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Author Topic: Article: "A Lifetime of Student Debt? Not Likely"  (Read 8663 times)
srpowers2004
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« on: May 18, 2009, 5:08:43 pm »

I still can't believe my eyes.  The love-fest between the Chronicle and education loans makes Romeo & Juliet seem like a one night stand.  I work for a non-profit scholarship fund in San Francisco that provides scholarships for poor high school graduates, and I'd agree -- the average amount of debt our students incur from a bachelor degree is around $20,000, as the article reports.  That amount is certainly manageable, and won't linger for a lifetime for most students.

However, the heavy ed loan endorsements in this article further fuel my belief that undergrad loans WILL become a lifelong burden very soon.  All educational loans have become a rather large commodity in our economy, and the more the government, media, institutions, think tanks, policy-makers, and everyone else involved point out what a good "investment in oneself" a bachelor, masters and doctoral degree is in the long run, the more overvalued and overpriced they'll become.

Even if it seems like the current amount of debt incurred by undergrads won't imprison them economically for life, and even if those profiled in this article are happy with their debt and the reason for their "investment", this should still be a major cause for concern.  Where will the line be drawn and when?  College tuitions don't work in a typical market economy system.  It's not like teenagers would simply stop "purchasing" higher education in general as a product if it were too expensive.  Sure, someday we may see students migrate in droves to less expensive state schools and community colleges to save money, but I doubt it would affect more expensive schools enough for them to lower tuition, and the less expensive schools can only handle so many students (as I'm seeing very clearly from the recent enrollment caps in the CSU system in California).  They also have their obligations to meet, and the Federal government and private lenders would simply be lobbied to offer more loans to keep students from being stuck with only that high school diploma. 

Everything in our economy and in the lives of each individual high school senior DEPENDS on the ability to enter today's workforce with a certain degree of training and preparation.  The economy of education is more akin to that of health care.  Everyone needs it at some point in their lives, and just about anywhere you go, it's expensive.  It's not like consumers have the power to change the industry with their pocketbooks in the same way we've seen with, say, the auto industry over the past decade (GM vs. Toyota).

So the average amount of student undergrad debt has doubled in the past 15 or so years?  Mark my words: it will DOUBLE AGAIN IN THE NEXT DECADE.  Will salaries double as well?  Not likely.

Any thoughts?
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fiona
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« Reply #1 on: May 18, 2009, 5:37:43 pm »

I still can't believe my eyes.  The love-fest between the Chronicle and education loans makes Romeo & Juliet seem like a one night stand. . . . 
Any thoughts?

Didn't Romeo and Juliet have a one-night stand, or am I just remembering the "West Side Story" version?

The Fiona
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dolljepopp
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« Reply #2 on: May 18, 2009, 6:31:55 pm »

Post a free link to the article in question and thoughts might emerge...
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« Reply #3 on: May 18, 2009, 6:37:05 pm »


Here's the free link:

http://chronicle.com/free/v55/i37/37a00101.htm
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conjugate
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« Reply #4 on: May 18, 2009, 7:01:30 pm »

I did not read the article the same way that you did.  In particular, I did not see the article as endorsing heavy loans, merely stating that "About 8 percent of undergraduates borrow at least double the national average," or about $40,000 and up.  Certainly, this is likely to increase in the next few years as dwindling state support for higher education requires more reliance on tuition amongst institutions. 

Now, the article also states "Still, many economists say borrowing for any kind of higher education is generally a smart idea. That's partly because student loans typically carry low interest rates. 'College is a very good investment, and most students take out too few loans, not too many,' says Caroline M. Hoxby, a professor of economics at Stanford University.

If this is the part to which you object, consider that: (1) the opinion was attributed to economists, with all the public trust and confidence that the title implies (which these days isn't a lot); and (2) such words as "generally" and "most" do suggest that these are not universal truths.

The article also notes other forms of financial aid provide significant assistance.  I was also struck by another quote.

