Do We Need Student Loan Debt Amnesty to Avoid a Crisis?

1 Shares

Normally, we think debtors should be required to pay their obligations in full. I was once in that camp. But during the Financial Meltdown, we had a similar crisis, with too many people owing too much money on their homes. Amnesty – perhaps in form of something like a 25% forgiveness of everyone’s mortgages – would probably have cost less than the estimated $12.8 trillion spent on bailing out banks and other assorted lenders. So do we need student loan debt amnesty to avoid a similar crisis today?

Do We Need Student Loan Debt Amnesty to Avoid a Crisis?
Do We Need Student Loan Debt Amnesty to Avoid a Crisis?

It’s a valid question. At the time, it may have cost the government about $5 trillion to write down everyone’s mortgages by 25%. Instead, they spent 2 1/2 times as much bailing out the lenders. In a cruel irony, the banks – which had been shown public mercy by being bailed out – didn’t extend that courtesy to homeowners. Instead, they foreclosed on millions, precipitating a near depression.

There’s a saying in lending, If you owe me $1,000, you’re in trouble. But if you owe me $100,000, I’m in trouble.

So it was during the financial meltdown. But I think we may be heading in the same direction with student loan debt. Whoever is at fault – students, their parents, the colleges, the lenders, or the government – it will soon be everyone’s problem.

That’s why it’s time to consider student loan debt amnesty. It may not be the perfect solution, or even a fair one, but it’s increasingly a necessary one.

The Magnitude of the Problem

Let’s start out with a few statistics…

The cost of a college education. The following statistics are from The College Board, and are based on the 2017-2018 school year and include tuition, fees, room and board:

  • Public colleges (in state), $20,770 per year, or just over $83,000 for 4 years.
  • Public colleges (out-of-state), $36,420 per year, or more than $145,000 for 4 years.
  • Private non-profit colleges, $46,950 per year, or nearly $188,000 for 4 years.

The median household income. Last month, the Census Bureau reported the median US household income was $61,372 for 2017. Since it’s a median figure, half of households earned more, and half earned less.

Now when you compare the cost of a college education with the median household income, there’s a clear disconnect. The average household, which is to say most households, don’t have nearly the income to cover the cost of higher education. And that’s to say nothing of families with two or three children to put through school.

The disconnect is increasingly being covered by student loan debt. The parents have neither the financial assets, nor the borrowing power to pay it all.

The natural outcome of this disconnect is a steady rise in student loan debt. That includes both the cumulative total nationally, and the average amount owed per student.

Last spring, an article on MarketWatch reported that student loan debt reached $1.52 Trillion, an average of more than $37,000 per graduate. Now again, it’s a median number, so half of graduates owe more, and some owe considerably more. It’s also up 50% from the $1 billion figure reached in 2012.

Clearly, the student loan debt problem is getting steadily worse.

The Economic Fallout of the Student Loan Debt Crisis

Everyone who’s ever been in debt understands the burden it creates. The Bible states the case clearly in Proverbs 22:7: The rich rule over the poor, and the borrower is slave to the lender. Debt is tough enough to manage when you’re an adult, and you’ve been around a while. But the burden is magnified when you’re young, and just coming out of the starting gate.

The purpose of a college education should be to better enable a graduate to compete in the economy. But student loan debt has the complete opposite effect. Even if the graduate is better able to compete for a job, he or she is stuck with the albatross of an often massive debt.

This hurts the graduate – and by extension the entire economy – in several ways.

Each of these outcomes hurts the economy, as well as the individuals directly affected. But I also believe there are other outcomes that made be even more significant, even if they’re subtle.

The Subtle Outcomes that Can’t be Measured by Statistics

For example, a young adult burdened by a large student debt may feel trapped in a job. He may feel such a strong need for the paycheck, that he become subdued, and even submissive.

I also believe a young person burdened by large debts is handcuffed in the job search. She may be so overwhelmed by her debt obligation, that she gives off a distinct air of desperation in job interviews.

Employers can sniff desperation, and that will result in one of two outcomes:

  1. The applicant is turned down for the job.
  2. She’s given a low-ball offer.

The low salary offer, which may also extend to a lower position, happens because the employer senses the applicant’s weak position. The employer’s strategy is reinforced when the applicant accepts the job at low pay. It then sets the stage for the employer to continue the process going forward with other applicants.

But there’s also a long-term consequence for the job applicant who accepts the low pay and position. The lower you start in the pecking order, the more difficult it is over the rest of your career.

Put another way, someone who starts at a lower station in the organizational hierarchy, is far less likely to be viewed as a fast track candidate in the future. It’s unfortunate, but a low start tends to follow you throughout your career.

This is a waste of potential.

Our Culture Encourages Debt

It’s tempting for us all the blame the graduate for his or her student debt problem. And to be sure, both the student and his or her family do deserve a large share of the blame. But they’re not alone.

Our entire economy, and even our culture, encourages debt. The marketing culture squarely emphasizes consumption. The pesky affordability problem is dealt with through easy financing arrangements. Whether it’s a brand new car, a house, a college education, or even an exotic vacation, there’s always a low cost financing package to grease the wheels of the sale.

That problem is inherent in our society, to the degree that it’s accepted without question. How else can we explain a nation that accepts a national debt of more than $21 trillion, while considering itself the richest nation on earth?

Yes, students and their families are to blame for student loan debt crisis. But the entire country has a hand in it.

The Education Industry in Particular Encourages Debt

The education industry deserves a special place of blame. And yes, education is exactly that – an industry. Like every other industry, it exists to survive, increase revenues, and pay its employees – particularly those at the top of the managerial chain.

Student loan debt has been encouraged by the education establishment since it began to realize the average household could no longer afford to send their children to college. The education establishment has tremendous influence with the political establishment. Getting the government to guarantee student loans for students with no means of support on their own, was the beginning of what has become a clear bubble.

The student loan debt bubble works the same way the housing and healthcare bubbles work. In the case of housing, lax credit guidelines and artificially low interest rates enable more people to buy homes. I saw this when I was in the mortgage industry, prior to the mortgage meltdown. People who could barely afford rent were being approved for six figure mortgages on borderline credit, insufficient income, and no money for the down payment.

It led to an unsustainable increase in house prices, that led to a real estate crash.

Healthcare is much the same. The entire industry is raising costs relentlessly, financed by health insurance, at least one-third of which comes from the government in the form of Medicare and Medicaid. The end result is both unaffordable health care costs and health insurance premiums. It hasn’t crashed yet, but my guess is we’re not to far from it.

All three are in clear bubble formation, housing, healthcare and education. And all for pretty much the same reason. Unrestrained lending leads to price explosions, that eventually overwhelms the affordability granted by the financing.

How Far Will we let This Crisis Go Before Action is Taken?

In 2018, student loan debt surpassed the $1.5 trillion mark. If things continue as they have for the past few decades, we’ll easily sail past the $2 trillion mark, probably in no more than 2 or 3 years. Next, we’ll go to $3 trillion, and soon enough to $5 trillion.

We can continue issuing debt to pay for rising college costs – which has become the American way in virtually every corner of the economy. But sooner or later, we’re going to reach the point of no return. And when we do, whether you’re a deeply indebted recent graduate, a person with no student debt at all, or even a retiree, you’re going to pay for this.

It may be in the form of higher taxes, higher interest rates, higher inflation, a weaker economy, or fewer job prospects. Or it might appear as the unkindest personal financial cut of all, a decline in the value of your house or your investment or retirement portfolio.

That’s usually when a crisis is finally acknowledged to be a crisis. But it’s also when it’s too late to act in a way that will prevent the crisis from getting really bad.

That’s why I think we need student loan debt amnesty. There’s a crisis brewing out there in the future, and we have a chance to do something about it now. The least painful solution maybe to simply reduce the amount of indebtedness per debtor, then cap the amount of money that can be borrowed for an education going forward.

What are your thoughts on this topic? Do you think we need student loan debt amnesty? What do you think will be the consequences if we do it? And what do you think the consequences will be if we don’t?

( Photo by Nastassia Davis (www.ndavisphoto.com) )

1 Shares

60 Responses to Do We Need Student Loan Debt Amnesty to Avoid a Crisis?

  1. As always, you present a well thought out article and I see the validity in all your points. In spite of that, however, I am not in favor of amnesty for student loans. It feels like in doing so, we are a step closer to the free tuition for all demand being made by socialist wannabes. And even if that doesn’t occur, universities will simply be emboldened to continue their sky high increases, figuring the students can take on even more debt because the government will grant amnesty yet again. Students soon will decide they shouldn’t have to repay their car or mortgage loans once they take on that debt. I freely admit to being in college long before tuition got so astronomically high, but I did pay for my own education (with major parent input as well). My husband and I paid for our son’s education all the way through graduate school without student loans and without sacrificing our retirement savings. We were not rich but we made those two goals our priority, sacrificing vacations trips, new furniture, eating out etc. Perhaps loans should be given with an eye on the student’s major and how it will pay off in the future. No more funding degrees that don’t provide a foundation toward earning an income that allows someone to be self-sufficient.

  2. Hi Kathy – I can’t disagree with anything you’re saying. There’s a part of this I see as a moral hazard, which as you’ve pointed out, creates the possibility of strategic default on other loan types. But I’m thinking more along the lines of collectively admitting the current student loan set up is capricious, writing down existing debts to more manageable levels, then capping the amount a student can borrow at much lower levels to insure this insanity doesn’t continue.

    The schools are the real beneficiaries of student loans, not the students. They’re just the marks in this scam. If future loan were cut substantially, the cost of college would drop and become more affordable. In the process, we’d unburden a generation of what are effectively indentured servants.

    Like you, I went on the pay as you go plan back in a time when college was much more affordable, and the payoff more immediate. But then I went to a two year school, followed by an in-state four year school, and commuted to both. Not many are willing to do any of that any more. But they way we’re going now, we’re on a collision course with a totally predictable crisis. We can either let some air out of the balloon now, and enact reforms (less liberal lending), or face a blow up later that will take millions down with it.

    This really is a tough subject!

  3. I agree with Kathy (except the part about the major). Also,there are several things we can do to lessen the blow,number one would be to lessen the interest rate charged by the government on these loans, also have the payment amount calculated by income.If we go down this path of loan forgiveness there will be many unintended consequences.

  4. I wish I could agree Polly, but making the payments more affordable doesn’t make the debt go away, it just makes it more tolerable by extending the term. Of course, I have to agree there will be unintended consequences. We saw that with mortgages in 2008-09 when strategic default developed and people just walked away from their loans. But this is precisely why these loans shouldn’t be so easy to get, and in much smaller amounts.

    This is just a theory of mine, but I believe a lot of young people take these loans under the assumption they’ll be forgiven. That’s the only explanation for why someone would go so deep into debt. So maybe we bite the bullet now, and reduce both current and future debt. The real moral hazard is the ability of people to borrow without limit, and that’s what needs to end. Not just with student loans, but with everything. Loan cause prices to rise, increasing the demand and perceived necessity for more loans. It’s a vicious cycle that needs to end.

  5. Government should not be involved in the student loan business, period. The institution should loan, collect there own debts. Just like government shouldn’t be involved in anything. Mortgages, Loans etc etc.
    Once you take out the institution from any consequences of default it’s like the wild west.
    The prices run rampant because they can. Just like there should be no backing of your bank account. The bank itself should be responsible for it. It makes us as people do are research and it makes the bank more responsible for depositors money.

    I wish people would sit down and look at ROI before they go running off and borrowing money. Spending that kind of money should give you triple return in the job market. If it doesn’t then don’t do it.

    Where does it end Kevin ? I hear you but why not forgive all the home debt? Credit card debt? Student loan debt? Just give everybody a free pass for everything.
    It’s not fair to the people who have been responsible. Who have paid there debts.

    You know what will happen. Forgive student loan debt and then everybody with mortgage debt will be screaming. That will be next. It won’t end there. It’s a can of worms.

  6. I agree Tim, but we’re sitting on dynamite right now. We need to have a reset, which means to end this silliness, or limit it severely, going forward. The problem is that John and Jane Q. Citizen have been propagandized to believe that all ills can be solved by government. Government is the god of the 21st Century. We have faith in it, even though we superficially claim to not trust it. We expect it to solve our problems (answer our prayers), and we live under the misguided notion we control it through the voting process. All are false assumptions. The reality is that what ever government gets involved in gets distorted. But we have to have a strategy to unwind all this indebtedness, then begin to phase it out. When we do, prices will fall, and debt will be unnecessary.

    The model for this was 30-40 years ago. You could go to college without getting buried in debt. Once student loans started becoming common, the cost of education exploded. Financing doesn’t make college (or anything else) more affordable. It just pushes the cost into the future. And here we are, in a future of millions of young, indentured servants unable to move forward in life, and many not even in the promised occupations college was supposed to provide.

  7. WHAT A MESS THESE HAVE BECOME! I closed a loan for a young gal whose dad was her cosigner. She was upset because she was unable to find a job w her degree…..in poetry?! I want to be sympathetic on the subject but Im not. Tooooo many are going to college for useless degrees and taking on way too much debt without batting an eye as to how it is affecting their future.
    My kids got $xxx amount for college, had to attend a local school, pay for their own books, school fees, etc and that was it! None of them have large debt and each has a great job. Oh yeh, and we had to ‘approve’ of their degree.
    We saw this problem coming and was able to thwart its consequences-whew!

  8. I couldn’t agree more Ruth Ann. The basic problem is that for too many students, and their parents, a college education is just another consumer good. It’s become “what you do”. Meanwhile, a degree in poetry is seen as being no different than a degree in nursing. That’s completely delusional. The poetry degree (or equivalent major) is usually someone who wants to go to college but doesn’t want to work hard to be there. They probably mostly want the “college experience” (living away at school, partying, etc.). That wasn’t me, my wife or my kids.

