Student Loan Debt Growing, Along With Delinquency Rate

Here are some interesting charts from a recent presentation about student loan debt by Donghoon Lee, an economist at the Federal Reserve Bank of New York.

Total student debt was the only type of household debt that continued to rise throughout the recent recession while most households were de-leveraging, and is now second only to mortgage debt. You’ve probably heard the “trillion dollar” number in the news.

Below is a recent breakdown of the student loan balances. While a greater percentage of students now have debt, 70% of loan balances are under $25,000. Six-figure debt loads only make up less than 4% of borrowers.

However, I think the most worrying stat is the increasing rate of defaults. Actual delinquency rates are often understated because almost half of these loans are currently in deferment or in grace periods and therefore are not in the repayment cycle. Among loans that are actually subject to repayment, delinquency rates are over 30% overall and rising.

I think this last indicator shows that the current trends are unsustainable, although I don’t know what the solution will be.

Comments

  1. In the UK student loan payments are calculated as a percentage of your income (above a threshold). So you only start paying once you have a job that earns enough that you can afford a payment. This means that people who get jobs with large salaries pay off their loans faster, and people who lose their job for a year don’t make payments until they are earning again. Payments are deducted from your salary if you are an employee. Simple, and in theory no delinquent borrowers.

  2. Thanks for writing about this. I don’t know how many sensationalized news stories I’ve read about John or Jane Doe who has an advanced degree in basket weaving from XYZ For-Profit University and student loan balances of over $250k. The truth, as you’ve pointed out, is that most graduates have low and manageable levels of student loans (~70% less than $25k), provided the job market is strong enough to allow them to find gainful employment.

  3. The “solution” will either be forgiveness (which is already being pursued) and/or the popping of the higher education bubble.

    As far as the former is successful, it will lengthen the pain of the latter.

  4. What gets me is that several of my friends were pushing “student loan forgiveness” as one of the stimulus plans.

    Here I am, having worked 3 jobs while going to school in order to pay for it without taking out student loans, and the students that didn’t work as hard are wanting the government to forgive them?

    The solution is for the government to get out of this business. If the government wants to create a scholarship program, here’s my proposal: expand the SBIR program to include scholarships. Or expand the SMART program. When a student wants the government to pay for their schooling, they must write a proposal and have it accepted, and the classes they take must be in order to obtain the goal of the proposal they submit. Using an expansion of the SBIR program, pay the students cash when they meet their goals (as an incentive to contributing to the research of a particular area). Under the SMART program, guarantee the students a job in a Science/Math area when they graduate (as an incentive for doing well in school). You’ll get more people interested in both research (SBIR) and employable skills (SMART) so that they become solid tax payers in the future. Competition-based investment in students will increase competition and drive down the cost of tuition at the same time.

  5. @Mike H: I can’t believe that anyone would have the audacity to punish me for working extra hard and being financially responsible. Had I taken a heavier load, I would have racked up a ton of student debt. Instead, I worked hard, paid taxes, and all so that my classmates reap the benefits? I start getting heart palpitations when someone brings up student loan forgiveness: it’s a terrible thought that several years of my life could be thrown away in an instant, knowing that I didn’t have to waste that much time working.

  6. So what are the ramifications of this information? Are underwriters going to require down payments on loans and require that degrees are in high income professions? Then low income families who can’t afford the down payment will not be able to get a degree?

  7. What the presentation didn’t show and what I think would be interesting is the delinquency rates as a function of student loan balance.

    (Full disclosure, I have a student loan with a balance under 10k and I am not delinquent.) There really are a lot of ways that you can adjust your payment to match your income level (and extend your repayment period) or get a hardship deferral if you are unemployed that I don’t see how so many people are not making payments.

    From the pie chart, most people seem to have a balance similar to a new car, which really isn’t that much especially with the ten year student loan repayment plan that is standard.

    I would love to see the education bubble burst but I think it would require government to get out of the education funding business and I don’t see that happening anytime soon.

  8. Those delinquency rates are alarming. Particularly now that we have income based repayment programs. Getting behind on student loans really hurts you, its just going to pile up interest and fees and hurt your credit. so if people can’t afford payments they should definitely do IBR.

