Friday, July 23, 2021

The student loan time-bomb

 

I wasn't aware that, in part because of pandemic relief legislation, only about 1% of student loans are currently being repaid.  That's supposed to change in October - but how many borrowers can afford to resume payments?


In the 2020 CARES Act, Congress gave student-loan borrowers a temporary break from repaying their loans. President Trump extended that twice and President Biden once, with loan payments now set to resume Oct. 1, 2021.

Borrowers could have kept paying if they wanted to, but almost nobody did. As Tom Lee of the American Action Forum recently explained, the portion of borrowers repaying their student loans dropped from 46% at the beginning of 2020 to 1% today. The portion of borrowers in forbearance rose from 10% to 57%. The rest include borrowers who are still in school, who have gotten deferments or who have defaulted.

. . .

America’s $1.4 trillion in federally backed student debt has become a cultural and generational flashpoint as politicians debate what, if anything, to do about it. Liberal Democrats feel some or all of the 40 million student-loan borrowers deserve relief, since the average amount owed per borrower has exploded to nearly $37,000. The growth in average balances has far exceeded inflation or income growth. The hardest cases are students who take on debt but never get a degree or the extra earning power that comes with it.

The economic case for canceling student debt is extremely weak, however. It would be a massive handout to a subset of Americans with better economic prospects than others, with no similar benefit for those worse off or those who already paid what they owe. "It would be a terrible thing to do,” says Sandy Baum, a senior fellow at the Urban Institute. “Making those handouts and excluding the people who have never been to college is totally inequitable. What about people who start borrowing tomorrow? Are we going to forgive debt every few years?”


There's more at the link.

I'm from an old-fashioned school.  I completed every one of my university qualifications through part-time and/or distance learning, paying my way every year and never carrying any student loan debt.  I ended up with four of them, every one hard-earned.  I honestly don't understand how any student can willingly contemplate going into debt for tens or even hundreds of thousands of dollars, to earn a qualification that won't produce a salary sufficient to repay those study loans.  It makes no sense to me at all.  I can't figure out how young people today can't see this problem for themselves, but apparently they can't.

I hope very few of you, dear readers, are facing this dilemma right now, but I'm sure some of you are.  How are you planning to cope with it?  Can you afford to cope with it in this post-pandemic business environment?  Please let us know in Comments, so we can learn from each other.

Peter


24 comments:

  1. I went to a state school and managed to cover with savings and working during college and some help from my dad but my wife went to U of Chicago and has loans. Granted that's an awesome school and I'd probably have been willing to take loans to go there if I'd gotten in. She's in a field where she's eligible for forgiveness after 10 years which we put in for and are waiting to hear back. we're in good enough financial shape even if they aren't we'd be ok and honestly most of my friends who got loans are making enough they'll be fine now. I know it was a struggle for them in the entry level jobs like 5-10 years ago but now they're more than making up for it. So yeah I agree with Mike Rowe lots of people are lied to by the educrats and the cost of college is insane and needs to come down, but forgiving the loans is not the way to go. Stop telling every girl in highschool who gets decent grades she needs to go to college so there's a zillion "psychology" majors who really want Mrs. degrees. Stop the overcredentialism where employers want a bachelors for stuff a highschooler could do.

    ReplyDelete
  2. I am one of those oddballs that went back to school for a law degree but didn’t finish. During my first year, I got a job offer that I could not refuse (from which I was laid off just two years later). The student loans from just that time are currently in forbearance. I will continue to pay them off unless Congress decides to make that a non-issue. What most people do not realize is that Navient (the student loan services “company”) will readily grant you a deferment if you find yourself in need of one due to circumstances. So, those who cannot afford to pay due to the economic situation will most likely be granted as much forbearance as they need.

    ReplyDelete
  3. Only student loans I took out were for law school in 2005 and 2006, and I paid those off within two years of taking them out. They were more for managing cash flow than anything else. Law school administration tried very hard to warn people about how much debt they were taking on ... "get used to Costco Raman noodle packets" was the way I heard it.

    When I attended undergrad in 1974, tuition was dirt cheap. Every grad school degree I earned after that was paid for by working as a teaching or research assistant and getting tuition waivers. (My rule of thumb is that you should never go to a graduate program that won't allow you to do that. If they try to charge you for it, it isn't a degree worth getting.)

