Here is an interesting case study. A woman took out a $5,000 student loan in the late 1960s. That as the equivalent of $35,000 today. She paid it off in three years.
Her son is $85,000 in debt. It will take him far more than three years to pay off this debt.
Here is a woman who took out a $5,000 student loan in the late 1960s to study at the State University of New York. She became a nurse and repaid the debt in less than three years. The degree was useful.
Her son has deferred paying anything for the last three yeas.
He earned a master’s degree in education — a useless degree. He earned at at an expensive private university in New York City.
The poor schnook got a degree that keeps him from getting a job. No one told him that school districts must pay more to anyone with an M.A., compared to someone with only a bachelor’s degree. So, they hire the cheaper employee.
He paid $85,000 to kill his career.
He complains: “The idea of buying a house — it’s completely inconceivable.” Of course it is. Anyone looking at the economics of an $85,000 M.A. in education should have understood this. But fools rush in where angels fear to tread.
The government encouraged all this. It bankrolled the program with loan guarantees to banks.
As college costs have soared faster than the rate of inflation over the past four decades — reaching $60,000 a year at the most expensive private schools — Republicans and Democrats alike postponed a reckoning. They encouraged borrowing and ignored surging tuition, leaving loans to balloon to the size of mortgages, shocking even the system’s own architects.
“No one ever conceived this was a way to create a debtor class of former students, the indentured student,” said Tom Wolanin, who worked on federal higher education policy for 30 years and was a deputy assistant education secretary in the Clinton administration.
Politicians of all stripes ignored repeated warnings that the day would come when debt would become unsustainable.
Of course they ignored the warnings. Only conservatives gave these warnings. The politicians brushed off these warnings.
Congress, during the administrations of Jimmy Carter, Ronald Reagan, George H.W. Bush and George W. Bush dangled more credit to more families. The U.S. raised the total amount that dependent students could borrow during their college careers to $31,000, up from $7,500 when the loan program began, according to an April Congressional Research Service report. Under certain circumstances, the limit for dependent students is even higher.
This was the equivalent of sub-prime loans.
The government began offering loans to all college students regardless of income in 1992. At the same time, it let parents borrow up to the cost of attendance minus any financial aid. Congress endorsed almost unlimited borrowing for graduate students in 2006, the same year it let federal grants and loans be used for online programs, especially at for-profit schools targeting working adults.
As borrowing soared, university presidents began a multibillion-dollar building boom across campuses, featuring private dorm rooms and network TV-ready football fields. Colleges themselves went into debt to pay for these extras. By the end of 2011, more than 500 colleges and universities rated by Moody’s Investors Service had $211 billion of outstanding debt, compared with $91 billion in 2002.
It is a gigantic Ponzi scheme. The debt grows ever larger. No one in Washington has the guts to vote no.
“Some scholars are coming to a conclusion that shakes at the core of a long-held belief: College may not be for everyone.” No kidding!
“Mindlessly drifting into college, believing that anything they study for however many years is going to be worth going into debt for — that’s what is getting far too many young people into deep trouble,” Robert Schwartz, academic dean at Harvard’s education school, said in an interview.
It all started in 1965. Lyndon Johnson created the loan program as part of the Great Society.
The bills are coming due.
By 2005-2006, tuition and fees at a public university were $5,492, while the costs at a private, nonprofit college averaged $21,000, according to the New York-based College Board. A year later, under President George W. Bush, graduate students were able to borrow up to the cost to attend, which can amount to $100,000 or more. Universities began enrolling more students.
No kidding! The government offers loan guarantees to banks, money flows to colleges, and guess what? Prices rise! Will wonders never cease?
Naive parents go into debt, and their naive children make debt slaves of themselves. it still goes on, despite articles like these. It will not stop until these federal programs are killed.