    Like Peter pointed out I think it would be useful to see how delinquency relates to loan balances.
    Note that a lot of the people with the >$100k debts are professionals like doctors and lawyers. VERY few people with just bachelors have that debt level. Its about 0.3%.
    And again like Peter said, the average loan balance is similar to new car loan debt.
    Theres also a lot of people who graduate with no debts. THe charts only consider those who do have debts nad leave out the people with $0 debt.

    I do not consider this a ‘bubble’. A number can go up over time and grow steadily without it being a bubble. Yes $1 trillion in debt is a big deal and the increase is not sustainable forever, but that doesn’t make this a bubble.

  9. Robert: In the US we do now have an income based repayment that sets your monthly payment according to your income.

    Squinky: Giving other people financial assistance is not ‘punishing’ you nor throwing away years of your life. Tax dollars fund most of college education one way or another. I don’t agree with loan forgiveness and I don’t think it will happen. But if it did it certainly shouldn’t give you a heart attack.

  10. @Jim: Giving someone financial assistance who chose to do less work than I did is certainly punishing those of us who worked extra to avoid massive student loans. Had I known that loan forgiveness would have been on the table, I would have maxed out my student loans and gone through school more quickly. Instead, I wasted several years by working my way through college. To suggest that my education is funded by tax dollars (it is not – my PhD is funded through private contract with much coming out of my own pocket) in an effort to make it sound like I still got something from the government is in no way equitable to the fact that, if my classmates’ loans are forgiven, they will be given an average of $30k that I did not get for doing more work than they did. That is not equitable, fair, or in any way the function of government.

    The bottom line is that giving others $10′s of thousands that another student didn’t get is punishing to the students that had to earn those $10′s of thousands in the workforce.

  11. Jim: In my view, the “higher education bubble” is the fact that college tuition has risen faster than market rates due to interference by the government. This interference has come in the form of grants and cheap, easy-to-get student loans. This “cheap money” has allowed colleges to inflate their prices. If there was little to no government money given to students, then colleges would have to charge what most people would be able to pay, which is far less than what they charge now. It’s the same thing that happened with housing recently when the government made it easy for almost anyone to get a home loan, and this caused housing prices to rise faster than they should have until they crashed a few years ago.

  12. Taxpayer support for higher education has diminished greatly over the past 30 – 35 years across states, contributing to the rise in tuition.

    It varies by state, but 30-35 years ago the average student attending a public college or university was paying about one-quarter of the cost of education – even if they received no grants or scholarships – now, they pay about half of the freight. Skip to figure 5:

    http://www.cbpp.org/cms/index......38;id=3927

    The really scary figures are the one which precede figure 5, showing the correlation between cuts in funding and increase in tuition, state-by-state.

    With decreasing state support, colleges and universities have turned elsewhere for money and one of those places is tuition.

  13. Higher Ed is not a bubble. Yes, tuition rates have grown for many years at above the rate of inflation, but there are many fundamental drivers for this that could continue for decades. The primary one is the amount of increased expected income one can expect from getting a college degree. The average return on a degree was so high decades ago that the top universities have been able to grow tuition rates in order to re-coup some of those economics without hurting the demand for the education they provide, because education remains a very compelling investment for the student.

    Government lending is not the cause of the increase in tuition, it is a public policy reaction to it. Top universities could double their tuition next year and still fill up their enrollment 100%, by admitting only the most affluent students and international students who could afford to pay out of pocket. They don’t do so for a lot of reasons, moral and practical, but they could. The government would prefer not to see lower and moderate income students displaced from higher education in favor of wealthy U.S. and foreign students at our top institutions, so they subsidize the cost of education by passing on some of their low borrowing cost to students. Like any subsidy program, there is the potential for abuse. But overall the system works pretty well and the debt levels among most students are very manageable, as shown in the data above.

    Delinquency rates are up, which is no surprise, given how poor the job market has been for years now, and new graduates have been hit relatively hard. I expect those will come back down when the economy enters a more robust recovery and job creation picks up.

