$830 Billion in Student Loans: The New Mortgage Bubble

[marmar]

by Anya Kamenetz
HuffPost


A strange milestone was marked this week in the history of student loans. The total balance of all outstanding US student loans (given as $730 billion in DIY U, based on OMB estimates) is now estimated by Mark Kantrowitz of Finaid.org at more like $830 billion -- $605.6 billion in federally guaranteed student loans, which have interest rates fixed and in some cases interest subsidized by the government, and a further $167.8 billion in private student loans, with interest rates that hover around 18-20%. Furthermore, Kantrowitz says, $300 billion in federal student loan debts have been incurred in the last four years.

This means the total balance of student loans has just surpassed the total balance of credit card debt for the first time in history. Each makes up roughly a third of the money Americans owe, mortgages excluded.

The good news here is that at least since the credit crisis in 2008, credit card debt has been going down slightly. Americans are saving more and spending less.

The bad news, of course, is that student loan debt is much more severe than credit card debt, because it can't be discharged in bankruptcy. That means your only "recourse" if you can't manage your loans is default, and in the case of federal loans, that means being pursued until you die. The federal government can and will seize your tax refunds, Social Security and disability payments until your dying day.

From where I'm sitting, the buildup of the national student loan balance looks like a massive betrayal of trust. People have been told for decades that this is "good" debt. In fact it's really, really bad debt. Increasingly, high unmanageable debt burdens are falling on those least prepared to deal with the stresses and costs of college: the so called "nontraditional" adult, working-class student who is more and more likely to attend for-profit colleges that cost an average of around $14,000. And 40% and higher of these students are defaulting. (The same students default on their loans at higher rates when they attend for-profits, even controlling for demographics.)

This is starting to look more and more like the mortgage bubble. What was first depicted as an exapansion of opportunity now starts to look like a massive scam perpetrated on the socially disadvantaged. The difference is that while the mortgage bubble was happening, homeownership in the US actually rose to an all-time high. Whereas while we were adding $300 billion to our national student loan tab, college attainment among young people actually fell.

Someone with experience in the for-profit college marketing business told me that the same online sales geniuses who used to work for mortgage brokers are now employed by for-profit colleges. Their business is the same: fill out the forms, get the money, consequences be damned. Will we stop them this time?

If you are moved to action, check out the good folks at Student Loan Justice , who advocate restoring bankruptcy protection for all student loans.



http://www.huffingtonpost.com/anya-kamenetz/830-billion-in-student-lo_b_679497.html

[HEyHEY]

1. The idea of student loans is so contrary to having a successful natio

All these people that say students are freeloaders and should pay for their education and such are fucking dicks. I'm 31, have student loans, (And I'm Canadian) and they are crippling enough. Had I not been paying them I may have already purchased other things that give the economy a more direct boost.

It's pathetic to say, "Hey! Well, we want you to contribute to your country! And, man, is it ever gonna cost you!" This is not a joke, when I was 20, I worked for the city as a gardener in the summertime for 20$ an hour. After I was done school, I had $30,000 in loans and my first job was 12$ an hour, after three years I made 25. At one time I worked three jobs in my field working from 9:00 am until midnight. I was on track to net about $60,000 a year.

So, obviously, society needs people in my profession, but aren't willing to pay for it, and government isn't willing to aid in the education of it.

[liberal N proud]

11. In a land were greed is king, it is what is expected

At one time, the government loaned you the money to go to school and little or now interest. I paid 1% on my student loans and they were easy to pay off. Additionally, you had one loan that covered your 4 or 5 years of school.

Now, the interest rate is based on the current market rate and you have to apply for a new loan every school year. Couple that with the inflation of college tuition and families, not students are strapped with the debt. Students are unable to get these loans because they don't have a credit rating coming out of high school. Mom and Dad have to get the money for them, strapping them with this cost on top of their mortgage and then add another child.

I don't know how we are going to pay for the second college education. I just don't see how.

[HEyHEY]

14. I moved in with my folsk my second year

And had a good job for the summer. So I only needed a $2,000 loan for tuition (this is Canada, so it's subsidised) I apply for the loan through the government student loan program and they said they couldn't loan me less than 6,000 bucks. So, I had to take out that much and they made money on the interest!!!! Dispicable!

[hunter]

2. This will be a biggie in igniting kentuck's "revolution."

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=8948967&mesg_id=8948967

[Orrex]

3. Predatory student loan lenders will be well-protected when this bubble bursts

Since, after all, the 45-year-old who took out a loan when she was 17 can do nothing to escape that crippling debt that has blown up to between 150% and 250% of what it was when she started.


Student loans are a disastrous blight on the economy, and their deceptive, high-pressure, and predatory tactics should be outlawed.

[mod mom]

4. Could this be intentional to turn the right further against intellectualism?

They'll blame students & the educated of their welfare on the state. :mad:

If we weren't ruled by those who want to dumb down the population to fill their war quotas, and if we truly valued education, this type of predatory lending wouldn't be allowed.

[bluethruandthru]

13. I wouldn't doubt it.

Repubs hate the educated (if they're poor) and have had a long history of trying to dumb down the populace. Just look at their ongoing attack on public schools. They only want the rich to be educated.

[xchrom]

5. Very interesting. Recommend. Nt

[handmade34]

6. rec x1000

[FirstLight]

7. I was conned into this debt as a 20 yr old

"by the time you graduate, the payment will be easy cuz you wiill be making sooooo much!"

nice pitch to a 25 yr old struggling to make ends meet and go to school...

I have over 20K in student loans, used them in my COMMUNITY college years to fill in the gaps in life cuz i was a single mom going to school..
never got to finish my BA
never made over 17K in a year, EVER

and my credit is ruined for LIFE
i've never been able to pay

and every year, they even take my EIC credit from my taxes. I thought that they'd realize if i was poor enough to need the EIC, maybe I actually NEED it...but no, they take it and pay my INTEREST with it every year...

endless hole of debt, if there were debtors prisons, i'd be there for life i guess

[Luciferous]

8. K&R!

I have a huge amount of student loan debt, and haven't been able to find a job since I graduated 18 months ago.

[Turbineguy]

9. Another republican idea

going off the rails. Harming the country for short-term profits.

[hunter]

10. I graduated from college years ago without any debt.

Every dollar I made, and every dollar I spent after I graduated contributed to the local economy. California was a wealthy state with a vibrant growing economy. There was no giant vacuum cleaner sucking all that money back to the bankers.

[ipaint]

12. There are some limits on what the government can take from you

should you default.



"The Department of Education and student loan guaranty agencies are authorized to take ("garnish") a limited portion of the wages of a student loan debtor who is in default. The Department and guaranty agencies may garnish up to 15% of your disposable income.

These agencies cannot take the full 15% of it means that your weekly income would be less than 30 times the federal minimum wage. Based on the current minimum wage of $5.15, this means that a minimum of $154.40 (30 x $5.15) of your weekly wages are protected from garnishment.

...if your Social Security benefits or other qualifying federal benefits are $750 or less, the government cannot take any of your money."

...The Department of Education can sue you for defaulting on your student loans. Unlike other debts, there is no time limit on suing to collect student loans -- you can be sued indefinitely.

Still, there is a good chance you won't be sued if your loan agency determines that:

* the cost of suing would exceed any amount it could get from you, or
* you have no assets that could be taken to satisfy all or a substantial portion of the debt."

http://bankruptcy.findlaw.com/bankruptcy/more-bankruptcy-topics/default-on-student-loans.html

[XemaSab]

15. I don't know how they expect me to give them money

if I have only been employed half the time since I graduated. :shrug: