Student Loans In America: the Next Big Credit Bubble

PolygamousRanchKid writes "In late 1965, President Lyndon Johnson stood in the modest gymnasium of what had once been the tiny teaching college he attended and announced a program to promote education. Almost a half-century later these modest steps have metastasized into a huge, federally guaranteed student-loan industry. On October 25th the Obama administration added indebted students to the list of banks, car companies, homeowners, solar manufacturers and others that have benefited from a federal handout. In response to students burying their obligations in court during the 1970s, anti-default provisions were imposed to make it almost impossible to shed student loans in bankruptcy. There are increasingly loud calls for reform of the system, with demands that range from a full-fledged bail-out of borrowers to a phased curtailment of government lending. The changes announced this week are designed to ease the pressure on struggling graduates. Borrowers who qualify will get payment relief, not debt relief. The administration says these changes will have no cost to taxpayers."

Comments

Re:Forgiveness at no cost?

[chill]

This means that after 20 years of you making income-based payments, they forgive the remaining debt. In order to qualify for income-based payments, you can be making no more than 150% of the poverty line. In that case, you payments are no more than 10% of your income.

The reality is, there are very, very few people who actually accrue student loans who can't pay them back over 20 years. Not only that, but are living around the poverty line for 20 years.

There are other paths to loan forgiveness in exchange for service. Details are here.

Re:What is really needed.

[Anonymous Coward]

It may also indicate a problem with education at the pre-university level. there are lots of stories in north america about high school graduates who are functionally illiterate. if a high school grad would do, but you need to be sure they are literate, it's much easier to look for a university grad.

Re:One of many causes of problem

[garcia]

Disclaimer: I have worked in higher education my entire life and have worked for both state schools and a for-profit. I am currently employed by a for-profit institution.

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Like any institution of higher education, the value of the education received is only equal to the accreditation it has. If a for-profit institution is accredited by a regional accrediting body (like your Harvards and state schools) their education quality is not going to be much different from what you would get elsewhere.

You can argue the worthiness of regional accreditation all day long but at the end of the day that's the final determining factor of a "quality" education in this country. For you to lump all for-profit institutions together into one big "fraud/lack quality" bucket shows that you have fallen prey to lack of information.

I suggest you do your homework and realize that while neither education system is perfect (public/non-profits have their own set of problems too) they're not all as bad as you want to believe.

Reduced State Funding, Increased Administration

[dcollins]

Note: That report was from 2002, and things have gotten much worse since then. Here's a more current story from the last week: http://www.sacbee.com/2011/10/26/4008283/college-prices-up-again-as-states.html

Another major factor is that -- even though faculty and facilities costs have not appreciably gone up -- the number and cost of non-teaching administrators have dramatically bloated (as part of the corporate-management takeover of universities in the last few decades). Today there are more administrators than teachers in colleges, which was not the case in the past. Article on that in the last month: http://www.washingtonmonthly.com/magazine/septemberoctober_2011/features/administrators_ate_my_tuition031641.php