  14. I don’t know why people get upset about forgiveness. Mass loan forgiveness isn’t at all likely to happen, its a pipe dream and mostly pandering for votes among 20 somethings.

    Ron is right. As states cut funding the difference is made up in higher tuition. This is a key reason tuition has been going up.

    Andy is right. College still has high appeal and high ROI. Why wouldn’t prices increase if the market will bear it?

    Jon Hood: Did you go to a public or private university? If you went to a public university then a large portion of your education was paid for by tax dollars. Public schools get most of their money from government tax dollars. I’m not talking about your tuition bill, thats only a % of the funding picture. If you went to a private university then that was your choice to pay a large tuition bill by going private. If you want to work hard to pay more at a private school then thats on you. You either got fat tax subsidies or you decided to pay more at a private school.

  15. Point taken, Andy and Ron. From the CBPP article I can see that the tuition rise is partly due to the decrease in state funding. I will also admit that I don’t want to just have the well-off be able to afford college, and that having people graduate from college and get good jobs helps the prosperity of our country overall, so government intervention to help people afford college can be good.

    I don’t like the forgiveness idea though. I worked during college too like the other posters who expressed their displeasure with loan forgiveness. The government didn’t force anybody to take a loan or even to go to college, so people that took loans need to pay them back. Student loans have really generous hardship deferrals which allow you to not make payments if you have a hardship, so really there is no excuse to want forgiveness other than the desire for free money.

  16. @Jon Hood: I agree with everything you said. And although the reallocation of capital by the gov’t “is not equitable, fair, or in any way the function of government,” as you pointed out, it describes exactly what gov’t does. It distorts markets by taking from one group and giving to another.

    @Andy: I cannot disagree more. Higher ed is absolutely a bubble. There is _no_ increased expected income for new graduates. They are competing with experienced workers for the same few jobs. And most of the jobs lost throughout this “Greater Depression” are not coming back. Gov’t/Fed monetary policies and new taxes (Obamacare is officially a tax) are squeezing out the middle class upon whose shoulders small businesses are built. Less small biz means even less jobs.

    Cheers.

  17. My simple takeaway from this is that when I have to worry about college next again in 17 years (I already paid off my $30k in student loans), something big will have changed. The extrapolations that college will cost a $700,000 or something in 2030 are going to be useless. There’s just no way things will continue at the same pace. What will change is what I don’t know.

  18. @Jim: You are correct that the school received federal funds (http://www.auburn.edu/arra/).

    @Andy and @Jim: You are incorrect that the data show that increased government dollars decreases tuition cost. You must make these two assumptions to arrive at that conclusion:
    1. Those who received a student loan would have gone to the same school.
    2. Those who received a student loan would have otherwise had the same class load.
    3. The same would have paid the same amount of money out-of-pocket.

    My proposal above only gives scholarships to those who are getting degrees in employable fields and show the initiative to write a proposal. Education, like health care, is not a one-size-fits-all solution like the government is trying to make it. You can skew the data and try to draw an interpolation as many of the commentators here have tried to do, or you can foment real innovation and competition, which would be destroyed by a loan forgiveness program across the board. Such a program would unequally affect those in programs of low employability.

    I do believe loan forgiveness is coming, but that’s because those in Washington are wanting to buy votes. That’s the goal – unequally forgive the debts of those who are more likely to suckle the government’s teat. After all, they’ll be the ones more likely to vote to grow the government which is taking care of them by robbing people like me. It’s the fall of conservatism and sound fiscal policy as we know it.

    Bottom line: get the government out of the student loan business and let the private sector award the loans.

  19. As a recent college graduate, I can relate to these stats. Tuition went up nearly 120% while attending a state school – the one of supposedly lesser prestige, no less (CSU vs UC). At some point that number really challenges the idea that one can simply work harder and pay for education as you go. Employment rates for young graduates are beyond dismal (I concede there exist numerous reasons for that including somewhat….useless? degrees). But even when employment is had, the pay is low (perhaps justifiably). I doubt anyone could guarantee that they would find a way to nearly double their income during 4 years and still have the level of success in school that most places expect.