    It’s bad enough when rich kids go away to college mainly to have fun, but that’s a benefit of being born into privilege and a topic for a different day. But middle class kids don’t need to be going for degrees in poetry, sociology, philosophy, gender studies, etc, when the lions share of the cost will be financed with debt. They spend the rest of their lives paying for the “college experience” out of very limited income.

  9. Good, then let it be. Maybe that’s what it will take for people to smarten up. Your federal government is the problem.

    I say let the whole thing crumble instead of kicking the can down the road which what this is.
    Nobody learns having things forgiven.

    If you idiot enough to cosign a loan for poetry then you should pay the rest of your life. As a matter of fact, co sign for anything. I’ll never do it, ever!!

  10. I do feel something needs to be done. Yes I’m still paying back student loans and it’s ridiculous. I have a Chemistry and Management degree but I’m also at the mercy of what a company will pay. This never equates to the amount it took to get the degrees. Then to add injury to insult, I am at the bottom of the food chain. That elephant in the room that statistically show African American women and Latinos receive way less in pay than any other race. Better believe we pay the same in tuition though. And don’t get me started on grants, show me one link that doesn’t put a virus on your computer. My loan started the same amount as my mortgage with the same interest rate for both, same time. I owe 13k less on my mortgage. Student loans equal Enron math. People try to pay and don’t want to walk away but nobody will be beaten unfairly and unjustly. Good for you that you were able to pay, be thankful for your blessing.

  11. Hi Donna – “Student loans equal Enron math” – I LOVE that! It should be the mantra of the student loan fiasco. You also bring up a good point about African American and Latino women, and I’d maybe extend that to women in general. Last year The Atlantic reported that women make up 56% of college students, a solid majority. From what I’ve heard anecdotally, men are increasingly avoiding college and pursuing the trades or self-employment – or just falling through the cracks. Since women are more likely to go to college now, they may be more susceptible to the student loan debt trap. In my own small universe, I think that seems to be the case.

    I also agree with you that student loans seem to be set up as a form of perpetual debt. No matter how much you pay, the balance never goes down. This is why I think it’s time to move away from them entirely. At one time the idea was noble, but the end result is turning into another national disaster.

  12. When will we finally get back to the idea that people are responsible for their actions and choices. What’s to stop people from having kids they cant afford- they get health care free lunches and food stamps. Why pay attention and learn in school-drop out and get low cost housing and expensive remedial education paid by the dummies that have jobs. I could go on. It used to be that being in debt was frowned upon. Now its a way of life. It used to be that bankruptcy was a terrible thing. Now its almost a badge of honor. Now they are talking about universal minimum wage. When will we learn that handouts and bailouts are the worst things we can do for yhe moral and motivation of our country? There are some that do need help but this has gotten way out of hand. If only the people that could afford college went to college, the costs would go way down. Supply and demand.

  13. I’m in complete agreement with your Ric. But what we’re looking at with student loans is a national disaster in waiting. You’re right, it should be the problem of the debtor. But when the culmination of all those debts cracks up and hurts us all, we all need to be concerned. And as I said in the article, these loans are part of accepted national policy, so the debtors had some encouragement in taking them. That should never mean common sense should be abandoned. But most people will follow the herd, and that’s what we’ve got going on with student loans.

  14. You don’t have to go to school to be a student. I’m living proof. I barley made it out of high school but I have been a student my whole life. A student of life. There we’re many years when I was ashamed I didn’t go to school but when I see the fiasco unfolding now I’m glad I didn’t.

    I was lucky. I didn’t have school smarts but I was taught how to handle money. I have never had a loan for anything in my entire life.
    I own my own business.

    This is another myth sold to the public. You have to go to school. Education is key. I agree but it has to be the right education.
    Doug Casey, Kevin. I personal favorite of yours. He speaks of educating yourself on life. Not out of a school book.
    I have found professors and educators, especially now are some of the dumbest people I have ever met.

    I feel for the women above. She says it perfectly. If that is true what she says then really that is sick. I was also taught you are either a decent person or not. If your smart enough to get a chemistry degree then what difference does it make where you come from or what color you are.

    I’m in Rick’s camp for the most part. I just wish more people would wake up. That is the most frustrating part.

  15. Part of the problem is our notion that a college degree is necessary to get a job. In other cultures and countries, and even in the U.S. you can opt for an apprenticeship, vocational training in a skilled trade, get a certification, or decide you want an academic degree. College also doesn’t have to be 4 or 6 or 8 years. There’s nothing that says you have to finish in a particular time frame, that a course has to be a semester long, or that you have to finish at all – we have just bought in to what the academic institutions are telling us. I agree that the academic institution should be responsible for funding and collecting student loans. That would be a good way to make colleges and universities keep their fees more in line with reality. Maybe if student loans were set up to only pay a percentage of a year’s worth of tuition and the student or their family had to put up the balance that would help reduce the amount of student loan debt? Regardless, I think that the nature of education is trending less and less toward traditional degrees and more toward a modular approach that’s performance based. I don’t think it would be a bad thing if our culture began to see education as something that is individually driven, not scripted by a high-school counselor, a college recruiter or a child’s peers. If someone has no motivation, then there is no reason for them to accumulate mountains of debt to work in a low paying job. Higher education is not for everyone and there are plenty of people who live a sustainable lifestyle and are raising families who don’t have a university degree.

  16. Hi Kathleen, and thanks for your insight, but I also want to address Tim’s last comment as well, as I think both yours and his are pointing in the same direction. There’s a great video on TED by Ken Robinson, Do Schools Kill Creativity? that addresses both your points. Robinson is a former college professor from England, and he takes aim at the entire current educational system. It’s well worth a watch at 19 minutes. He says the world is changing fundamentally over the next 30 years, but that the education system is rooted in the 19th century industrial model. That model he claims is killing the creativity we’ll need to survive in a the future.

    In fact his comments on the future are quite on point. He says the schools are preparing students for a future we can’t even predict. I’ve long been of the opinion that school curricula is backward looking, that it prepares students for what was needed 10 or 20 years ago (being charitable). Anyway, Robinson points to the diminishing utility of college, which I think is rapidly becoming self-evident. It’s typical of human existence that bubbles develop just before the end of a major run. So the student loan crisis may be predicting an end to the college system we currently know. I think Robinson is on to something with that. If that’s the case, young people really need to rethink college. And the colleges need to open up to the non-matriculated student who’s just looking to learn certain skills. That would be more targeted and less costly, and we wouldn’t need all these loans. But we should expect the colleges to dig in and resist any wholesale change.

    Personally, I think we’re past time on this. BTW, Robinson has a clever sense of humor, so the video has good entertainment value as well.

  17. While I hear what you’re saying Kevin, I don’t agree with writing off student debts either. Anytime you offer an amnesty for anything, you encourage more people to do it. It’s human nature – people know if it’s been written off once, it will be written off again even if it is supposedly a one time deal.

    I suppose it could work, in theory, if, indeed, the system was changed to one where the schools themselves offered/collected loans but I am not convinced that would happen. There are too many people making too much money off the current bloated college degree industry to allow it.

    But it’s a shame because I do think, forward thinkers like Mr. Robinson aside, most companies do still demand a traditional degree and will continue to do so for the foreseeable future, even for jobs that don’t really need it (which, let’s face it, when you get right down to it, are a lot of them!)

    I don’t have a college degree – my family didn’t think girls needed a college education and, unfortunately, neither did I when I was young! – but I worked myself up in my current company and now have a decent job but I know that if I ever left, I would have a hard time finding a similar role, in large part because I don’t have a degree. If I applied to my company today, I wouldn’t even get an interview!

    I have known other middle-aged people in a similar position – no matter how smart, hard-working and experienced they are, they all know that if they tried to find a similar (or better) position in a different company, it would be virtually impossible without that piece of paper…

  18. I’m glad you referred to it as a “college degree industry” Suzy, because that’s really what it is. One of the delusions we labor under today is that education is a virtue, which it is if you’re a life long learner. But like the real estate industry has hijacked “the American dream”, the education establishment has convinced the masses that a formal education is a virtue in itself. Unfortunately, I’ve met too many college grads who I judge to know very little about anything of value.

    But I do need to clarity that what I really meant was a partial amnesty, and I’m realizing I didn’t make that point in the article. A total amnesty would be a complete disaster. But a partial one may be needed for the benefit of those who have debts they’ll never be able to repay. The more important follow up will be restricting student loans to much more modest levels going forward, and even to limit them to certain degrees likely to produce a commensurate return in the form of a job with a living wage.

    As to the requirement of a degree even for jobs where it shouldn’t be necessary, Charles Hugh Smith has written on a number of occasions that a college degree is now more of a signalling device than anything else. He says in most cases the education itself is close to useless, but employers use it as a filtering device. No degree, no job. Simple for the job sifting process, but it eliminates a lot of very qualified people. This is also why I think online job boards primarily benefit employers, not job hunters. The employers establish algorithms that filter out people who lack certain qualifications making their job easier, as well as opening a job to a higher number of applicants. The job hunter on the other hand has more competition for each job, and is easily subject to elimination due to a missing credential or two.

  19. Having worked at a college (albeit a community college) I know a bit about the scam that college can be.
    Accrediting agencies force students to take otherwise useless courses just to fulfill some sort of pre-set track that will keep the college accredited. Here is an example. I was taking Internet App Development. I needed an elective. I wanted to take Spanish because I felt it would help me if I ever got a Help Desk job and needed to serve the many Spanish speaking customers. But I was not allowed to take Spanish. I had to take Sociology of the Family. It was an interesting course and would have been an asset if I were pursuing social work or psychology but it was absolutely useless to me in my track.
    When I worked in the Nursing Department as an Admin Assist, text book reps came by and pushed updated material every semester, the same way pharmaceutical reps push new drugs on doctors. They gave the staff goodies and sent some of the top admins on trips to conventions sponsored by the text book and materials companies. The military recruiters did the same thing (except for sending anyone to conventions).
    Another issue: With so much education going online, why are we still having massive building programs? I think within 10 years or so, old style on campus learning will be defunct except in the hard sciences and medicine, etc.
    Students interested in the arts should apprentice or attend small workshop type schools not be sent for four year on campus degrees. If they need some math and English, they could take classes at a community college or online.
    And what about the massive paychecks for many football and basketball coaches and money used to build stadiums and such. These programs are basically training programs for the pros to troll and pick off the most likely players for their teams.
    Yet another issue is who these schools admit and at what level. I saw kids being admitted to the community college as freshmen that has less proficiency in math and English than I had in elementary school. THAT is absolutely shameful and damaging on so many levels. Most of these kids were on PELL or other grants and maybe on loans. In my opinion, it is both a social and economic waste to send kids to college who have so little background education. It is an embarrassment for America. Many of the for profits will take almost anybody as long as they can pony up the cash.

  20. Hi Mary – You’ve done an outstanding job of laying out the many vices of the current college system. And I agree with you about the ridiculous level of building going on, investing in physical plant at a time when the internet is taking over. But as I said in an earlier comment, I think these are all signs of a coming collapse in the higher education regime. We have several indicators:

    1) Student debt is reaching unsustainable levels. When you need that much debt to make a system run, the system itself is in danger of collapse.
    2) The building programs are what administration does in defiance of the reality of the internet. They figure by building more infrastructure, they’ll protect their systems.
    3) The entire industry is in classic denial about what’s happening. I suspect many in the industry know what’s coming, but they do their best to paper it over with bold predictions and unsustainable expansion plans (who was that nut job in the last Bush administration who said “we’re creating reality”? He wasn’t the only one who thinks he has such powers).
    4) The decline of young men attending college is probably a sign. Once women begin doing the same, even the industry cheerleaders won’t be able to deny what’s happening.

    You mentioned about the sports programs, and I don’t even want to get into that. These big time programs are really professional sports organizations using the schools for their alumni and local fan base. Notice most of the big time programs are in communities or states that don’t have professional sports teams? As a friend of mine said long ago, the colleges have become cost free farm teams to the pro teams.

    Colleges are now doing all kinds of things they were never intended to do. Did you know that up until the late 1920s, a college degree was two years? Then they doubled it overnight. We might suspect a lot of the useless coursework required today is a result of that expansion. Courses had to be added to fill up the extra two years.

  21. Hi Kevin. I respectfully disagree on student loan forgiveness for all of the reasons previous commenters have made. In my opinion, it’s just another message to encourage the something for nothing attitude that is so prevalent in our culture. It encourages the mindset that you don’t have to work hard and pay for something in life. Too many students graduate, get a job, well-paying or not, and now want to marry, have children, buy a house, car, etc. All normal things to be sure, but they don’t understand the consequences of all of this debt. And if someone has $37,000 in student loan debt, that is not insurmountable by any means. It’s the price of a new car that many take on, make payments over five years, and no thought is given to paying this particular debt because you have a shiny, new tangible object. I know not all young people think like this, but many, many do. Easy credit is not helping anyone except the schools. I had my student loan debt and there was never, ever any consideration given to it being forgiven. I lived in a one-bedroom apartment for 14 years paying off the loan, drove junker cars, and struggled like so many others have. How much equity did I lose not being able to buy a house at that age, but those were the facts of the time. I fully support a college-educated population, but like others have said, it’s not the answer for everyone, and you can do well in life without it. In fact, many do better without it. This is a sore subject with me because I know of too many people, young or not, who are expecting the gov’t to support them through life, and the rest of the taxpayers end up paying for it. I agree with Ric Pau, Tim K and all the others who say no to this. We have to teach responsibility and consequences for your actions, not expectations of free rides. It just exacerbates an already existing problem that is out of control, something for nothing. Sorry for the rant. I tried to be respectful.