    As far as I'm concerned, they borrowed the money, they signed the loan contract, they need to pay it back. No loan forgiveness. If they didn't understand it, they weren't college material to begin with. Life is hard when you are stupid.

    I've got one son who went to college for three years and dropped out. He got a job and paid off his student loans. Another who got a full ride scholarship. A third who is still in school and has loans outstanding, but as he is now in a PhD STEM program, has an assistanceship and tuition waiver.

    If what the colleges and so-called smart people tell us, a college degree increases your lifetime earnings significantly. So why should people who wouldn't or couldn't go to college (and are stastically poorer) have to pay for those who did?

    You can't pay off your student loans and have no reasonable employment prospects in your future? You chose your education really poorly. Really, really poorly. But it was your choice, and that means you own the outcome.

    ReplyDelete
    Replies
    1. God, you're a really selfish, unpleasant person, aren't you? With no capacity for foresight.

      Can you understand the concept of 40 million+ young people, burdened by debts they'll never be able to repay? They didn't all get gender studies degrees, Saint ruralcounsel. And they can't file bankruptcy to relieve the debt. That's not a "you problem" my dear, sainted fellow. That's a civilizational collapse problem. But keep clinging to your smug sense of self-righteous moral superiority, while civilization collapses around your ears.

      An 18 year old isn't considered mature enough to legally drink, but he or she is perfectly fine signing a legal contract binding them, irrevocably, to a life of debt servitude. And if they fail to fully understand the concept, or they get in over their heads, "screw their stupid asses, I got mine, and I wasn't stupid!"

      Nota bene: I haven't gone to college, and likely never will. So student loan debt isn't a direct problem for me. I'm just not as shortsighted, selfish, and -frankly- foolish as you and those like you, in this respect.

      I'll never benefit directly from student loan forgiveness. But I know that, indirectly, my nation will benefit tremendously. Personally I'd like the money for that forgiveness to come straight out of the universities' endowments. It sadly won't bankrupt them, but it'll get the message across. 40 million+ young Americans will be relieved of a crushing debt, suddenly able to qualify for a home loan, blessedly free of one of the worries keeping them from considering having kids, and the poisonous universities will get a hearty kick in their collective groins and wallets.

      The alternative is, as you say, stupid.

      Finally, read this: https://voxday.blogspot.com/2021/07/but-what-about-me.html

      And this: https://voxday.blogspot.com/2021/07/the-student-debt-jubilee.html

      Delete
  4. I just finished putting two kids through STEM degrees and I can tell you that there is no, and I mean not any, way you can "work your way" through college at the inflated prices they charge these days. Young people, especially young men, are in a real trap. The only jobs available that pay a living wage with things like health insurance benefits require real degrees. Another problem is that white males from families that make any money at all are disqualified from academic scholarships. My younger son got a 2000 on his SAT and was in the top 3% of high school students in Texas and in spite of an intense application effort was not offered one thin dime of scholarship money. He also received unsolicited undergraduate recruitment from Yale and Columbia but got turned down while the idiotic kids of famous people got in. In spite of this both kids are doing well. One is part owner of an IOT start up and recently received a patent on a cell tower/internet interface he designed and the other is a 23 year old consultant in the medical instrument certification field. Both have student loan debt load but they are working their way through it.

    ReplyDelete
  5. A lot of the demand for young people to go to university/college is to get them into the indoctrination program that these institutions have become. Degrees in "studies" are useless outside of academia; yet many students go into such programs. But these "studies" programs make a lot of useless Leftists out of our young people. They have no skills other than to be aggrieved.

    Degrees in STEM and Medicine (and even some Law) are useful to Society. Doing as some have done to work their way through or at least take minimal loans is good. These people also have the mind not to be subverted by the political indoctrination of universities and colleges. They also have salable skills that allow them to pay back any loans.

    Disclaimer if needed. Air Force ROTC payed my tuition, books and a stipend for my undergraduate degree (Electrical Engineering). I got a Masters Degree in an engineering discipline payed for in large part by the company I worked for at the time.

    ReplyDelete
  6. In America (today) education is an industry and one that seems to do well. Student loans never go away (bankruptcy does not touch a "student loan"), they are part of the bottom line of the industry.

