Mary Pilon at the Wall Street Journal tells us that total outstanding student-loan debt has now overtaken total outstanding credit-card debt:
WSJ: Student Loan Debt Surpasses Credit Cards
As of June, there was roughly $830 billion outstanding in student loans, compared to $826 billion in credit-card debt.
Swell, ain’t it? I tell you, this country can strap on the anchors and leg chains of debt like nobody’s business.
Now here’s an interesting article from Yahoo. Apparently someone has taken the time to compile a list of the worst-paying college degrees out there:
Yahoo: 20 Worst-Paying Degrees of 2010
I get a kick out of lists like this — especially ones that reinforce my own views on the relative value (or lack thereof) of higher education. Which is that “higher education,” in and of itself, is very rarely the Ticket to Financial Success which society makes it out to be. (Check out this article in the Harvard Business Review; the difference between “knowledge” and “skills” is immense. The higher-ed conglomerate may disperse knowledge, but usually, what employers want are skills.)
And oh yeah — if you take on lots of debt to get that higher ed, you can easily end up worse off — far worse off — than if you had no degree at all.
Because I’m lazy, I won’t reprint the whole list here. However, the top five worst-paying degrees…
| College Degree | Starting Pay | Mid-Career Pay |
| 1. Child and Family Studies | $29,500 | $38,400 |
| 2. Elementary Education | $31,600 | $44,400 |
| 3. Social Work | $31,800 | $44,900 |
| 4. Athletic Training | $32,800 | $45,700 |
| 5. Culinary Arts | $35,900 | $50,600 |
… are pretty much what I’d expect. (Wait — where is Underwater Basket Weaving?)
I do, though, have to take issue with how the author finishes out her missive:
I’m not so sure about that. I mean, politicians seem to do pretty well financially. And it’s obvious that math was never a core requisite at any point in their lives.
Those of you with an interest in default rates — student loan default rates, in particular — will want to set aside a few minutes to read the following:
Chronicle Of Higher Ed: Student-Loan Default Rates: Understated
Of course findings such as the following will come as a complete and utter shock to everyone (not!):
One in every five loans that entered repayment in 1995 are in default? Yikes. That is nasty. As in, subprime nasty. This is worth mentioning because, according to the fine folks at S&P in July, 2009 …
So the folks issuing student loans to pretty much anybody with a pulse still have some work to do to reach those vaunted levels we associate with subprime default rates. Keep at it, guys! You’re making progress!
Back to the Chronicle piece:
Boy — this would be really troubling to hear if we didn’t recognize that student loans are undoubtedly “good debt” meant only to help you reach your dreams!
Except, of course, that it’s much easier to walk away from poor real-estate decisions.
NY Times: Placing Blame As Students Are Buried in Debt
One view I’ve always presented at IYM — and which I believe more strongly now than ever — is that the old saying, “Student loans are good debt!” is, to be polite, a load of horse crap. And a mighty dangerous one at that.
Oh, the “good debt” notion might have held merit at some point. But now that decades of easy credit for student loans have allowed universities to increase costs at double-digit clips each year, and with world economies showing the strains of unsustainable debt (high unemployment, stagnant or declining wages, general societal unease) everywhere you look, I would like to think that we can pretty much kick the “good debt” preachers to the curb.
(Your local university president, faculty, and financial-aid office staff would disagree, of course. But you’re nuts if you can’t realize that these folks must, in trader parlance, “talk their book.”)
As I noted in my “Student Loan Bailouts” post, when you make money (credit) easily available for something, the price of that something will rise. This is basic economics. It has held true for:
And there are probably more examples which I can’t conjure up just now. But I’ve often wondered: Where might auto prices be if there weren’t an entire industry set up to loan cheap money to anyone who can fog a mirror?
And where might higher-ed prices be if there weren’t an entire industry (and/or a federal government) set up to loan cheap (taxpayer-backed) money on the same basis?
Answer: Significantly lower than they are now.
In a world where the middle class has no savings to speak of — only piles of debt in its place — the words “cash only” would mean retail pricing power is out the freakin’ window.
