Ah, the American Dream. Go to college, work hard, graduate, get a good job, career and then you'll be set for life with high earnings, enough money to buy a home, raise a family and retire comfortably.
Oops, rewind, this isn't the Ozzie and Harriet show, it's real life. Did you know student debt is one of the few debts one cannot declare bankruptcy on, no matter what? That literally you have to be in a pine box, or close to it, to have your debt forgiven? That 53.6% of those under the age of 25 with a four year college degree or better cannot find a job?
Student loan debt is now the next great bubble, threatening the U.S. economy as the mortgage crisis did. The NACBA released a study and calls student loan debt the next financial crisis, on the level of the mortgage crisis.
- College seniors who graduated with student loans in 2010 owed an average of $25,250, up five percent from the previous year. Borrowing has grown far more quickly for those in the 35-49 age group, with school debt burden increasing by a staggering 47 percent.
- Students are not alone in borrowing at record rates, so too are their parents. Loans to parents for the college education of children have jumped 75 percent since the 2005-2006 academic year. Parents have an average of $34,000 in student loans and that figure rises to about $50,000 over a standard 10-year loan repayment period. An estimated 17 percent of parents whose children graduated in 2010 took out loans, up from 5.6 percent in 1992-1993.
- Of the Class of 2005 borrowers who began repayments the year they graduated, one analysis found 25 percent became delinquent at some point and 15 percent defaulted. The Chronicle of Education puts the default rate on government loans at 20 percent.
The student debt crisis is not just the people who graduated with seemingly worthless diplomas, it's their families, parents as well who are paying the price. Parents co-signed loans, put up their homes, retirement and other assets as collateral. Literally the Consumer Financial Protection Bureau just said student loans are killing the economy.
Currently Americans owe $150 billion in private student loan debt, fueled by speculators craving for asset backed securities. Just like the subprime mortgage crisis, there were lax lending standards and by 2011 90% of these loans were co-signed by unsuspecting parents trying to help out their kids. But it's not just private loans that are a problem, just like the mortgage crisis, private loans are just the tip of the iceberg.
With student loan debt now topping U.S. credit card debt and few or no options available for distressed borrowers (including unwary parents who co-signed loans and now face the loss of nest eggs, retirement homes and other assets), America faces the very real possibility of another major economic threat on a par with the devastating home mortgage crisis, according to a new survey and report published today by the National Association of Consumer Bankruptcy Attorneys (NACBA)
We already saw 14% of all student loans are past due in 2011. Student loans are both public and private. Private student loans are about 10-15% of all student loans. Student loans are now over $1 trillion, surpassing credit cards in consumer debt.
Bloomberg law talks about the student debt crisis and interviews Congressman Steve Cohen (D-TN), who is trying to get a bill passed in Congress to allow private student loan debt be discharged. Currently private student loan debt is protected by the 2005 bankruptcy law and cannot be forgiven in most circumstances.
Cohen's bill, H.R.2028 is called the Private Student Loan Bankruptcy Fairness Act of 2011 and it's seemingly nowhere in the House of Representatives, even though the bill has 45 cosponsors. H.R. 2028 is seemingly buried in committee, the Judiciary subcommittee on Courts, Commercial and Administrative Law. There is a petition to pass this bill, as it sits dormant in the House. Notice this bill does nothing for student loans from the government.
Another thing to note is how lobbyists demand more foreign workers with businesses absolutely refusing to hire these new college grads who are Americans. It's an absolute outrage to hear claims of worker shortage when so many people, graduating from the best higher educational system in the world, the United States, are passed over and not hired. Next time you hear Americans are unskilled, contemplate how the U.S. university system is ranked highest among nations, yet U.S. businesses, corporations seemingly refuse to hire graduates who happen to be U.S. citizens.
Literally Americans are being hoodwinked into a new form of debtor's prison. The entire game is sold by a lie that higher education is the ticket to the American dream. Meanwhile businesses, corporations refuse to hire Americans and most absurdly refuse to train Americans. On the job training was standard fare for new hires. It wasn't until offshore outsourcing and manipulation of the U.S. immigration system for cheap labor did training new workers go by the wayside. Higher education has also turned into a zoo, with hyper-competitive entrance requirements and for Academicians, tenure is next to impossible. Universities have an unlimited supply of cheap labor, against through foreign guest worker Visas and literally we have a glut of PhDs in this country. Additionally, higher education costs are going through the roof and at this point one must wonder what kind of product higher education is and if it's worth the skyrocketing price tag. College costs are outrageous with a 15% increase in just the last two years. Something needs to happen to reduce the expense of getting a sheepskin.
Between 1999 and 2009, tuition at public four-year colleges rose 73 percent on average, and tuition at private nonprofit colleges jumped 34 percent. In the same period, median family income fell by about 7 percent.
These days so much real education is available on-line, why not simply have certifications and online tests, free of charge to accredit people in learning and mastering material on their own? Does one really have to go marching off to the ivory towers and sit in physical seats to certify one has become educated? What's the endgame here when America's best and the brightest are being denied opportunity, work and career? Canceling private student loans is simply a stepping stone. The reality is not only did policymakers sell our future down the river, they sold out our higher educational system along with it.