    I have read of co-signers to a student loan who had their social security garnished because the kid who took the loan did not/could not keep up the life long payments.

    ReplyDelete
  7. When they made it impossible to relieve the immense burden of college loan debt (made so great by despicably exorbitant tuition costs) through bankruptcy, they declared war on the future of the nation. The Boomers, in general, can pull themselves up by their own bootstraps and kindly strangle themselves with them.

    Tuition today isn't comparable to tuition when we still more or less had an actual country. I've never been to college, and don't know that I ever will, which means I'll never have college loan debt myself, but that's irrelevant to the point. Well, it's irrelevant to the point unless I'm an irredeemably selfish, self-centered imbecile who can't tolerate the thought of someone else benefiting from an act of justice and fairness that won't benefit me personally, except indirectly.

    If my struggling neighbor is blessed by having someone offer to pay off his mortgage, so he's relieved of that burden, only a monster or narcissist would object to that because they had already paid off their own mortgage, with great difficulty, and therefore wouldn't benefit from the same generous offer.

    Vox explains it better than I can. There have been other posts by him on the subject, but these are the most recent:

    https://voxday.blogspot.com/2021/07/the-student-debt-jubilee.html

    https://voxday.blogspot.com/2021/07/but-what-about-me.html

    ReplyDelete
  8. Fascinating comments, every one. Some thoughts:

    1. Eighteen-year-olds are in many cases (not al) not capable of abstract thought. 'Tomorrow will take care of itself'.

    2. The "system" is designed to subsidize universities (a Democrat stake-holder/constituency) at the future expense of the students. It also adds them to the politically-dependent constituencies of the Democrats, "their friends", who will one day free them from their cruel yokes with magical government money. And give them forty acres and a mule. And a mule!

    3. Universities are no longer primarily places of learning. Mission creep, you know. They are just what you do after high school if you don't want to work on cars or lose your fingers in accidents at oil rigs or be an assistant manager at a convenience store or wait on tables. If you are of the fair sex perhaps you hunt for Mr. Right or just have a good time.

    ReplyDelete
  9. A whole slew of people slaves to the banking industry for the rest of their lives for something they did before they were old enough drink. The goose that lays the golden egg for the bankers!

    That interest money going to the bankers won't be spent on a house anytime soon....

    ReplyDelete
  10. Bibliotheca Servare Said it better than I will. Everyone's situation is unique. I was of the (uninformed) opinion for a long time on this as well let'm pay it back though the no bankrupt thing was totally broken.

    Read up on it, learned and am much more on the same page on an at least student debt Jubilee. exactly as he linked in his comments. Much better researched pinion now is Vox is absolutely right.

    And one note he put in there as well was that the endowments for the top 20 richest schools would wipe out 1/5 of all of the debt by itself is hugely damning of the universities.

    Myself, it wouldn't affect me as I haven't had any student loan debt in 30 years. Our family, oh yeah it would affect us a great deal. My wife’s debt, well, we call it our other other home. Like the other other white meat. That home, the one we can’t go to. Or our boat we can’t float, it’s a hell of a nice boat though. She has 3 degrees and she makes a fat check, but it's a house payment a month extra we send off to Navient. So yeah, love to see it, but rather doubt it, until inflation brings home that cow and we can start printing dollars from home for toilet paper. yaaaay inflation. /sarcasm

    No biggie, just get paid twice a day like back in the Weimar Republic so bread is only 1 million bucks, and 1.5 million at the end of the day.

    Enough, this isn't about sarcasm or "pay off yer own debt" anymore, it's gone way way past that.


    Link again:
    Finally, read this: https://voxday.blogspot.com/2021/07/but-what-about-me.html

    And this: https://voxday.blogspot.com/2021/07/the-student-debt-jubilee.html

    ReplyDelete
  11. 3rd and lasttime to try posting.

    172 comments

    The student debt jubilee
    A student-debt jubilee is absolutely necessary, it's just, and it's fair:

    Almost nobody is repaying their student loans

    In the 2020 CARES Act, Congress gave student-loan borrowers a temporary break from repaying their loans. President Trump extended that twice and President Biden once, with loan payments now set to resume Oct. 1, 2021.

