by We have created at least two generations of highly educated people who are unwillingly being crushed by student loan debt. The housing crisis will look like nothing compared to the massive hit our economy will take if these student loans are ever called in or forced into default.
The dirty little secret that is keeping these loans in play — and always ready to tip on the borrowers with the slightest nudge — is the ability to “forbear” and “defer” in a vicious circle where you don’t have to pay what you owe, but what you owe gets compounded and pummeled and jacked back into what you already owe. Every day you live, you dig your financial grave just a little bit deeper until you know what you’ve always known: There’s no way out; so give in to that punishing reality and live with your ruined financial debt, but never give up.
How do smart people get put into such financial ruin? They were brought up believing that higher education was the only way to live a right and promising life. You had to “pay to play” in the world and if you didn’t have any money or connections, you could still make your way by making yourself smarter and working harder.
Unfortunately, none of that is true today. Yes, you can still go deeply into student loan debt, but you won’t ever be able to live a good life with a smarter mind because the system is set against you never being able to pay off your loans. You’re a slave to the education of your own mind and you’re smart enough to know your end is doom. Not even bankruptcy can save you from that infernal debt that follows you around — both up and downhill — like Sisyphus’ rolling rock.
From The Atlantic:
How does the housing bubble debt compare? If you add together mortgages and revolving home equity, then from the first quarter of 1999 to when housing-related debt peaked in the third quarter of 2008, the sum increased from $3.28 trillion to $9.98 trillion. Over this period, housing-related debt had increased threefold. Meanwhile, over the entire period shown on the chart, the balance of student loans grew by more than 6x. The growth of student loans has been twice as steep — and it’s showing no signs of slowing.
From the Washington Post:
The amount of student loan debt has skyrocketed in recent years to a total of $867 billion last year — or more than the $704 billion in outstanding U.S. credit card debt, according to the Federal Reserve Bank of New York. Of the 37 million borrowers who have outstanding student loan balances as of third-quarter 2011, 14.4 percent have at least one past-due student loan account.
During the 2010-11 academic year, students and families borrowed $104 billion in loans from the Education Department, a 50 percent increase over three years. Private education loans fell by 65 percent in that time, to $7.9 billion in 2010-11.
From The New York Times:
With more than $1 trillion in student loans outstanding in this country, crippling debt is no longer confined to dropouts from for-profit colleges or graduate students who owe on many years of education, some of the overextended debtors in years past. As prices soar, a college degree statistically remains a good lifetime investment, but it often comes with an unprecedented financial burden.
About two-thirds of bachelor’s degree recipients borrow money to attend college, either from the government or private lenders, according to a Department of Education survey of 2007-8 graduates; the total number of borrowers is most likely higher since the survey does not track borrowing from family members.
Is there any hope to solving this student loan debt crisis?
I bet not.
The GOP hate higher education; they want followers, not free-thinkers. The Democrats won’t help because they don’t want to be put in the position of “forgiving” debt to “elites.” Things will continue on as they always have — with more and more people choosing to defer and forbear and sink deeper into the abyss of what has become a national shame: “Home of the Free, Land of the Stupid.”
The one salvation we have is that smart people who know they’re being purposely ruined by an unfair system that requires massive debt in order to brighten the mind, have the ways and means and the guts to stand up and fight back against any future unfairness that seeks to punish them for bettering their thinking — and that’s the great and grave danger for the current political system and their banker backers — furious, but educated, minds know how to win a knife fight against authority when their very livelihoods are being fatefully and purposefully threatened.
This is exactly why we are saving money now for our young son’s future university education. 18 years of saving will hopefully put a dent in that debt!
I hope it all works out, Gordon!
http://thinkprogress.org/education/2012/01/09/400252/skyrocketing-tuition-inflation/?mobile=nc
“smart people who know they’re being purposely ruined by an unfair system that requires massive debt in order to brighten the mind, have the ways and means and the guts to stand up and fight back against any future unfairness that seeks to punish them for bettering their thinking”
Who has the means? They are in debt. Many smart people are too depressed and ashamed to care. Smart people realize that debt is control…and a way for a small group of people to make a whole lot of money. The smart people know that the system cannot sustain itself and will collapse under it’s own weight. Your comment to Gordon proves my point.
Hi Barry —
“Means” doesn’t always mean money. It can also construe ways of getting things done.
The day the Federal student loan programs tells people there are no more deferments or forbearances or the entire balance is now due – – will be the day that the downtrodden will finally rise up and fight back. Right now, the indentured are keeping quiet because the system, while suffocating them, is still providing puffs of air to keep them just afloat enough not to go into a total meltdown panic.
The ultimate resolution will have to be total loan forgiveness after, say 20 years or so without any qualifying considerations, or the total dismissal of these loans in bankruptcy so people can actually, truly, start over with their lives on a clean financial slate.
Ok….
Maybe specificity is required. Aside from splitting hairs by use of the word “means”, the problem is systemic and IBR, ICR, PSLF, Deferment and Forbearance give the borrower a false sense of security. I think the lack of jobs to service these debts will bring this problem to a head…regardless of “means” because the system is corrupt, along with most of our politicians and lobbyists. Many of us would love a blank slate.
I agree.
The system will stay corrupt in stasis as long as somebody doesn’t start sending final dunning notices to borrowers. Then everything will change in a revolt by smart, educated, people who are forced to choose absolute death or a chance at living again. That rebellion needs to happen no matter what, so the smart money is on never letting it get that far by just keeping everything the same.
If the student loan debt problem can be played — from a PR angle — as another botched job by a greedy banking industry, then there might be a way out of it for both sides of the aisle; but if the system blames the borrower who was trapped as a young adult with no other way to get a college education other than risking ruining their lives with overwhelming debt acquisition, then those millions of smart people aren’t going into a final grave without one last fight to overthrow the oppressive and greedy regime. The basic unfairness of it all will finally come home and the unfairly indebted will start to stand up.
So, the “smart” thing from a policy POV is to just keep everything in place and let the debt continue to build and build and build…
I’ve been pulling my hair out thinking about what my son is going to be facing when he gets done with his schooling. He’s studying for law enforcement; Highway Patrol is his goal. He’s only going to a ‘technical college’, not a major university, and the debt load is still astromical. Partner that with the purchase of a home on a small tract of land in the country, and I fear the worst for his financial future. I dealt with it some myself, and didn’t get the loan paid off (from ONE year in University) until 2004. I attended in 1991.
Everybody who attended college over the last 30 years are sinking in this tipsy boat on a raging sea. Doctors, lawyers — they, too, owe hundreds of thousands of dollars in student loan debt. Many will never begin to even begin to pay off the balance. It’s a horrible catastrophe that will strike the core of the nation if anyone ever calls these loans immediately due and payable.
AND I just read a book called “Confessions of a Surgeon” (Dr Paul Ruggieri)…… Besides the burgeoning debt load that it takes to support a ‘well-paying’ profession – I note the blog about school drop-outs. No one is attending high school, much LESS college. I’m glad I’m in my 40’s. In the year 2090, it’s not going to be pretty around here.
We are definitely in for a reckoning. We have been reckless with our wealth and good fortune and punished the wrong people for trying to move up.