"According to the Census Bureau, the average college graduate earned $57,181 in 2007, while the average high-school graduate earned just $31,286. That means college graduates earned about 80 percent more that year than high-school graduates did."

Dang, maybe I should not have gotten a job in academia when I was looking earlier this year.  One of my students encouraged me to look for six-figure positions.  I'd be happy if I earned "average" college-grad money, as it would be a steep raise.

Perhaps instead of trying to get student loans forgiven, we should consider "stupidity rebates" for people who incur debt to take jobs as public defenders, district attorneys, or college professors.  Those of us silly enough to try to do something useful (to other people, I mean) with our lives might get cut a break.  Of course, I don't need one; I have no student loan debt.  But there seem to be lots of others who have to pay.
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« Reply #5 on: May 19, 2009, 8:54:36 am »

I thought the article provided a note of rationality on a subject that is often focused on those folks in the 8 percent.  Unless you are one of those folks who argue that all debt is, of necessity, bad, I think it's reasonable to say that education debt is one of the better kinds of debt (as long as you finish): the loan is subsidized in ways that consumer debt is not, and the payoff is greater than most other kinds of debt.

What I found most useful was the simile comparing the average overall debt to the price of a new car.  I rather like that comparison as a good rule of thumb:  if you have to borrow more than what a new car costs, you're probably borrowing too much; college is a much better investment than a car; prove you can pay off your student loan and it's easier to get a car loan or mortgage loan; would you rather drive a used car to your white-collar job or drive a new car to the Burger King.

I work for one of those high-tuition-high-aid schools, and I see students and parents borrowing quite a bit of money.  The $20,000 figure helps me to gauge how much of a stretch they are making, and also a ballpark figure for my own (currently grade-school-age) children.

What wasn't clear in the article is whether that average figure includes parent loans as well.  If parents are borrowing that much or more for their kids then that could produce problems too, even though their incomes are likely higher than those of their kids, because they likely have greater expenses and fewer working years to pay it off.

Now, OP, as to your final question, my first question was, while average indebtedness has doubled in absolute dollars, what about adjusting for inflation?  When I graduated mumblety-mumble years ago, I owed less than $20K, but more than the price of a car.  So let me rephrase the terms of your question.  Do I think that in fifteen years average indebtedness will rise to the price of two cars?  No, I do not.  I do not think net prices (net of aid) will continue to rise at the rate they have, and I think students will become more price-sensitive.
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« Reply #6 on: May 19, 2009, 9:00:17 am »

The few students I know weho have no debt  are in that position because their parents ponied up the bucks or took out loans in parents' names.

As for students migrating to lower-cost CCs and state U's at a future day mentioned in the article, that day is now.
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jackofallchem
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« Reply #7 on: May 19, 2009, 12:25:48 pm »

The OP's anger is misdirected.  The article is pointing out that although some people are getting in trouble with student loans, the vast majority are not and the inflammatory reports of more widespread problems are overstated.  There is a looming problem of higher rates and amounts of student loan debt, but the student loans are not the problem.

The higher rates of student loan debt are caused by the lack of planning on the part of parents and the fact that higher education costs are increasing much faster than inflation and seem to be increasing twice as fast as family incomes.  My parents saved money for my college, but I don't see many of my students in that same boat.  Their parents somehow thought they could pay out of their paycheck somehow.  They also seem to have this idea that college is a right and should be free.  To make matters worse, education costs are increasing much more rapidly than family income.  Even if a family saves at the same rate for college as before, they are falling further behind.  This is the looming problem, that eventually, a college education will become so expensive that its debt will be something that people have to pay off over a lifetime, like a serious illness.