    Borrowers could have kept paying if they wanted to, but almost nobody did. As Tom Lee of the American Action Forum recently explained, the portion of borrowers repaying their student loans dropped from 46% at the beginning of 2020 to 1% today. The portion of borrowers in forbearance rose from 10% to 57%. The rest include borrowers who are still in school, who have gotten deferments or who have defaulted.

    Now, I understand there are a lot of college graduates who will whine and complain about how THEY had grit and how THEY worked their way through school and how THEY pulled themselves up by their own bootstraps.

    Of course, these retards are all ignoring the rather pertinent fact that average annual college costs have increased 3,819% from 1964 to 2019.

    The Cost of College in 1964-65

    Average cost of public school: $261
    Average cost of private school: $1,160
    The Cost of College in 2018-2019
    Average cost of a four-year public school: $10,230
    Average cost of a four-year private school: $35,830
    Even if we adjust for inflation, the average annual cost of college in 1965 was $2,116.21 for public and $9,405.40 in 2019 dollars.
    So, what I propose, in the interest of taking into account the narcissistic feelings of those who are more concerned about fairness about the past than what is good for everyone who is a participant in today's economy, is to eliminate all student debts in excess of $4,000 for those who attended public schools and $20,000 for those who attended private schools.
    This would make the remaining debts reasonably affordable going forward, would free those whose lives are already ruined by crippling debt servitude, and would mean various younger generations would have paid a similar amount for higher education as the Boomers. It would also end the charade of extending usurious loans to young people who cannot be reasonably expected to pay them off.

    UPDATE: I'm going to type this very slowly in the hopes that the morons can understand this: contracts do not determine reality. It does not matter if you have signed a contract agreeing that you will fly to the Moon by flapping your arms, there is no way you can deliver on that contract. Moreover, fraud vitiates all contracts, and students who took out student loans were lied to, deceived, and defrauded. The fact that someone agreed to something does not mean that they are bound to the agreement in any and all circumstances.

    UPDATE: The endowments of the 20 richest universities alone would cover one-fifth of the cost of entirely writing off all student loans.

    ReplyDelete
  12. Honestly, as far as I'm concerned most of (if not all of) those loans were obtained via fraudulent means. Even 25 years ago they were beating it into students heads that they HAD to go to college or they'd end up homeless on the streets eating garbage by 2025 because "everything is going automated, there won't be a spot for the uneducated anymore". Then there was "it doesn't matter what degree, any degree will increase your lifetime earnings by hundreds of thousands (by the time I graduated high school they were pushing that to "over a million dollars") and then there were the bright, shiny pamphlets from FAFSA and some college/university association that pushed getting student loans with images of happy, successful people in an office or lab versus the dirty, miserable bastard holding out an empty can on a sidewalk.

    I didn't take out any loans, the education I got was either out of pocket or paid by the USAF or VA, and my wife's were all out of pocket. Screw the banks, screw the schools, forgive all the debt, and make schools prove each degree path actually provides a way to pay back the loans before they are given out.

    Colleges & universities have been tearing into that trough long enough.

    ReplyDelete
  13. I'm one of the 1% that kept paying on mine.

    I had three semesters and a summer class worth of loans, because 30 hours a week of work was insufficient to live on and pay all of my tuition at the beginning of each semester, toward the end of grad school.

    I will have paid off the 3rd of the four loans the week before the forbearance expires, a mere three years and three months after graduating. I am, therefore, ahead of my planned payoff schedule of 6 years, and well ahead of the 10 or 15 years that payoff would have taken by the government's minimum payment schedule. The forbearance has been a godsend in terms of paying down principal.

    The only downside to a year and half of no interest accumulation on the loans was that there was no interest paid that I could deduct from my taxes.

    ReplyDelete
  14. Feather Blade - welcome to the 1% club. ;>) My Daughter and I also used the no interest forbearance to pay-down our principals on our respective student loans. Just made good fiscal sense to me and I suggested it to my daughter. Took her about thirty-seconds to see the logic. My minimum is $35.00 a month and that would just barely cover the interest. It's as bad as a 30 year mortgage on a home. You are totally upside down on it until the last ten years or so.

    Rob - Which is why I Did Not co-sign any student loans for my daughter. I love the kid dearly, but I am not going to put the ability to keep a roof over my head and food in my belly above her potential earnings and good faith. Plus, while she was in Grad School I put the roof over both of our heads to cut costs.