  22. You did a fine job of being respectful Bev, and I welcome disagreement. When I wrote this article I knew it would be controversial. But remember, I was on the front lines for the mortgage meltdown which was very similar. Government and lenders collaborated to give mortgages – in absurd amounts – to people who should never have had them. Though they were careful to frame it within the “virtue” of getting every American into a “home” (as if rentals are some kind of hell on earth), when the real purpose was to juice the housing market for economic and tax reasons. We all know how that ended. Yes, the people who never should have owned a house got thrown out. But a lot of innocent people went underwater on their mortgages and some even lost their houses. No one ever got prosecuted for that fiasco because it would have taken down the highest ranking members of the political system and Corporate America.

    The same is happening with student loans. College now costs twice as much in the US as in other rich countries, and it’s largely because of debt. So now we have yet another bubble blowing, and the powers that be see no problem. It’s also like healthcare. No one in a position of power is concerned with lowering costs. The entire emphasis is on funding. So it is with college.

    An adjustment is coming and when it does it will be a disaster. Something could be done right now, but it won’t be. But it could be an issue in the next presidential election, which is just two years away. We need to decide where we stand on this, and be ready to vote accordingly – if that even matters any more. As Mark Twain once said, “If voting made a difference, they wouldn’t let us do it.” And he said that more than 100 years ago, when it wasn’t even as true as it is now.

  23. Some of the issue here is when things like this become national epidemic’s which it is becoming or already has it affects everybody in one way or another.
    When bubbles burst it affects the whole economy. The housing bubble affected just about everybody. Stocks were much lower, people lost a lot of wealth. People lost homes, jobs, etc etc. Even if you were not directly involved it still touched everybody in some way.
    With the global economy, all tied together now all these inflated bubbles when they go bad they affect all people in one way or another.

    If you forgive student loan debt then where does that money come from? Raise taxes? We would all end up paying for it anyway. If you allow it to continue and it finally pops then it affects us all anyway. Debt allows no real way out. The only way out is for the people who borrowed the money to pay it back themselves.

    We tend to think this stuff doesn’t affect us if we are not part of it but it does. Even things like people defaulting on mortgages affect us. It diminishes neighborhoods among other things.
    Uncontrolled debt ends up weaseling its way into everything. Companies raise rates to make up for loss. Why does our insurance go up every year? We all makeup for people who scam the system or abuse it by paying more. If they pay out too many claims for the year they will make up for it by charging more.

    We look at all these things as individual issues but they are really not. Bubbles bursting and uncontrolled debt that doesn’t get settled affects us all.
    Kevin, we are past the point of no return with this. Either way, you look at it it will not end well.
    We have a federal government 21 trillion in debt. That will never be settled. It will affect us all. People don’t take this seriously they act like it’s there issue but it is ours. All ours.

    When all these asset bubbles finally burst it will affect all people. Student loans are one of the many bubbles that are overinflated.

    Anyway, this is my point. We always look at things from an individual perspective. Which this is anything but.
    The policies of the federal government are at the root of all these issues. There is too much moral hazard when you start guaranteeing things, like loans backed by a third party.
    Defaulting on a government-backed loan affects the whole country. They’re going to get the money from somewhere and it is taken right from everybody else in some form.

  24. Tim that’s the whole reason I suggested amnesty. This isn’t just a student loan debtor problem, or maybe it is right now. But soon enough it will be all our problem. But you’re right about government. They’re supposed to protect us, but instead they’re the instigators. You get elected by promising goodies to people, who are so self-centered they focus only on the goodies, not the burden it will load up on them or on society at large. (I love what Jesus said about the Pharisees, who were both religious and political leaders in first century Israel, “They tie up heavy burdens, hard to bear,and lay them on people’s shoulders, but they themselves are not willing to lift a finger to help.” Matthew 23:4. Apparently nothing has changed in 2000 years despite the fact that we think we’re so much smarter today.)

    The problem with government is once they came out with paper money, then declared a monopoly on money printing, it gave them unlimited power. They can print or borrow nearly unlimited amounts of money, to fulfill these impossible promises. That’s why we keep getting these serial bubbles, and why the government always seems to ride to the rescue of the problems they create. How many trillions did it take for them to bail us out of the Financial Meltdown? The problem is that people don’t blame them for the fall, but give them credit for the save. We have an uninformed, deluded citizenry, which is why things never get better. The student loan debt problem won’t get better either. It will collapse, then get bailed out by the government, then everyone will sit around waiting and anxious for the next loan give away program.

    So what I’m proposing doesn’t fix the system, it just gets us to deal with one of the latest component problems before it blows up into something much worse.

  25. I still stand on my position. Student loans shouldn’t be forgiven but a better system needs to be in place. What about whatever your balance is, pay that back with payments. That Enron math calculation they use to eat up all payments in interest is why people don’t pay. Many speak without looking at the whole picture. Yes you did it, great for you. To say if you can’t afford it you shouldn’t go is wrong. If I followed that mantra I would still be entering back doors, riding the back of the bus, etc. things like this made an equal playing field that’s all. It just got out of hand due to greed and exploitation. It’s debt and should be paid back, just without interest. Dollar for dollar. Sometimes you may not need a degree for a particular job but I promise you the job search isn’t as fair as it may be for some. One person with a high school diploma and another with a bachelors are equally qualified in many instances. Some make it seem like it’s ok to charge a person with bad credit 15% interest or just another in general but a person with better credit or another in general an interest rate of 1%. No it’s not, it leaves room for dishonesty, privilege, and a whole lot of other stuff. What’s wrong with a flat interest rate? Again, pay back student loans? Yes but remove the interest, the greedy have made enough.

  26. I can’t agree with what you’re saying about interest, but there’s something capricious about student loan interest calculations. Too many people are having problems with the student loan system to be ignored. But this all reminds me of something the one-time Secretary of Human Resources of Georgia said a few years back, “Government does not make for good family”. She wasn’t talking about student loans, but it still applies. Most people aren’t aware what they’re signing up for with government programs. And when they don’t work out as expected they’re disillusioned.

    My personal thought, as described in the article, is that the student loan program has failed, and needs to be overhauled and greatly reduced. That will lower the cost of college, which benefits everyone, individuals and the country. Unfortunately, we no longer think and act as a country. And it’s not just political divisions either. People want what they want without giving much thought to the outcomes, and how it will affect everyone. Just give me what I want.

    The truth is that if government wasn’t enabling so many people to go to college there’d be a lot more jobs for people without college degrees. The UK does high school technical/apprenticeship programs that enable graduates to go directly into a career. It’s much more cost effective and helps a lot of people. The problem in this country is the “one size fits all” mentality. We have to allow everyone to go to college so we’ll all be equal. Well, if everyone goes to college a) the cost will explode, and b) the market will be so flooded with graduates you won’t be able to make any money in most fields.

    And here we are.

  27. I have been trying to talk my grandkids into learning real skills that their immediate neighbors will need using tools they can carry on a pushcart. A person that can fix a faucet or replace a wall plug is gonna be much more valuable than a financial planner.

  28. That’s really the “secret” Ric – Find something you can monetize and do it. It’s really the key to making any venture work – you just have to do it. They can’t teach that in school, and even if you have a high priced degree, you’ll be beaten out by the person who can do what you’re describing.

