1. Darn Those Student Loans, Anyway

    If ever you wanted to know just how deep is the belief in consumption and big-ticket buying in this country, you need look no further:

    USA Today: Student Loan Loads Block Home, Car Purchases

    Amidst all the hand-ringing and “Someone must help our debt-ridden children be able to get more debt!” chants, you’ll run into this laser-sharp social commentary … emphasis mine:

    One interesting fact: The high cost of student debt is stopping many young consumers from buying big items, such as new cars, homes and furniture.

    Nearly 30,000 Americans commented to the federal consumer watchdog agency on the student debt issue, and many discussed day-to-day struggles.

    One borrower, Debra, told the CFPB, “I can’t buy a house because of my student loan. I have to rent.” Another borrower, Daria, said: “These loans are stunting my growth as a citizen. No car. No home.”

    Oh, the misery, the suffering, the ANGST these poor young souls must endure! They can’t go out and be Good Little Consumers straight out of college! All because of those big mean nasty student loans which they were forced to take on!

    (And, I might add, over a year later, yet again media voices are lamenting how student loans are keeping a lid on house prices.)




     

     

  2. Captain Obvious: Student Loans

    Well, here’s a surprise from student-loan land. Not.

    ABC News: Lax Student Loan Standards Created Debt Crisis

    This, obviously, was a topic which required a bureaucratic government study, and so we got one. From it we get amazing and startling new findings, guaranteed to drop jaws … findings like these:

    From 2005 – 2007, the report found that school involvement in student loans began to shrink and students began borrowing more than necessary. And, lenders began making exceptions for students with lower credit scores.

    Private lenders gave out money without considering whether borrowers would repay, then bundled and resold the loans to investors to avoid losing money when students defaulted.

    Those practices are closely associated with subprime mortgage lending, which inflated the housing bubble and helped bring about the 2008 financial crisis, according to the Associated Press.

    Huh. That’s weird. I know a guy who compared student-loan lending to subprime lending way back in 2010.

    Whodathunkit.




     

     

  3. Idea: End Student Loans Altogether

    Whilst I haven’t yet finished reading the whole piece, the title made it just too good to not share ASAP:

    Bloomberg: Forget “Cheaper” … Just End Student Loans

    What — you mean supply and demand matters, even in higher ed? Pffft. When did that start? [/snark]




     

     

  4. Daily Student-Loan Idiocy

    Man, I could practically write a standalone blog just on the topic of student loans, couldn’t I? I mean, the fodder is everywhere.

    Bloomberg: Student Borrowers Lack Understanding of Loan Terms

    This little snippet is pretty darn tough to ignore:

    Marjorie Gelin Goodwin, 37, one of the respondents, said she owes about $107,000 in federal loans and about $15,000 in private loans for college and graduate school. She is in forbearance on her federal loans, meaning she isn’t making payments. She didn’t understand that her private loans would have a variable rate that could fluctuate so greatly, she said in an interview.

    “I was surprised by how much my student-loan payments would take away from my income,” said Goodwin, who works at a nonprofit organization in San Francisco. “I’ll be retired and still paying my student loans at the rate I’m going.”

    You just really have to read that article. As that great philosopher, Homer Simpson, might say:

    “The stupid, it burns!”




     

     

  5. House Prices Suffer From Student-Loan Debt (But Colleges Seem Happy)

    For today’s “LOL” moment, I proudly present to you:

    Businessweek: Student Debt Is Stifling House Prices

    It’s pretty darn comedic when you think about it: A pharmacist earning $125k/year, and carrying $100k in student loans, is miffed that she can’t — for some unfathomable reason — go out and buy a home. Like, yesterday.

    Roshell Schenck has a Ph.D. in pharmacy and earns $125,000 a year. Yet, because she has more than $110,000 in student loan debt, counselors have told her she can’t qualify for a mortgage. “I’d love to buy and can afford to buy,” says the 28-year-old graduate of Lake Erie College of Osteopathic Medicine in Erie, Pa. With lenders scrutinizing college loans more closely than in previous years, it’s almost impossible for borrowers such as Schenck to get approved for mortgages. “My debt is crushing my chances of purchasing a home.”

    Roshell, say hello to my esteemed colleague, the Law of Unintended Consequences. Kinda crazy, isn’t it, how these days, the debt you’re already carrying seems to matter again? And, darn the bad luck, it’s mattering just when you’d really like to borrow even more! Ain’t that a kick in the pants!

    It’s not that I don’t have some sympathy for grads like Ms. Schenck. The situation she finds herself in — making a really nice income in a good field, but unable to qualify for a home loan due to six digits of student-loan debt around her neck — isn’t entirely of her own doing. After all, the government and our university system forced her to take out those loans—

    Okay, never mind. It IS entirely of her own doing.