    ReplyDelete
  15. I'm in the 1%, but the loans I have were thought out. I was broke, facing no way to support my kids, and had already been told by multiple potential jobs that no degree meant no more money/growth. So I took on the equivalent of a mortgage, on myself. And I made sure I got a degree that would allow me to pay it back. It was an investment, and I'm making it pay (and it'll be gone in a year or two at this point). I wouldn't expect or want the government to pay off my mortgage, I won't with my student loans. And I will deeply resent anyone who sponges off me to pay off their ill-considered loans.

    That being said, student loan and the whole debacle they have created need to go away. The costs soar, because the money was easy and teenagers can't think through their future. I was in my thirties when I squared up my shoulders and took it on. Student loans and the industry they have created is propping up so much crap that when they give out, and they will, the landslide will destroy what's left of education. And there is value in advanced education - but not everyone needs it. I had to have it, because it's been devalued, but also because I wanted to go into science on a level beyond technician (which does NOT need higher education, although it's expected but that's a whole 'nother rant). Two of my kids are going into trade, and I'm supporting that decision happily because they will succeed at being bakers and everyone has to eat.

    ReplyDelete
  16. The price of education is 5x what it was in the Baby Boomers time and wages inflation adjusted as percentage GDP are half.

    How precisely is someone with that level of debt and those wages supposed to start a family, buy a house, or a new car? Especially with yield hungry institutional investors like Black Rock Capital making housing ultra expensive or turning yeoman into renters.

    Honestly so many so called Conservatives have horrible linkage blindness , somehow high debt, high housing and lower wages magically don't have any impact on family formation and clearly it must the "the Internet" or something that's given us fifty years of low fertility.

    The choice is stark, higher wages, stable jobs cheaper housing and yes divorce reform or no babies. Well OK you can bring in Muslims , Latin Americans, Indians and Africans by the hundred million for a while.

    I'm sure that will work out well.

    Modern life is expansive, pay up or die off.

    ReplyDelete
  17. "I honestly don't understand how any student can willingly contemplate going into debt for tens or even hundreds of thousands of dollars, to earn a qualification that won't produce a salary sufficient to repay those study loans. It makes no sense to me at all."

    I graduated from a high school in a middle class/upper middle class area which was 2/3 children of mid-level executives/engineers and 1/3 children of well compensated union employees. There was simply no alternatives discussed, or allowed to be discussed. One simply graduated HS, went to college (taking loans out if required, but we were told this was ok as "a college degree is the new HS, every job requires one").

    During our required career counseling (which occupied many tedious hours) I often attempted to select other plans/paths as possible alternatives and was repeatedly told I would not receive credit for hour if I wouldn't take it seriously. Pointing out that welding/skilled trades/other in-demand physical jobs paid well, had potential to own a small business or provided other benefits was met with "stop messing around, your plan must include college".

    On one occasion we were required to select several potential jobs and explain how college would help us get them. Not careers/how we would get that career, but simply "select a job from this database and explain why we have to go to college to get it".

    In my final year they decided to implement (I think now scrapped) a HS portfolio/exit interview. You'd compile a binder showing what you learned in HS/resume/classes took/exceptional assignments, and then do a bunch of paperwork/worksheets on how this will help you in college and in your selected future career. Then you'd do an exit interview to talk about your plan and your binder. We were told that, because it was new, our year was pass/fail, all you had to do was fill the information in and show up to pass and graduate (as far as I know this was eventually scrapped because someone pointed out it was probably illegal to withhold a HS diploma based on an exit interview).

    One of the required worksheets was generated by a program where you went to the computer lab, did some tests and selected a major/degree program and career you liked from the results. Not, find a life-plan/career that fits you, just select from the available majors and careers.

    Every. Single. Step. was predicated on the idea that it was HS->College->Career. No alternatives were discussed, none were allowed to be discussed. Yes, it's your own life and you need to take control, but this programming began in middle school and continued every year thereafter. It takes time in the real-world to shake this level of programming off, and by then most students have racked up years of debt.

    ReplyDelete
  18. Four kids. Two went to college. Two did not.

    The first one who went to college was assured that most of her loans would be forgiven if she worked in "Title One" schools.