Easy credit, on the other hand, allows for an unimaginable amount of can-kicking: Prices can rise largely as desired, masking any and all underlying strains as long as the money flow is uninhibited. Rising prices mean prosperity, don’t you know. The eventual day of reckoning can be put off for a long, long time.
But not forever.
From the NY Times article:
Hmmm. That whole “blind faith” thing — it sounds vaguely familiar. Oh yeah — didn’t we just careen through a period wherein real estate, and property prices, were viewed the same way? Blind faith … home prices only go up … price doesn’t matter … buy now or be priced out forever … and so on.
Yep. I’ve seen this movie before.
Ms. Munna has become proficient at playing kick-the-can at an early age, I see. Completely foreseeable offshoot of the “Price doesn’t matter; easy credit can make it happen!” environment we’ve so effectively cultivated.
B I N G O.
The “failure of parenting” part, I agree with. The “failure of loan underwriting” part, I don’t. Where’s the underwriting failure, exactly, when student loans are pretty much non-dischargeable? And further, guaranteed by Uncle Sam?
Sounds like a lender’s dream, if you ask me. (Government policy changes notwithstanding.)
Oh, please. Were the loans not made available, we’d have heard from Ms. Munna and her mom about how “unfair” it all was — that dear Cortney wasn’t being allowed the “same opportunities” as were other, more financially well-off students. Again we can draw a clean parallel to easy-credit, government-backed mortgage lending: We’re told that it “has to be done” to afford the same “opportunities” to those of lesser financial means.
And then, sometime later, we’ll hear how unexpected the blow-up was. How, of course, no one could see this coming.
Seriously? You have to ask that question? The financial-aid office, and the university itself, has nothing to lose here. Like the TBTF banks and Wall Street houses who packaged mortgage-backed securities, the plan was to always and forever (1) make the questionable loan, (2) get paid, and (3) quickly roll the risk onto someone else.
In the case of Ms. Munna, so long as NYU gets its bucks from Sallie Mae, Citibank, or whomever, then the risk immediately becomes someone else’s. For them, the system is operating precisely to specs.
Once the Citibank checks cleared, it was Game, Set, Match.
Um, no. First and foremost, it is the job of the parent. Stop trying to foist the largest chunk of blame anyplace but on the individual and/or family.
Well, let’s see: The university wants revenue. The (most painless) way to get more revenue is to charge more money. Since nobody has any savings, the way to charge more money is to promote more borrowing. (Easily done, when your product is advantaged by the “good debt” notion.) The way to promote more borrowing is to … well, our culture pretty much does that for you.
You’ll note that, as a nation, the United States has not had “financial literacy” and common-sense financial education as a strong suit. Instead, we tend to learn our basic economics the hard way. There’s a reason for that.
When your job depends on you not deploying certain information, you won’t deploy it.
When your economy depends on consumers not understanding something, you won’t put forth much more than token, public-relations effort in the other direction.
…Cortney could move someplace cheaper than her current home city of San Francisco, but she worries about her job prospects, even with her N.Y.U. diploma.
She recently received a raise and now makes $22 an hour working for a photographer. It’s the highest salary she’s earned since graduating with an interdisciplinary degree in religious and women’s studies.
Sounds like our heroine took the lifetime vow of poverty pretty early on. (The truth hurts.)
What? Taking out loans with variable rates entails more risk, and can turn out badly? Since when?
Indeed. Somewhere a pole is missing its best friend.
(Sorry. The urge to insert a pole-dancing joke was just overwhelming. I’ll try to do better next time.)
Yes, well, I don’t want to pay for your education, either, Cortney. I have my own family (and daughter) to worry about. So I’d appreciate it if you’d take that sense of entitlement and woe-is-me you exhibit and place it … oh, never mind. If nothing else, you can just dodge the loans, and call it good.
A hundred grand down the tubes, and I wonder if this young lady has really learned anything at all.
Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).
My financial life began turning around when I took responsibility for it. — Dave Ramsey
Call me nuts, but I'm usually reading anywhere from 4 to 6 books at a given time.
Here's what I'm digging into now: