--as they say, if something can't go on forever, it won't. I suspect eventually the consumer pressure will force colleges to drop tuitions, though it'll likely be a while before that has any real effect. And in the meantime has a devastating effect on our economy.

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  3. my loans is quite a bit smaller then my freinds who went to private school, but explaining to them every other month why I can't make the minimal payment is stressful enough.
    I have a job I love that happens to pay very little and living in DC with their high rent I barely have money for my food and other bills.... they should all really take a chill bill, you will get your money someday just not today when I'm a struggling 25 yr old.

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