    That said, these stats mask a couple of sad truths and I think you’re correct, Jonathan. For profit colleges plundering the GI bill? Law schools popping up everywhere with government-backed loans and nearly zero job prospects… Taxpayers will, when and if they are so inclined, find no shortage of reasons to demand something change. And I doubt it will be tuition forgiveness. But any policy should reflect the sad truth that society mortgaged the future of the current generation. Student loans that will never go away; a social security system that will surely be broken 40 years from now… (which will we will have paid into). That’s not the sort of bright, picture-esque future that makes me get up in the morning and work hard to pay taxes and save for the future.

    (Disclaimer: gainfully (+ happily) employed; proud money saver; shrinking student loans :))

  20. @Brady:
    To say that there is no increased expectation of lifetime earnings associated with completing a college degree is factually inaccurate. Average lifetime earnings for college grads have always been a multiple of the average lifetime earnings of high school graduates, and today’s entry-level salaries for college graduates imply that that will continue. Unemployment among college graduates is much lower (say, 4-5%) than among those without a degree, or the general workforce, which we know is more like 7-8%. The job market isn’t good right now, but it is definitely better for those with more education than less.

  21. Brady said : “There is _no_ increased expected income for new graduates.”

    You’re saying that getting a college degree doesn’t increase incomes? Thtas not true. I know its hard to get a job now and the ROI on college is decreasing in general, but new college grads still have better incomes than high school grads on average. Now the average includes engineers and doctors along with people who got less demand degrees. I’m sure that for some degrees a college education is not going to increase their income versus a high school diploma. But thats not the average and not the case in general. Degree choice matters a ton.

  22. Are you “punished” when some other student at your school gets a scholarship that you are not awarded? What about when your neighbor gets laid-off and receives unemployment? You’re working hard for your money and they’re just collecting a check every week without working! What about when your long lost cousin won the lottery. If you had known that the convenience store in Philadelphia near your cousin was going to sell the winning ticket last Tuesday afternoon, you would have definitely gone and bought it…! What about when your street floods, and your neighbors on either side have their furniture all ruined, while your house, which is built on slightly higher ground, escapes unscathed. Were they punished? What about when they get totally new furniture from the insurance payoff? Are you punished then? What about when your premiums go up?

    My point is that there are a lot of windfalls in society, some deserved and others undeserved. Sometimes the government acts as an insurer, and other times private companies do. To fail to receive a windfall (or an insurance payout) is not the same as being punished. In this instance, you made the choice to work while attending college. Some of your peers made the choice to take out loans. I’m not convinced that the one choice is unambiguously better than the other. I chose to take out loans, which allowed me to focus 100% of my energies in school. I did really well, went to a great grad program, and now have an amazing job that makes paying off my loans easy. Had I worked, I suspect I would not as many loans, but I also suspect I would not have as great of a job or as sterling credentials. For me, not working through college seems to have been the clear correct choice. Your comments imply that those who took out loans in college, however, made a poor choice and therefore are undeserving of any societal aid. I’m not convinced that that’s as easily true as you imply. Regardless, the question is not whether you would have acted differently had you known that some loans might be forgiven — the question is whether forgiving such loans is in the best interest of society. I think that the answer’s probably yes…that the benefit of forgiving the loans (to society) exceeds the cost.

  23. abl: You are taking my comments so far out of context; I will not respond to the straw man arguments. I will, however, respond to your false assumptions:

    Those who took out loans are absolutely undeserving of societal aid, because they are reneging on their promise to pay that loan back. Forgiving the loans does punish those who chose not to take the loans out, takes money directly out of their pockets, and puts it directly into the pockets of others who are more likely to vote in a certain type of way: pull the money out of the conservative’s pocket who generally relies on himself more, and give it to the one who has learned to rely on their government. That is why the current political powers in Washington are trying to push this idea.