    Look: She’s fortunate to be making the money she is. I mean, I would love to have an income like that.

    But only if there’s not $100k+ of debt attached to it.

    But She Wants It Now

    By my reckoning, Ms. Schenck makes enough money that paying back those student loans should be no biggie, in the grand scheme of things. A few years of scrimping, saving, and consistent four- and five-digit extra payments toward those loans, and she’ll be in fine shape.

    Admittedly, though, this concept works only if she goes all Dave Ramsey on it, and can manage to not play “Keep up with the Joneses” as regards her spending habits. (Yes, that dreaded disease which ravages so many of the high-earning types, like doctors, lawyers, pharmacists, and so on. Lots of money comes in the door, sure … and even more of it goes out. Wouldn’t want to not “look the part.” Heavens, no.)

    Back to the article:

    Recent college graduates carry an average debt load of more than $25,000, limiting their ability to qualify for mortgages even if they’re able to land a job in a market with an unemployment rate of 9 percent for 25- to 34-year-olds. Dubbing it a “student loan debt bomb,” the National Association of Consumer Bankruptcy Attorneys (NACBA) warned on Feb. 7 about the effects of rising student debt on recent graduates, parents who co-signed their loans, and older Americans who’ve gone back to school for job training.

    Well, the good news is that borrowing of federally-subsidized student-loan dollars shows no signs of abating. So colleges will remain free to increase tuition at will, year after year, with no danger of “decreased financial resources” or anything outlandish like that out there to slow things down.

    “Just as the housing bubble created a mortgage debt overhang that absorbs the income of consumers and renders them unable to engage in consumer spending that sustains the economy, so too are student loans beginning to have the same effect, which will be a drag on the economy for the foreseeable future,” John Rao, vice president of the NACBA, said on a conference call.

    Absolutely preposterous, says I. How great of a country can we be, really, when our citizens’ past borrowing proclivities keep us from borrowing skads more now, right at the time when we most need it? Pffft.

    I don’t know who came up with this silly idea that “Today’s choices create those of tomorrow,” but I don’t like it. And it seems like Ms. Schenck doesn’t, either. Since when should debt limit our choices? I mean, really.

    Someone should just, like, do something.




     

     

  6. How to Make College More Expensive

    For this, they needed a study? Really?

    SmartMoney: Why College Aid Makes College Cost More

    It’s pretty basic: The more money you make available for a limited good or service, the more that good or service will cost.

    This is what happened when “Fog a mirror, get a home loan” policies were all the rage in the early 2000s. It’s also why “Fog a mirror, get a student loan” policies are NOT the elixir for ever-increasing college tuition that everyone makes them out to be. Rather, they make the problem worse.




     

     

  7. Higher Debt-ucation

    From from the annals of Bloomberg comes this jewel:

    Bloomberg: Trapped by $50k Degree in Low-Paying Job…

    One of the reasons I’ve not spent a single word voicing my thoughts on the current Occupy Wall Street (OWS) saga is that while I agree with them on several counts (yes, Virginia, laws should apply to everyone equally, regardless of political stature or the size of one’s bank account), there are numerous “grievances” put forth by OWS which are simply ridiculous, and merit not a moment of my time nor consideration. One of these issues centers on student loans and higher-ed debt.

    So Here Comes My Opinion

    No, OWS, higher education is not a right, nor should it be. Student loans should not be forgiven on any sort of universal basis. I care not whether you could or couldn’t find a job suitable to make your loan payments, Ms. Occupy Protester, because I was not the one who decreed it necessary for you to attend said institution and take out big loans to do the same.

    Lament that mid-five-figures debt all you want, but the reason you have it is simply this: Government made it possible for anyone able to fog a mirror to sign their name on a few dotted lines and walk away with thousands of debt bucks, easily, for the glorious purpose of “higher” education. Take away that “easy” loan ability, and the demand for college goes down … as does the ability of college administrative boards to bump tuition and fees 8 to 15 percent per year. And down will come prices. Eventually.

    If anyone could step out and borrow $5k per year (or whatever) for your product, just by slapping their siggy on a form or two, then you’d be lifting your prices by double-digit percentages each year, too. The more money you make available for “something,” the more that “something’s” price goes up. (Pretty neat how well it worked for housing, too, huh?)

    Sold a Bill O’ Goods

    That’s exactly what happens to lots of college students, it appears. They’re being sold a bill of goods.

    Because if you, like Laura Sayer in the linked article above, run out and borrow $50k to get a Masters degree at NYU’s Program for Interdisciplinary Studies in Humanities and Social Thought, and then you’re upset to find that that degree doesn’t do jack squat for you in the Real World, well, I don’t know what to say.