    She felt "called by God" to work in a non-Title One school and suddenly found herself with $60k in debt and making less than $30k/year.

    Stupid? Maybe. It is her life. Those are not choices I would make but it is her life. Kids are on-hold for the time being.

    The second kid who went to college was twisted into pretzels because we would not co-sign.

    We ended up having to supply financial info to FAFSA (Hawk-spit) and digitally signed the information was accurate. A year after our daughter graduated I found myself on-the-hook for $20k in loans. The process is NOT transparent.

    I deviated from conventional wisdom. I liquidated some of my 401-k and paid off the $20k even though my daughter promised she "would take care of it".

    I also informed my daughter that I had adjusted the beneficiaries of my life-insurance so she would get $20k less than her siblings. That solution does not comprehend the time value of money but it makes a stab at evening things out.

    Frankly, I will be surprised if there is student loan jubilee. The money system cannot afford the precedent. What next? Home loan jubilee? The counter-parties (many of them pension funds, insurance companies and banks) cannot survive the haircut. Uncle Sam backfilling with paper? Maybe, but the inflation would be stupid-big.

    For what it is worth, I would not have paid the $20k if I only had $30k in my 401-k. It is a balancing act and I share my decisions for the entertainment of others and not as a lesson of "you should do this".

    ReplyDelete
  19. I was tied down financially for over a decade because of my student loans, but that was because I chose a stupid major. (Mortuary Science - I was raised on horror films.) I don't want my tax dollars going toward paying off the loans on some androgynous, blue-haired Gender Studies major who hates me and my country.

    You Vox chippies can pound sand.

    ReplyDelete
  20. When I ran out of my (meager) college savings and discovered through practical experience that the old boomer trope of working your way through college was no longer financially viable I did the sensible thing: dropped out and sought a job suitable to me that didn't require a degree. My friends and peers that took the loans and went to college are, for the most part, still in debt 20 years later. Even the ones that got some GI bill money after serving in Iraq/Afghanistan.

    It seems like the monthly payments on their (in some cases ever-growing) debt are just a sunk part of their budget, like taxes. Less their student debt payments and living expenses to stay in places where there are jobs for people with their degrees, we're in similar financial shape, and subjectively I think I have better quality of life - for once the grass is not greener on the other side of the fence. Makes me wonder what was the point of getting those degrees in the first place. Seems like "the system" manages to extract most of the excess income.

    There are exceptions of course, and I suppose I'm an exception on the "blue collar" side of things, but if you're smart and ambitious college is not necessarily the right place for you. Leave that for the apple polishers who want a cushy job pushing papers and grumbling about capitalism for the government or some corporate bureaucracy

    ReplyDelete


  21. I'm guessing all you money junkies don't want children or economic growth.

    Anyway Eaton Rapids Joe, don't whine if you don't get grand kids from that daughter once on hold gets past 30 or so. Or any of them really.

    No money no babies and a lot of lines are going to extinct.

    Also no one is worried about the precedents and if the government thinks any kind of jubilee is a good thing , it will happen. Moral hazard in a collapsing society is a luxury no one can afford.

    Maniac, mortuary science pays around 60k these days and if you can do the work, is steady work. If you couldn't make something of it, that was on you.

    That said you may not have to pay for a jubilee. At some point the USG will just embrace hyper inflation to get out of debt or just extend unemployment benefits and loan suspension indefinitely.

    They won't be able to loot if the economy is gone and the worse the economy, the greater risk of civil war.

    Ultimately we get economic reform that works or the society becomes 3rd worlds and you don't get paid anyway. You might even get outright Communism for your troubles.

    Young people want to start a life and older folks had damn well allow it to happen or there will be hell to pay. Best case scenario, decades of crime, poverty, drug abuse and population decline. Best case.

    ReplyDelete
  22. My eldest paid her way through junior college and now we’re paying tuition for state college- and we’ll do the same for the youngest. I don’t object to loan forgiveness at this point because we all benefit from a stronger overall economy. Saddling kids with pointless debt isn’t good for anyone.

    ReplyDelete
  23. I had my student loans paid off before I got married. Actually, I had all of my debt paid off before I got married. My wife went to Grad School after we got married, and we paid that off this spring after I was diagnosed with stage 4 cancer so that we wouldn't have to worry about those payments.

    ReplyDelete