  29. My thought exactly Kevin! Yes if everyone had degrees, salaries would decrease. If that happened the cost would have to follow. I don’t see how cost would increase if nobody had the money to pay for it. Someone would go out of business.
    I wasn’t thinking one size fits all but more of an opportunity for everyone who wants to work for it. This topic is so controversial because opportunities are not the same across the board and so many factors interfere with everyone’s interpretation.
    Also, what’s wrong with people only paying back principle and not interest on student loans? Why should someone make money off of that considering?
    One thing I have learned is if we as people are not caught in the washer, we will be in the dryer. These crisis are created by greed and even if the student loan issue was fixed, another one would be brewing in the background. So I still don’t agree about punishing the puppets when nobody can or will punish the puppet master.
    It’s not that people want what they want. It’s hard out here and getting worse by the minute. This is a survival game. People are trying anything to stay in it including going to school to increase their ability to stay relevant. Many can’t hang which has led to mental breaks etc. I know it looks like molten garbage from several clicks up but we feel rushed just the same.

  30. There are economic factors that are causing most of these problems, but neither the government nor the media know how to articulate them or come up with solutions. So they keep pounding away at what they’ve always done, hoping more of the same will work better going forward.

    As far as interest, it isn’t the enemy. Islam prohibits charging interest, but if you look at the Islamic countries, they have no real economy other than oil production. No capital markets, no lending, no real jobs. There’s a reason people are leaving those counties and coming to the ones that charge interest. Not saying interest is what makes these countries better places to live, but it is part of the overall package.

    Unfortunately, none of our problems are simple. And not only are they complicated, but they’re also interconnected. That’s why the population is so confused, and why government and the media have no solutions. They don’t dare tell us we can’t keep doing what we’re doing otherwise it will look like they aren’t really in control.

  31. So what your saying is this. I own my own business. I should not profit off selling anything? I should give the customer the price it costs me.
    That’s basically what your saying.
    Banks are selling money. The profit is the interest. So they should give it to you and forget about making money. If all businesses operated how you’re describing, there would be no business.
    When it gets down to it. Nobody cares period if you go to college or not. Nobody is going to give you anything just so you can get ahead at the cost of they’re business.

    That’s the reality of a loan. It is the sale of money ( there’s ) to a consumer ( You ) at a profit. ( How they stay in business ) How all businesses stay in business.

  32. Well said, Tim K. I know no one wants to give more money to the gov’t than they already do (taxes), but it is a loan. No other business is going to give you a loan and not charge interest. We pay it on our houses, cars, credit cards, everything where you borrow money and don’t pay cash up front. I’d love to have my mortgage interest free. If I need healthcare and can’t pay for the deductible, I have to borrow the money and pay interest. And even if it’s not a loan per se, but you buy any product, you’re paying more for the product than what the seller paid to sell it to you. It’s been like that forever, and I do believe it’s going to stay that way, like it or not. There’s no such thing as a free lunch.

  33. We can think of interest as paying for the privilege of being able to make a purchase even though you don’t have the money upfront. As well, though everyone focuses on the burden on the debtor, few think of the investors who put up the money to fund the loans. They’re taking a risk in putting up the money, and deserve to be compensated for that risk. As you said Bev, there’s no free lunch. Ever.

  34. I agree Bev and Tim but I didn’t mean everything should be interest free. Not at all. Meaning just a solution to the current student loan crisis. I’ve given 2 ideas, fixi the calculation for interest and not charging it at all. I would rather get some of my money than none of my money. They cut deals like that with bad debt all the time and then they write it off. Everyone on here has valid points and it is very confusing, just know not everyone with student loans wants a free ride. I really wish you could see what I see. My loan balance with nelnet is 54k at a rate of 4.25%, yet I send them $680 a month and my balance only went down $3800. No missed payments, nothing. I’ve been paying since 2014 by the way. When I call them I am told flat out student loans are designed to never be paid off unless you can drop chunks of money.

  35. Donna, I see what you’re saying. I just did a quick calculation, and based on what I’ve come up with you should have paid $24,000+ toward principal in four years, based on that interest rate and monthly payment. Have you thought about talking to a lawyer about this? This isn’t right. And I agree, something needs to be done about student loans, it’a a scandal.

  36. Until we fix the current debacle which some call Education, writing off a bunch of loans just so new ones can be given will just kick the can down the road. Almost 1/2 of the price of college is from room and board and extras, not the actual cost of the education, so people are taking out loans for things they actually should be paying for without loans. It is just like the housing bubble, many people were taking out second mortgages or doing cash out refinancing on their homes to take a trip or buy a car or pay off credit cards and when the bubble burst they were screwed, it’s borrowing money for lifestyle not needs.

    If there were some type of forgiveness I would say they should first stop charging interest, yes the banks will be hurt, but like a short sale on a house, it is better to get something rather than nothing and secondly if more forgiveness is needed it should be only for the actual cost of education not the beer and pizza part.

  37. I completely agree Rick. First, much of the education is wasteful, which we’ve touched on in the comments. But as you say too much of the “cost” is for room, board, and incidentals. I’ve even heard of students living off student debts, paying for travel and entertainment since there’s often no restrictions on the use of the funds.

    But you’re right Rick, education is broken. But it won’t/can’t be reformed. The industry will and is resisting change. Politicians don’t have a clue what’s wrong, let alone what to do. The only outcome will be a bubble bursting, than a restart of a new system. My guess is it will be less money-centric, and more guided by the internet, and the actual needs of the economy and job market. Until then we muddle through with the broken system we have. What’s unfortunate is that so many of our current systems are similarly broken. We have to hope they don’t all implode at roughly the same time.

  38. From working at that college, I know many of the borrowers were borrowing amounts well past that needed for tuition and books. Some were borrowing to avoid having to have a job while in school. Others were borrowing to add income for things like buying cars, etc. Some borrowed for extra partying money.
    There is no other loan industry, other than the odious payday loan industry and underworld loan sharks, that allows young people with no or weak credit and no collateral to borrow such substantial amounts of money with no questions asked and no guarantee of future ability to repay the loans. MOST American kids that age are naive and uneducated about financial issues.
    And WHERE is that money being spent at the unis? For the most part, it is not being spent on professors. Professors, with the exception of Engineering and Medicine, make notoriously low salaries. Many courses are taught by adjuncts and/or grad students.
    Perhaps we should stop the industry in its tracks and stop giving out loans right and left.

  39. Well said Mary, but I think you have the strongest handle on what’s going on with this. I remember after the financial meltdown a lot of students extended their time in college, sometimes by going to grad school. But the reason they did it was to buy time. They couldn’t get jobs, so they lived on loans. I heard more than a few stories about that. It may not be as pronounced now, but like most trends, once it gets in motion, it just keeps going.

    The other problem, as you point out is young people being naive. But I don’t entirely blame them. I do blame their parents, as well as a culture that teaches young people to be consumers, rather than how to manage money, which includes a large helping of debt avoidance. When I was growing up we knew debt wasn’t your friend. And my parents certainly made that case in the strongest way possible. Today, the people who should know better (parents, educators, politicians, economists, etc) are asleep at the wheel. It’s really a bigger picture problem, one of adults who still act and think like kids. Nobody wants to grow up any more. When I was young you WANTED to grow up. Not any more. There are 50 year olds who act like they’re 19 and are completely incapable of giving sound advice to real 19 year olds. That can’t be fixed.

  40. As a business owner I hear that all the time. Oh, just write it off. It doesn’t work that way. Write it off to what?
    Why would I write it off? Lose my profit because you don’t want to pay your interest. I’m amazed at these statements.
    Credit cards are designed the same way. To keep you in debt. So are basically all loans.
    I’m sorry but I don’t agree with these statements about not letting something stop you because you can’t afford it. It’s that kind of thinking that got you in that position to begin with.
    I didn’t go to college because I didn’t have the money and I wasn’t borrowing it. I’ll find another way.

    Sorry this seems harsh. I don’t mean to minimize your effort or position. I respect your opinion. I just do not agree with it.

  41. I agree with you Tim. But the problem is we now live in a debt based economy. We hardly trade with money any more, it’s all IOUs in one form or another. The question is then, where do we go from here? We can either hatch strategies to unravel this nonsense, or we’re going to have a serious crash that will hurt even the people who never borrowed a dime. As you and I have discussed in the past, this economy has evolved into a house of cards, and the fall is coming. It would be encouraging to see the people in charge finally step up and start unraveling this mess while there’s still – maybe – some time to create a soft landing.

  42. I am with you Tim, what I meant is IF!!!! something was to be done, instead of writing off the entire loan and really hurting the bank, just stop the interest payment. The banks have been charging over 5% on student loan all through this period of zero interest rates so they have made a boat load of money off of these loans already. Plus they are a secured loan backed by the FED so that was easy and secure money.

    I do NOT believe they should do anything but force them to pay. I paid my way through college, I did not graduate until I was 31 because of it and now I am paying the entire cost for my 2 children. I would be pissed if they did forgive them for I am paying my 200 plus thousand dollars to get my kids through college and if they get it for free I will have a melt down. I almost want to take out loans just encase they do forgive them.

    We are on the same page, I was just giving the only scenerio that I would remotely be accepting of and that is making the borrower pay what they borrowed and what ever interest they have already paid.

    All is good

  43. You’re also pointing to a bigger picture problem, in this case the priority of bailing out the banks. That’s being done, and has for years, at the expense of the taxpayers and citizens. The government bails out the banks, then the banks stick the customer. You mentioned zero interest rates for the banks with 5%+ student loan rates, but that’s only the beginning. Some banks are charging over 20% on credit cards, and 14.99% is considered a preferred rate. When did the banks become the foundation of the economy??? It’s evidence the real economy is rotting.

  44. Because Mary, when you take out the risk if loaning money by guarantee backed by the government then they don’t care if you can repay or not. They will get there money from the good ol taxpayers.

  45. Yet another bigger picture issue, Tim. The government is guarantying everything these days, and it’s creating distortions and dysfunctions most people don’t remotely understand, if they’re even aware of them. Student loans are a classic example of a government guaranteed distortion. Even the students have no idea what’s really going on.

  46. I hear you Rick. If something had to happen that would probably be the least painful. Your situation is exactly why it is not right or fair to the people who have paid out of pocket.
    Kevin made a good point. Donna’s calculation doesn’t seem right
    I get a little batty because I hear that all the time and from my friends. Oh, you can just write it off. No big deal.
    I hope your kids go on and make a boatload of money for that investment. They are lucky. Most are not.

  47. The best evidence the system is screwed up is when people get burned for doing the right thing. I feel for you Rick, because while we can go back and forth on this, ultimately I believe most of the debt floating around out there will never be paid back. I see one of three outcomes:

    1) An across the board legislated debt moratorium, perhaps brought on by a really bad downturn
    2) The debts will be inflated out of existence by a hyper-inflation (in recognition of the reality that the debts can’t ever be repaid)
    3) An economic collapse will cause debtors to simply stop paying their debts, finally forcing the lenders into collapse, after which no one will or borrow for a long time

    I know these predictions seem off the charts, but stop to consider that debts are no longer repaid – they’re just rolled over and refinanced. Debt is growing too fast for the economy, and it won’t take much of a downturn in the economy to trigger the domino effect.

    If I’m right about this, debtors will ultimately “win”, to the degree anyone will come out on top in this mess.

  48. Your right Kevin. Anybody who is 60 and under have grown up with a debt based economy. People just never learned or understood how serious debt is. It effects every aspect of your life. It takes away your freedom and forces you to live a life maybe you don’t want. It turns you into a puppet. This is a serious issue. Maybe one of the top issues of our time.
    I would scream it from the rooftops if I thought anybody would listen.
    I hate debt and what it does to peoples lives.

    People just keep making the same mistakes over and over. It’s lumacy.
    Your right , adults who are kids in grown up bodies should be helping these young people with adult advice. But they can’t because they never grew up themselves .

  49. The current view of debt is that it’s benign. Reigning in the credit system is considered a heresy. If you even suggest it you’re considered a nut job, like people who believe in alien life forms. It’ll take a serious economic disaster to change people’s opinions. The Great Depression did this for at least a generation, and it’s why the 40s, 50s and 60s were the best economic time in American history.

  50. It’s been a long time since I repaid my student loans, but I’m assuming they work the same way as a mortgage where you are paying all of the interest up front in the beginning of the loan and a smaller amount towards the principal and then it starts to even out, if you can say that, many years if not decades later. Is that correct, Kevin? If so, that’s why it seems the balance is not decreasing. I’m not saying it’s right, I’m just asking that question. And I also think Tim’s point is so valid about the loan being backed by the gov’t, so people don’t care about paying it back. Plus, there’s nothing to take away from you if you don’t pay, no car to reposses, no mortgage to forclose on. You always will have your education. Instead of forgiving interest, how about mandatory paid education for several classes about what having student loan debt, or any debt, actually means, mandatory classes for how to manage money, mandatory working during college…I have no idea how to enforce that last one. People need to understand and be fearful of having debt, not accept it like its commonplace. I truly wonder how many people even realize that student loans can’t be discharged in bankruptcy…they follow you to your grave. You will pay, one way or the other.

  51. You’re right about your interpretation of mortgages Bev. But those have a 30 year amortization. Based on Donna’s loan details, her loan should be substantially paid down at this point, so something is definitely wrong. $54,000 at 4.25% and a payment of $680 works out to be an eight year loan. Four years in she should be nearly half paid.

    I chuckled at the idea of offering courses in student loans. For the education industry that would be a completele heresy, and I can envision any administrator proposing it being tarred and feathered in the square of his or her university. No one in academia dares kill the golden goose (student loans) with…education!

    Student loans are a scandal, and Donna’s one of millions caught in the snare. One thing I’ve learned in my life is that where there’s complication, someone is benefiting financially. Charles Hugh Smith has written that complication has become a moat around corruption. There are too many “gotcha” provisions with these loans.