    And just for the record, I graduated in 3 years with a double major from a local university (UAHuntsville), obtained my Master’s in two years (Auburn), and have just started my PhD work. All while working more than full time, getting married, having a kid, and starting my own business. The point is, I worked hard and sacrificed to stay out of debt, and people are trying to say that the government should take my money and give it to someone who chose not to take multiple jobs to get through school? I’m not saying that their choice was/is a poor choice, and am offended that you would suggest such! I am saying that their choice doesn’t entitle them to take my money. If you agree to take out a loan, you should have to pay it back by the terms you agreed to, no matter what that loan was for.

    Now, my government is going to give others who (generally) chose not to work that hard a break. I’m proud of what I accomplished without any help, but it’d be a lie to say that paying off everyone else’s debt would be a huge demotivator to my work ethic. What am I supposed to think other than, “All that extra work I did was for nothing – I could have had it handed to me for free?” Next time I have to work hard to earn something, there will be that little voice saying, “remember what happened last time you worked hard for something – everyone else got it for free!”

  24. Aside from federally-funded research grants – the bulk of which typically go to a handful of R-1 research schools (“handful” in the great mix of public two- and four-year schools) – the main source of government funding which go to the schools comes from individual states, and varies by state and institution (and in some states, the states also subsidize the private nonprofit schools in both direct funding and tax exemptions).

    My fear is with those public schools (in many cases, the R-1s) which do get a lot of money from research grants and are not as dependent on state assistance and tuition alone to pay the bills. In many cases those are the flagship institution in the state and do far, far more than generate research and educate students. They also are closely tied with businesses and communities, in some cases it is part of their land grant mission. Those schools are regional economic engines far beyond the dollars their employees spend where they are located.

    I fear that as they see the state appropriation shrink to where it is 10 – 15% of their operating budget, that they will simply forgo that money and increase tuition. Those schools have no shortage of highly qualified applicants each year for programs now. And it that won’t change. But it will shut out some. And it will change the school’s relationship with its state. Some will continue to be run to serve as an asset to the state, but will no longer be part of the “state.”

    It is already happening with some professional schools (University of Minnesota’s law school decided in 2011 that as state funding had dropped to the point where it was only ten percent of the operating budget it was time to break away – still part of the University but no longer taking any state money).

    The burden placed on individual students and the lack of jobs are the real issues, IMO. State legislatures for the most part have decided over the past 30-odd years to shift the cost of education to the individual. That has resulted in the rising tuition costs for the most part. Public sector employment has been cut over the past few years at all levels but private sector employment is still anemic. Add stagnate wages since the early ’70s (overall – certainly not in some fields) and that’s a recipe for what is pinching recent college grads.

  25. What did I take out of context from your argument? I apologize if I did.

    Turning to your follow-up post, the idea that this in any way is a liberal-conservative conspiracy is laughable. To begin with, I do not accept your basic premise that conservatives are somehow more independent than liberals. Second, it’s hard to say whether the loan bailout will help more democrats or republicans — college graduates tend to lean republican, but post-college graduates tend to lean democrat. This would imply that on the whole, more republicans will be aided by a loan bailout than democrats (but that for those democrats bailed-out, the individual benefits will be greater). Third, your argument relies on the assumption that those who took out loans have “learned to rely on their government.” Yet, the government has never bailed out student loans. So how would those who took out loans ever learn to rely on their government? Your argument assumes that an action that has not, but may, someday take place influenced actions that took place years ago. Fourth, you confuse not receiving a benefit with punishment. They are not the same thing. If your neighbor wins the lottery, you are not punished. If your neighbor receives unemployment insurance, you are not punished. If your neighbor invests well in stocks, you are not punished. If your neighbor is underwater on her mortgage and sees her loan partially forgiven by her lender, you are not punished. Some of these windfalls are deserved, some are not. None of them “punish” you.

