Category Archives: Budgets

And now the other side of the student loan debt crisis currently in the news– or maybe not a crisis:  ”What does $1 Trillion in Student Debt Really Mean?  Maybe Not That Much,” from CHE.  Unfortunately, it’s behind the paywall.  Here’s a long quote though:

A trillion is a big, round number. It has some shock value. But what does crossing the $1-trillion mark really tell us?

For one thing, that more people are going to college—and graduate school. The sum is an estimate of all outstanding education debt: private and federal student loans for undergraduates, parents, and graduate and professional-school students. And greater educational attainment is a goal the Obama administration and many nonprofit groups are pushing.

At the same time, in the wake of severe state budget cuts, tuition is rising, and students and their families are footing a larger share of the bill. A greater percentage of bachelor’s-degree recipients have borrowed, and the average amount of debt per borrower has also risen. About two-thirds of graduates of public and private nonprofit colleges have loans, with the borrowers’ average debt about $25,000, according to the most recent analysis, of the Class of 2010, by the Project on Student Debt. (The average debt for the Class of 2004 was under $19,000, according to the federal government, which counts somewhat differently.)

Total outstanding student-loan debt—even $1-trillion of it—may not have broad economic implications. It’s still too small a sum to derail the economy, at least for now, says Mark Kantrowitz.

And so forth, the article goes on about how college debt is good debt, how someone borrowing a reasonable amount for a reasonable degree is good, etc.  I mostly agree with this, but it of course doesn’t completely dismiss all the problems of college debt and for me even brings attention to different problems. For example, is it such a good idea that more people are attending college and graduate school and going into huge amounts of debt to pay those bills?  I dunno about that.

From the Freep comes “Crushed by college debt:  Massive loan bills hang over graduates, derail life plans.”  It popped up in my EMU feed because it referenced a student here who has lots of debt:

However the political battles are resolved, it won’t change the future for millions of graduates, such as MoReno Taylor II, 29, of Lansing, who sees his $80,000 in loans for Eastern Michigan University coloring his life.

“It impacts you in every way. Job decisions, searching for a potential home,” he said. “Knowing that you have that debt hanging over your head is debilitating.”

I have to say the comments for this piece raise some interesting questions for me.  Perhaps I should know more about why students are borrowing so much money in the first place, so maybe I just don’t know what I’m talking about here.  Besides that, I will freely admit that I grew up privileged enough that most of my college was paid for by my parents, and I also went to college in an era when tuition was a lot less.

Having said that, it seems to me there are some pretty simple ways to avoid that much debt.  For starters, if I was in a situation now where I had to pay for college out of my own pocket, I would certainly attend community college for a couple of years and get the gen ed stuff taken care of at half the price.  I certainly wouldn’t borrow to pay all the bills– that is, borrowing money to not live with the parents and to go to school full-time.  I’d probably live at home, work, attend part-time, etc.

And then there’s this quote at the end of the piece that makes me think:

Jessica Scott, 26, of Grand Haven graduated in 2009 from Central Michigan University with a degree in journalism and $60,000 in debt.

She’s working four part-time jobs, can’t afford health insurance and is living at home because she can’t make her debt payments and pay rent, too.

“It seems silly to think that myself, at 18 years old, made this kind of staggering financial decision,” she said. “I had no idea what I was getting into, or what it could possible lead to. When I graduated high school in 2004, taking out loans to pay for school is just what you did. There was an unspoken promise that you’ll graduate, find a great job and move on with your life. But as we know, that isn’t what happened.

“Now I’m left with a mountain of debt, a great deal of stress and the hopelessness that I’ll never get out from under this. This one financial decision, which took no time at all to make and a quick flip of a pen, will now define my future.”

It reminds me a little of the old days of students and credit cards.  This doesn’t seem to be as visible on campus as it once was and banks have tightened the rules on credit cards, but just a few years ago, there were tons of stories of young college kids who charged things willy-nilly and then got themselves forever in debt.  I’m not saying this is the same thing because it’s not, but at the same time, I wonder if part of the problem is it’s too easy to borrow too much money.

An alert EMUTalk.org reader sent me this from Saturday’s Washington Post, “Student loans seen as potential ‘next debt bomb’ for U.S. economy.”  Here’s the opening paragraphs:

Bankruptcy lawyers have a frightening message for America: They’re seeing the telltale signs of a student loan debt bubble that is placing increased financial pressure on families struggling with their children’s mounting debt. According to a recent survey by the National Association of Consumer Bankruptcy Attorneys, more than 80 percent of bankruptcy lawyers have seen a substantial increase in the number of clients seeking relief from student loans in recent years.

In most cases, those clients could not meet the federal hardship standards that are necessary to discharge a student loan through bankruptcy proceedings. Instead, many of these parents or guardians who co-signed the student loans face the prospect of losing their life savings, cars or homes to collection agencies for aggressive private lenders.

And then there’s this alarming paragraph:

The amount of student borrowing skyrocketed from $100 billion in 2010 to $867 billion last year — or more than the $704 billion in outstanding U.S. credit card debt, according to the Federal Reserve Bank of New York. Of the 37 million borrowers who have outstanding student loan balances as of third-quarter 2011, 14.4 percent have at least one past-due student loan account. Together, these balances come to $85 billion, or roughly 10 percent of the total outstanding student loan balance.

Yikes.