Having said that, there are some things I have observed about my students that make me less sympathetic about their student loan plight.  One of these is the fact that so many of my students have iPhones with $99/month plans (a shocking number actually).  If they would just have a bare-bones cell phone on their parent's account, this would save over $4000 during college.  The second thing is the students bragging about their wedding "budget".  These girls don't even have long-term boyfriends yet and discuss how they are going to spend the $25,000 budget for their weddings.  If they spent $5000 on the wedding, they could wipe out that student loan debt.  The third thing is that many of them are driving cars worth more than $20,000 or are getting a car valued at that much or more for graduation.  Again, same students are complaining about their student loan costs. 

I have a lot of sympathy for the student who truly can't afford college's costs without a heavy student loan burden.  All I can try to do is advise them what is an unreasonable amount, try to find ways for them to minimize it, and steer them toward graduate programs or jobs that will allow them to pay it off in a reasonable amount of time (5-6 years).  I feel more and more helpless in this advising role as the costs keep increasing faster than pay, however. 

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« Reply #8 on: May 19, 2009, 1:19:20 pm »

I find the comment about the wedding budget to be spot-on.  So many young people plan a wedding but not a marriage. 
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jonesey
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« Reply #9 on: May 19, 2009, 1:53:45 pm »

I thought this was interesting:

Quote
Why do some students borrow more than $40,000 for a bachelor's degree when average borrowing is only half that? The answer is almost never that they are from very low-income families and need that much money to get a four-year degree. Public four-year colleges charged an average of just $6,585 for in-state tuition and fees in 2008-9. The total cost, including textbooks, room and board, and other living expenses, averages $18,326 a year and financial aid brings that figure down for many students.

This might be true for public schools, but not one of the biggest areas of higher ed: for profit colleges and universities. 

At FP schools, the vast majority of students are low-income, and often the first person in their families to attend college.  These students take out astronomical student loans, almost always private (with corresponding higher interest rates) because they've bought into the myth that their BA will automatically get them that $60,000/year job. 

I see students every semester graduating with upwards of $85,000 in student loan debt for a BA from FP schools. 

It's not public and traditional private schools I'm worried about, it's the FP's. 
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crowie
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« Reply #10 on: May 19, 2009, 2:03:13 pm »


I see students every semester graduating with upwards of $85,000 in student loan debt for a BA from FP schools. 


Yikes!!

No further comment, just shocked by this.  It's a world that I am not familiar with.
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jonesey
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« Reply #11 on: May 19, 2009, 2:19:14 pm »


I see students every semester graduating with upwards of $85,000 in student loan debt for a BA from FP schools. 


Yikes!!

No further comment, just shocked by this.  It's a world that I am not familiar with.

UoP, Capella and Walden run about $5,000/quarter for their BA programs.  If a student comes in with zero college credits (not uncommon) the loan amount goes up quite quickly. 

The worst part are those students who drop after two years and have $40,000 in student loans for an AA...
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unusedusername
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« Reply #12 on: May 19, 2009, 6:08:15 pm »

A loan payment equivalent to a new car is hardly an undue burden for a college graduate.  As long as you major in something that teaches you how to do something that people are willing to pay for, it is an investment that will have a very high rate of return.  Of course, if you have a C average while majoring in Television Studies, you've wasted your money.
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fizmath
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« Reply #13 on: May 20, 2009, 1:44:51 pm »

http://studentloanjustice.org/

Read some of the horror stories.  Some of these people will never get out of debt.  On top of that, many will be barred from state government jobs which exclude those in default.

I don't understand why people are getting assistance to stay in homes they can't afford but these young people get stuck with an unpayable bill.
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los_dados_eternos
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« Reply #14 on: May 21, 2009, 6:49:51 pm »

(This is going to be somewhat long).

I am more shocked by some of the comments left on this thread, than by the CHE article itself. I expected that whenever the CHE got around to writing a piece on student loans, it would be one in which excuses are made for the debt that most students have to incur in order to attend college nowadays.