    It’s admirable that you worked through college, and I do not doubt that you had to work very hard to succeed in the ways that you did while earning money. That was a choice you made. In some ways it was a gamble, and in others it was a conservative choice. It was a gamble insofar as by working jobs in school, you lessened your chance of succeeding academically and therefore getting into a good graduate program and receiving a good job. Now, it turns out that it was a good gamble for you — you were adequately successful in school (despite your jobs) that you were admitted to a phd program. But, had your gamble not worked out, and had you graduated, debt free but jobless, you would have been eligible for unemployment insurance. My point is that this is not so dissimilar from the situation of those with overwhelming student loans. They made a different sort of gamble than you. They gambled that by not working through college, they would succeed to the extent that they would be able to repay their loans. They traded student loan debt for an increased chance of employment. Many of those people gambled correctly–probably the vast majority. This is the category I fell into. I worked my butt off in school, all on schoolwork, and was admitted into the #1 professional school in my area (law/business/medicine). I guarantee you, I would not have had I also earned an income in undergrad. Obviously, this is not a perfect comparison, but why should those who gambled on education not receive a government safety net similar to that provided to those who gamble on not having any debt? Neither gamble is a sure thing (and if I had to wager, I’d bet that working multiple jobs in college generally leads to negative post-graduate outcomes more frequently than graduating with debt does, for those who do not work any jobs in college).

    You end by claiming that such a bailout will motivate you to work less hard in the future. Do you think you’re less likely to strive to get a good job because the possibility of unemployment exists? This is an even more extreme example, as a one-time bailout (which is what I generally hear proposed) has none of the certain security of unemployment. You’d be a pretty economically irrational actor to work less hard in the future on the basis that the government once bailed-out student loans.

  26. Ron,

    My alma matter now gets about 5% of its funding from the state. They are probably what you refer to as R-1. State funding was cut in half in the past 5 years. Yes they raised tuition drastically in the past few years. Yes they turn away more instate students. yes this annoys state residents. However the school is still ran by the state and still has to do what the state says. Even if its not getting the bulk of its money from the state, its still a state ran institution. They can’t just stop being ran by the state and “go independent” or something. I expect public universities are all ran essentially the same way and are ran by the state and have to do what the state says to varying degrees, regardless of the actual amount of funding the state provides.

  27. Squinky : “You are incorrect that the data show that increased government dollars decreases tuition cost.”

    Didn’t say that.

    Its the opposite thats happening. Decreased government spending is causing increased tuition.

    BTW, UA Huntsville only gets about 25% of its money from tuition. Thats fairly typical for a public school. So you got a pretty fat government subsidy when you went there. Other peoples tax dollars subsidized your education there. Thats assuming you got $0 in financial aid.

  28. @Squinky: I didn’t mean to imply that government loan programs decrease tuition costs. I merely meant that they are not the sole determinant of excess higher ed price growth. My point was that tuition growth has occurred and will continue, and the government took it upon itself as a public policy matter to try to prevent low and middle-income students from being crowded out of a college education by granting subsidized loans.

    @abl: I agree with most of what you are saying, and you are correct that student loan forgiveness doesn’t directly harm those who avoided or paid off their student loans. However, the idea that the federal government has an endless supply of funding for this kind of program isn’t exactly correct, either. To be a revenue neutral program, forgiveness would mean increased taxes, most likely income taxes, which are necessarily levied on those who are working. Since those eligible for forgiveness would be un/underemployed, this is in fact a transfer of wealth from those who are able to pay off their loans (working) to those who cannot. So it does in fact “harm” taxpayers who pay off the loans that are being forgiven! I think the idea of a big transfer of wealth from people who are working to those who are not (for whatever the reason) is a problem for most people.

  29. Jim – you might be surprised at how many schools have Constitutional Automony. They get some money from the state but in no way are run by the state – except through the suggestions tied to that shrinking pot of money. Many are R-1 and many are land grant schools, making them the flagship institution in a state.

  30. @Andy & Jim: Yes, college grads have a better shot at getting better paying jobs than non-college grads while typically earning more over a lifetime. What I was trying to say is, in the context of what I believe to be a college cost bubble, the lack of available jobs for new college grads makes the potential for increased income moot. If Mr. New-grad can’t get a job, his degree (college debt) becomes a liability, not an asset.

    Check out the first chart showing the never ending increase in college tuition. This is clearly unsustainable:
    http://www.mymoneyblog.com/cha.....costs.html

  31. If loan forgiveness happens I will kill someone. Why did I work my a”" off to pay off all my loans? Why not just rack up debt upon debt so someone else responsible pays for it. This is the same BS schools have been pulling for years with the “everyone wins no one loses” sh”t. Life’s hard, work for what you want. Schools and govt Aid are ruining this country.