    …Sayer was set back $50,000 more after completing the Interdisciplinary Master’s Program in Humanities and Social Thought at New York University. The 27-year-old now makes about $45,000 a year as an administrative assistant for a nonprofit group, a job that didn’t require her advanced degree.

    Hmmm. Seems to me that her advanced degree was much more of a years-long (and quite expensive) whim than any sort of career booster:

    Sayer, the NYU graduate, said while she learned critical-thinking skills, her career prospects won’t allow her to pay off her debt anytime soon. [Emphasis mine]

    “Even if I didn’t know what field it would lead me to, I thought it would be worthwhile for my professional career,” said Sayer, who lives in the Crown Heights neighborhood of Brooklyn with two roommates.

    No, really. The jokes practically write themselves.

    Many of the students who enroll in the master’s of “Social Thought” program directly from college do so with an eye toward a Ph.D., said John Beckman, an NYU spokesman.

    Of course they do. The masters won’t do a damn thing for them. Thus, they want to put off those student-loan payments as long as is humanly possible. Of course, that will probably require taking out more loans, but as we’ve previously established, student-loan lending isn’t exactly “restricted” to only the best credit risks. No credit? No job prospects? Already $40k in debt? No problem. There’s more where that came from.

    “The numbers have shown, and will continue to show, over time that an investment in an advanced degree will yield better career prospects and income,” Beckman said.

    Some salesman, this guy. You have to wonder if the people who wrote the theses below — previous NYU attendees in the “Social Thought” program — really believed that what they were studying had ANY BEARING WHATSOEVER on whether or not they’d achieve gainful employment at anything above poverty-level Mcwages:

    • The Graven Image: Truth, Self, and Identity in Max Frisch’s Novel I’m Not Stiller
    • The Meaning of Documentary: Narrativity, the Cartesian World View, and a Heideggerian Critique
    • H.D.’s Creation of the New: Redeeming the Maternal Body in Pursuit of Feminine Language
    • Why Are Gay Men So Effeminate? An Essay on Aesthetics, Affect, and White Gay Male Subjectivity
    • Speaking in Tongues: Language and Creolite in the Work of Kamau Brathwaite and Junot Diaz

    Readers, please tell me: Do the authors of these things actually want to WORK and create products or services of value to the rest of us, or do they just want their egos stroked and subsidized (preferably at taxpayer expense) on a regular basis?

    Methinks I know the answer.

    And I didn’t need to borrow $50k to achieve my “critical-thinking” skills.




     

     

  8. Survey: Debt Gives Young Adults Self-Esteem Boost

    I suspect that most of this has to do with the fact that young people tend to feel “invincible,” but it’s pretty interesting nonetheless:

    OSU: Young Adults Get Self-Esteem Boost From Debt

    From the article:

    For this study, the researchers examined data on two types of debt: loans taken out to pay for college, and total credit-card debt. They looked at how both forms of debt were related to people’s self-esteem and sense of mastery – their belief that they were in control of their life, and that they had the ability to achieve their goals.

    …Researchers found that the more credit card and college loan debt held by young adults aged 18 to 27, the higher their self-esteem and the more they felt like they were in control of their lives. The effect was strongest among those in the lowest economic class.

    Only the oldest of those studied – those aged 28 to 34 – began showing signs of stress about the money they owed.

    If anyone wondered just why it is that lending institutions make such an effort to get young adults into debt, well, wonder no more. You can build up an immense pile of debt between the ages of 18 and 28. By the time the invincibility of youth has worn off and reality has set in, your next 20 or 30 years of payments are already set in stone.

    Then, when that “expected future income” thing doesn’t pan out, you get a host of nasty little outcomes — like one in five student loans being in default.

    More from the study:

    But how debt affected young people depended on what other financial resources they had available, the study found.

    Results showed that those in the bottom 25 percent in total family income got the largest boost from holding debt – the more debt they held, both education and credit card, the bigger the positive impact on their self-esteem and mastery.

    Those in the middle class didn’t see any impact on their self-esteem and mastery by holding educational debt, perhaps because it is so common among their peers that it is seen as normal. But they did see boosts from holding credit-card debt – the more debt, the more positive effects.

    Whoopee. And the debt-induced beat goes on … so long as you get ‘em hooked young!

    EDIT: A more in-depth opinion on this study can be found right here . . ..



     

     

  9. Student Loans For the Win

    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.




     

     

  10. Worst-Paying College Degrees

    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:

    If you’d rather end up with one of the best-paying college degrees, you’ll have to major in something that requires a lot of math classes.

    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.