The Student Debt Train Wreck

The Sunday NYTimes did a story on the plight of a White middle-class student who amassed a student debt of $100,000 to get a liberal arts degree from top-flight NYU. She is now living with that decision, compared to her earning capacity, and it looks grim. What the story doesn’t talk about is how minorities, with a graduation rate of nearly two-thirds that of Whites (here) (half for black men), get saddled with similar debt and no degree. That’s grim, with a side of criminal on the part of those who are suppose to be helping these kids get an education.

The article (here) describes how schools are in the ‘business’ of enrolling students, but not telling them that they will spend a near-lifetime repaying loans, similar to the way their parents paid off the 30-year home mortgage. Private banks have been too happy to step in and provide what amounts to ‘no-doc’ variable-rate loans to kids, to fill the gap of what the schools, with any conscience or financial sense, could not do. As long as the government or parents guarantee the loans everybody’s happy – but then judgment day arrives.

When you are facing 10-15 years of student loan payments that look like rent payments, the cost of a good education doesn’t look so good. Forget bankruptcy, since that loop-hole was closed a long time ago on student loans. With a growing college-educated, but yet hourly-waged, workforce, paying off this debt seems nearly impossible.

US education is in a rat-race for wearing the best brand, even when that brand is just flat-out over-priced and a bad deal. Expect it all to crash eventually. There will come a time of ‘adjustment’, where schools, government, and banks are forced to return to operating budgets and loan amounts that match what students can reasonably repay. Expect that on the way there, schools will close or shrink, banks will write down bad loans, government will rescue and make rules – and the people will complain and sober to the truth.

James C. Collier

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