  32. Oh and abl is an [editor: no ad hominem attacks]. I’m guessing a retired democrat or history teacher

  33. Brady wrote:
    “What I was trying to say is, in the context of what I believe to be a college cost bubble, the lack of available jobs for new college grads makes the potential for increased income moot. If Mr. New-grad can’t get a job, his degree (college debt) becomes a liability, not an asset.”

    Perhaps, but when jobs pick up, those with a college degree will be better positioned to move into the higher paying jobs than those without. No doubt, we still have a jobs problem here. And no doubt, college graduates are having to pay an increasingly larger proportion of their higher education than their parents’ generation or the generation before that. That is looking at in on a macro level, but we each live our lives on a micro level – if I was just getting into or out of college right now, I’d be angry.

    Another issue is those who graduate into and begin careers during a recession are likely to make less over their entire career than those who begin a career in an up economy, according to a recent Yale study.

  34. Yale study:

    http://qn.som.yale.edu/content.....-recession

    (meant to post that in the previous post – feel free to add it there, Jonathan.

  35. Ron – Yes you’re right I was not aware many other states give their states more autonomy. My alma mater has not autonomy and can’t even sit the tuition themselves. Seems they have less autonomy than typical.

    Brady – The employment situation today is bad all around. New college grads are unemployed or underemployed at a high rate. But thats not uncommon for young people in good times and bad. Last numbers I saw say the jobless/underemployed rate for new grads is 53%. Sounds awful. But back in 2000 it was a low of 41%. Thats worse but it didn’t exactly skyrocket between booming economy and recession. But all young people face high unemployment in general. by comparison about 18-20% of people with/without college under 25 are unemployed. And that includes people who’ve been established in the job market for years, versus the new grads who are currently job hunting. Yes new college grads have harder time finding jobs right now but its more like 25% unemployment and their jobs still pay more. Its bad but its not the end of the world by any measure. Also I would assume that a high portion of the unemployed/underemployed do not have degrees that are in demand. Major matters a ton. I have a relative who recently got a Phd in engineering and he had 3 job offers at graduation.

  36. Yikes, sorry for my awful grammar in that last comment. :(

  37. @Ron: Agreed. And many of those lost jobs aren’t coming back thereby making some degrees nearly worthless. As Jim noted, degree choice matters a ton. More than ever, students intent on higher education need to know the degree they want to pursue before attending their first college course. No more meandering through college while trying to figure out what they want to do. The extraordinary cost of tuition leads that road straight into debt slavery. … BTW, thanks for the link to the Yale piece.

    @Jim: You wrote: “Last numbers I saw say the jobless/underemployed rate for new grads is 53%. Sounds awful. But back in 2000 it was a low of 41%. Thats worse but it didn’t exactly skyrocket between booming economy and recession.”

    53%?! That’s horrendous! So we’re looking at a 29% increase in the new grad un/underemployment rate over the last 13 years. Perhaps it hasn’t skyrocketed but the countdown is certainly on. :) Combine that with rising tuition and I don’t see how that isn’t a bubble. In any case, as you mentioned earlier, college ROI is indeed shrinking.

  38. As I mentioned, I went to [law/business/medical] school, and am now a successful professional in that field. Not that it should matter. So what if I were a retired history teacher?

    To Kevin: part of life being hard is that sometimes we make the incorrect decisions. In the event that a student loan bailout happens, and you wonder “why did I work my a”” off to pay off all my loans?” I would respond: life is hard.

    To Andy: thank you for actually engaging my points in a thoughtful, reasoned way. You’re right that there’s some potential issue with transferring wealth from those who work to those who don’t. But that’s not what student loan forgiveness would do, as the vast majority of those who would benefit (college/post-college graduates) are currently working. The question that we need to ask ourselves as a society is whether the net utility of everyone is best served by having a substantial percentage of the people who should be our most productive workforce saddled by unsustainable debt. This is not entirely dissimilar from the housing crash. Banks gave people money who shouldn’t have qualified for a mortgage. Some of those people defaulted. Those defaults lowered the value of the surrounding homes, leading to more defaults. The only way to break the cycle–which would have been beneficial for everyone–was to forgive or write down losses on a lot of mortgages. Is that fair if you’re someone who has been working your butt off to pay off your mortgage? I don’t know, maybe not. But just about EVERYONE is better of by this course of action (which similar takes money from those who can pay their mortgage and gives it to those who can’t). My point is that we should be analyzing the student loan bubble similarly. Will making student debt sustainable (by writing off some of the loans, for example) better society? If so, we should do it.

  39. Brady, “So we’re looking at a 29% increase in the new grad un/underemployment rate over the last 13 years.”

    Remember that unemployment doubled for everyone cause of the recession.
    So yeah, a 29% increase isn’t all that awful considering.

    53% seems ridiculous, but half of that is unemployment and half is underemployment. Today the unemployment rate for teens is 25%. Young people have the highest unemployment compared to other age groups. New college grads are young as well so they aren’t fairing worse as far as unemployment versus the teens.

    While this level of unemployment is really bad and it sucks, its not as if its unprecedented. Unemployment was as bad in the early 80′s.

    It really doesn’t say much about the value of collegee.

  40. ABL “To Kevin: part of life being hard is that sometimes we make the incorrect decisions. In the event that a student loan bailout happens, and you wonder “why did I work my a”” off to pay off all my loans?” I would respond: life is hard. ”

    What? Life is hard? No, actually its not, if you try, and do feasible things, and follow thru on your commitments. Anyone asking for student loan forgiveness, didn’t do one of those first two things .. and certainly isn’t doing the third.

    ‘Life is hard’ is not a reasonable answer to anything I said … I worked my butt off through school and life, working hard for good grades, a good education, a good job, and then I paid my dues, and paid off the loans I took to get me there.

    Just because Joe Slacker can’t get a job to pay off his ridiculously high student loans, because he rather partied in school than actually learn and get good grades to get a solid resume, to PAY for those loans … thats not my fault, and as a TAX PAYER, I am not going to pay for MINE and THEIR LOANS.

    And ABL, if you really are a “successful” lawyer or doctor or whatever, you should 100% agree with what I am saying. You worked your butt off to get there, and chose that field. No one made you do it, and you are now reaping the benefits of those choices and decisions. To allow people to walk away from school loans is absolutely ridiculous, and to have tax payer dollars pay for it, is even more ludicrous.

  41. My father, who never went to college, bought and later sold land to put two daughters through college to have a means of employment. Parents now want granite countertops, separate bathrooms, spa, tanning salon and other amenties for their “babies” going through college. Graduates last year are “bored” with working a year and plan to get 3-4 more years of college…why? Because of student loans…and avoidance of the real world.

    “Entitled” is the word that comes to mind. Adult workers can’t afford the rents that these kids’ parents pay for them to live well while in college. Who’s to blame that the kids expect the world handed to them when they get out? Blame the helicopter parents — they’re everywhere. Hope they have jobs for their children.

    Still scarce in my neck of the woods.

  42. Another reason why student loan defaults are on the rise is the structural part of it in addition to the systemic issue. In other words, federal student loan servicers are not necessarily subject to a tremendous amount of regulatory oversight and this allows them to limit the amount of information disclosed to borrowers in regard to repayment plan expiration. For example, if an income based repayment plan is about to expire, the notification does not have to be sent by certified mail thereby increasing the chance of late payment of the new payment due amount.

  43. @AWB:

    Wow. It takes a truly twisted liberal to think that the federal regulators that caused this mess are the ones to fix it. Really? You’re going to blame the loan servicers who are sold the loans after the federal government issues them?

    If an individual has trouble paying a loan because he gets the notice via first class mail rather than certified mail, he has no one but himself to blame. A responsible loanee knows his amortization schedule – when every payment is due, and when it’s going to be completely payed off. Shame on the ignorant student, shame on the opportunistic government, and shame on you for suggesting that more of our tax money in the form of regulation is going to sort this out!

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