    And you’re right Bev, too many people are too trusting, especially when something has the government’s seal of approval on it. Individually and culturally, we’ve got to come to the realization that government isn’t God, Washington, DC, isn’t Mount Sinai, and government benefits aren’t manna from above. Until we do, we’re ripe for these situations. I like Tim’s idea of not relying on his police pension or on Social Security. Take them as bonuses, but have other income sources. Relying on government has become a popular alternative to personal responsibility, and it’s one of the major reasons we’re sinking into moral and cultural rot. Not to mention the every-man-for-himself mentality, that’s the real source of “polarization” in our country. There’s no “we” any more. It’s been replaced by “what’s in it for me”, which is largely why people get so hostile when a sacred cow program is threatened. It’s pathetic when you consider the great nation we once were.

  52. Your close Bev. What I meant was the college itself does not care if you can pay or not when it is guaranteed by the government. If you don’t pay the federal government pays. Of course, it does not really pay. The taxpayers pay.
    So what does the college care? It can charge whatever it wants. It is a recipe for over-inflating. It has nothing to do with your ability to pay.
    Think about it, what business in their right mind would give an unemployed college person any money. There’s no guarantee you will get a job after you graduate. Then they require a co-signer who then becomes on the hook for the balance regardless of any kids ability to pay it back or get a job. If the parent doesn’t pay then it sets off a whole other series of problems.
    The college cannot lose, period. These loans are prison sentences for who takes them.

    Kevin mentioned bank bailouts. They operate on the same premise. They can take depositors money and do whatever they want with it at no real risk. Savings are guaranteed up to 100000 dollars. Freddie and Fannie are basically government-backed mortgages. FHA or whatever else is backed by a government. Their no thought or care once that happens. The bank has no skin in the game. Ultimately the taxpayers pay for it all.

    Like Kevin also say’s. What’s in it for me. If we looked at this as a whole it affects us all. If not directly then indirectly. Every bailout ultimately ends up in our laps in the form of new taxes or some other way.

  53. That’s about right Tim, the colleges are never on the hook because they don’t actually make the loans. And as far as government backed loans, I think there’s a dirty little secret attached to that. In reality, the taxpayers don’t foot the bill either. The government borrows or prints money to cover any crisis or shortfall, specifically to insulate the taxpayers from the real cost.

    Here’s the reality…If taxpayers really had to pay for all these programs, we wouldn’t have them. The unspoken promise is that government will come up with the funds from “somewhere”, but it won’t be the taxpayers. That’s why spending never declines. There’s a net benefit to the taxpayers, that’s quietly accepted without serious questions.

    This is why tax cuts are meaningless. If you cut taxes, but increase spending (making up the difference with borrowed money and printing), taxpayers get a bonus, and government keeps spending under business as usual. That’s how you get to a national debt of over $21 trillion, and unfunded liabilities that are so high no one can accurately estimate them.

    It’s a game our culture is playing with itself, under the misguided notion there will be no consequences. And there have been no obvious ones up to this point. But we should suspect we’re approaching a tipping point. I believe the 20s are going to be very difficult decade, but there’s no way to know how it will play out or who will be most affected. I suspect most of us. We’re all part of this giant pyramid scheme, that few can see, let alone discuss intelligently. I’m aware of it, but it still overwhelms my simple mind.

  54. Yeah your right on that but every time I mention fiat currency or money printing everybody just reads right over it or thinks I’m out of my mind. So I try to relate it to something everybody can understand.
    But yes that seems to be more accurate. I know you know it’s there. I have sat with my wife and tried to explain it and even her eyes glaze over.
    I think your right. The 20s are going to be interesting. I think and actually hope we are close to the end of this madness.
    Maybe someday we can get back to some sanity.

  55. I realize that it is only an average, but $37,000 hardly seems a crisis. I knew people who graduated over 30 years ago who had almost that much in student debt. If it is a decent degree, that seems quite reasonable.

    If you come out of school with a big loan and no job, then you have done something wrong. Unless you are independently wealthy, you need to study something that pays. The information is readily available.

    The same people who are moaning about $37,000 in student loans are dropping $40K for fancy weddings and $60K for fancy cars. I don’t really find myself feeling sympathetic. (I know, I’m stereotyping a little)

    If I contrast today to the year I finished high school (cough, mid-1980s); if you come out of high school and don’t know what you want to do, for god’s sake do not go to university. Work for a few years and figure it out. Going to university is no longer for killing time while you figure it out.

  56. Neil – All that you’re saying is time tested, but “old school”. Few follow it any more. I’m in complete agreement, nobody needs to go to college if they aren’t sure of what they want to study, and haven’t shown a definite aptitude for it. But kids are being sent to college today as a default. Junior doesn’t know what he wants to do with his life (which is perfectly normal), so mom and dad and any in the education industry who care even a little, want him to go to college to study “something”. Remember, today’s adults came up at a time when a college degree was synonymous with a bright future. Back in the 70s and 80s people with humanities degrees were ending up as financial advisors and marketing directors. That’s their frame of reference. Today, those majors get you precisely nothing. But people are behind the curve, and give out advice that on the one hand seems high minded, but is also completely wrong. College should never be a default choice, especially if loans will be needed to make it happen.

    The truth is the economies of the world are going into uncharted directions, and nobody knows what to tell young people. So they give them the standard advice of get a good education then get a good job. Even bigger picture, they’re not even remotely aware that junior may one day need to create his own “job” because there will be no traditional jobs. But neither the parents nor the education industry knows how to coach people on how to do that. It’s lost art in our culture, despite the fact that until about 100 years ago, that’s exactly what people did.

    In a real way, the post World War II boom period – which was an anomaly – has completely ruined us for the future. We’re preparing young people for a stable world that no longer exists. The greatest assets workers can have today are flexibility, adaptabilty, and a willingness to continuously increase their skills. That’s at complete odds with the “get a good job” strategy that’s being advanced.

  57. It will take probably two or three generations to change this mentality. I’ve told this story before but my wife’s family came here from Lebanon in the early 70’s. None of them have ever had traditional jobs. They came here and created jobs by opening a business and buying rental properties.
    My wife has the same mentality. If you needed clothes she made them. I have never bought a curtain for my home. She has always made them. It really was her idea to start a business. I probably never would have had the guts on my own.

    I had the totally opposite mentality. You got a good job and saved your money. The money part was easy for me. That’s the brain washing that has taken place here for 50 years. If you look back at the business titans of the early part of the 1900’s they created there own jobs. Those are the guys I look up to in business.
    However I was pretty scared when I started my own business. A job was safety to me.
    Now, I can’t imagine ever having another job.

    You said it. The model that worked for our generation does not work now.

  58. I find it inspirational to read the biographies of successful people before WW2. People were on their own, to create their own paths. There were no career jobs. Sure, you might have held a job for a time, but it was temporary, until you created your own source of income. I love reading about the creativity, but also see it as being relevant to today’s economy. Yes, people continue to pursue “good jobs”, but they’re getting harder to find, and we need to start working in different directions.

Leave a reply