The problems of student-loan delinquency and default are only expected to get worse. Salaries and employment rates for recent college graduates have dropped: The median starting salary for a member of the class of 2009 or 2010 is only $27,000, down from $30,000 a couple of years ago. A recent report from Moody’s Analytics predicted that over the next few years, “many students will be unable to service their loans as income growth falls short of borrowers’ expectations.”If one were both smart and brave he might do quite well with only high school diploma but that option probably wouldn't work for the majority of students. Before this problem reaches catastrophic proportions it would be nice if Congress would act. Suppose Congress would set a $50,000 limit on what could be loaned for an undergraduate degree. After the outrage died down most institutions would find ways to offer a bachelor of science program for $50,000. They would have to shut down whole departments, reduce faculty size, contract curricula but they could indeed do it. The alternative is to allow colleges and universities to charge $100,000 a year to train our next generation of dog walkers.
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Monday, August 22, 2011
The Impending Collapse of the Student Loan Program
The is another crisis on the horizon that only the willfully ignorant can't see. Student loan debt has increased from $440 billion to $550 billion since 2008. That's an increase of 25 percent in just 3 years! Contrast that to mortgage or credit card debt that has shrunk during the same period. From the Huffington Post:
But I don't think you CAN default on a student loan anymore, can you? I just read something not to long ago about how they doggedly pursue you til you're dead to get their money. I'll have to go look that up.
ReplyDeleteThe other dangerous thing about the student loan program as it is now, in addition to the aforementioned, is that when the government is the one loaning the money, the government can find a way to tell you what you have to do.
This will certainly be true in medicine, as all medical college loans are derived from the govt now. It may end up being true of all other disciplines also.
Sorry, there's no market for an English major and we're not loaning you the money. We'd like you to go into waste management instead.
I knew a guy from work who tried to default on his student loan and they came down on him hard. I don't know what terms he finally got but he lived a pretty austere life style for his income. At some point it may become impossible for many to pay. People do get evicted, get their bank accounts and wages attached but sometime that's not enough. Eventually the lender might have to settle for just the interest and that could go on for years. Not formal default but not paying either.
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