More surprisingly is the type of response that many of you have left on this article, which almost sound like some comments from the "pull yourself by your boot straps" crowd. This leads me to wonder whether the responders are old-generation folks who attended college/grad school when higher ed was much cheaper and not a losing investment; or those lucky few who didn't have to borrow to go to college and/or grad school recently, and therefore have no personal knowledge of how bad things have gotten for those pursuing higher ed? Regardless, a little sympathy for your fellow grads would probably not hurt you too much, would it?

Regarding the article, the argument that "In fact...about a third of graduates leave college with no debt at all for their education" strikes me as clueless and dishonest. This figure does not seem to include those who drop out before completing their degree; if those guys were included, I'm sure the stats would change for the worse. Also, the statement above means that a full 2/3 of GRADS do accumulate debt (most of them at least $20,000) for their education! Where's the outrage?? Or are we so used to living with debt that now it's acceptable to see the majority of young people start their professional lives at least $20,000 (plus interests and enormous fees and interests if they default for any reason) in the hole?? I mean, the figures are "2/3 of grads @ -$20,000" not "2/300,000 @ -$2,000." If the latter, the small debt and small number of people would make this a non-issue. But the reverse is true. So once again, where's the outrage???

The IT'S NOT OUR FAULT argument: "Why do some students borrow more than $40,000 ...? (...) Public four-year colleges charged an average of just $6,585 for in-state tuition and fees in 2008-9. The total cost, including textbooks, room and board, and other living expenses, averages $18,326 a year and financial aid brings that figure down for many students." So, here CHE defends its membership, as expected: It couldn't possibly be the colleges' fault that these kids have to borrow that much! I mean, the AVERAGE IN-STATE tuition is only $6k per year or public schools! And no, it doesn't matter that for as long as many students can remember, tuition has gone up at twice the rate of inflation, since it is still so low (at public schools, under in-state tuition rates). So, it's not our fault because "More often, the problem among students who go heavily into debt is that they are determined to attend their dream college, no matter the cost." Yeah...Stats please!

"Her $30,000 in education loans put her above the average, but she is managing her $300-a-month payments by living with her mother for now. She doesn't regret her decision..." Good for her that she doesn't regret it, but having to live with her parents in order to pay her student loans back only shows how overdue higher ed is for a complete overhaul (including the cost of tuition, the amount of REAL finaid it offers, and the type of standards it sets admissions, all of which figure into the debt problem). Trying to normalize the "multi-generational household" trend will not fix the problems with higher ed in the US.

"Still, many economists say borrowing for any kind of higher education is generally a smart idea...From an economist's point of view, debt is the very best way to pay for education because you're shifting the cost forward until you'll be earning more money...You borrow cheap money. It's really a very good bargain." This type of statement as presented is incredibly irresponsible to make without at least a disclaimer discussing how serious the consequences can be if the "smart idea" does not pay at all (or doesn't pay enough). But, oh, how I bought that same idea myself... As a student of working-class background and without parental guidance, I had no one to advice me that this might not be true in all circumstances, even for the "smart ones" like myself. I'm sure my story is not unique.

"The average college graduate earned $57,181 in 2007, while the average high-school graduate earned just $31,286." Since these are averages, we should assume that the extremes salaries are included: hence, those making tons of $$ are going to skew the stats upward. And since this figure seems to include ALL grads, it probably also includes the older generation grads who are nearing or are at their highest expected wage for their line of work. Once again, CHE makes a dishonest claim by including this type of citation without further explanation.

" 'High student-loan debt, says Ms. Asher, 'can ruin someone for life.' " Very true, and the reason for that is that basic consumer protections, especially the absence  of bankruptcy protection, are absent for most student loans in most cases. Groups like studentloanjustice are advocating for a reinstatement of these consumer protections (which are available for nearly all other types of debt), not so much for a complete forgiveness of all loans for all grads--if a grad can pay his/her loans back, then by all means he/she should. But if that's not the case, the debt that has the potential of ruining a person's life, should qualify for bankruptcy. As things stand right now, unmanageable debt is looking more and more like a lifetime of indenture servitude.
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