America’s Student Debt Problem Is Much Bigger Than Anybody Realized

Tyler Durden's picture

Submitted by Shaun Bradley via,

The Department of Education recently released a memo admitting that repayment rates on student loans have been grossly exaggerated. Data from 99.8% of schools across the country has been manipulated to cover up growing problems with the $1.3 trillion in outstanding student loans. New calculations show that more than half of all borrowers from 1,000 different institutions have defaulted on or not paid back a single dollar of their loans over the last seven years.

This comes in stark contrast to previous claims and should call into question any statistics provided by government agencies. The American people haven’t fully grasped the long-term implications of loaning a trillion dollars to young people who have no credit or assets.

Increases in tuition seen over the past two decades have become a point of controversy and angst for those who don’t fully understand the contributing factors. Between 1995 and 2015, the average cost of a public, four-year university skyrocketed by well over 200%. Although federal student aid programs are often championed as a necessity, they have been instrumental in making higher education unaffordable. The opportunity to pay for college by working a part-time job evaporated as soon as huge sums of money were handed out to anyone with a pulse. Since students no longer pay their tuition upfront, colleges are able to raise prices in perpetuity, knowing the government will step in and make credit easier and easier to obtain. As an added bonus, outstanding student loans account for 45% of the government’s financial assets.

Subsidizing the lives of an entire generation has turned personal growth and advancement into a choice instead of a necessity. After all, why take risks or work your way up from the bottom when with just a signature, the life you’ve always wanted could be laid at your feet? It’s not hard to figure out why so many people are tempted to take advantage of the instant gratification that comes from student loans, but like everything else in life, they have a price. The same safety net that delays the anxiety of the future also ensures that monthly payments will be owed for decades to come. Procrastinating when faced with pivotal life decisions is an instinct that used to be overcome as a teenager, but today it is worn like a badge of honor well into adulthood.

The policies of intervention haven’t stopped at federal aid, and loan forgiveness is now being offered to those willing to work in the public sector or at a non-profit for ten years. This perverse incentive only serves to drive those desperately in debt further towards government dependence. Productive jobs are created when the needs of others are met in the free market, not by joining the ranks of the state for self-preservation.

The idea that success comes exclusively through attending a university has created a stigma against some of the most valuable occupations. The lack of real skill sets has lead to a shortage of welders, electricians, carpenters, and other trade workers. Instead of learning through experience with apprenticeships, many students have embraced four years of sleeping in, drinking heavily, and getting an increasingly useless degree. While there are many fields that require specialized training, the surge in popularity of degrees like sociology, anthropology, and communications clearly illustrate a disconnect between the needs of the economy and the skills of the incoming workforce.

The normalization of this system has blinded individuals to their own potential. Some of the most successful entrepreneurs and thinkers are those who have bypassed traditional education. Mark Zuckerberg, Steve Jobs, Richard Branson, and hundreds of other innovators achieved greatness by breaking from predictable paths to knowledge. Instead, passion and experience were the foundations that gave them the confidence needed to make groundbreaking strides. What it means to learn and be educated is changing rapidly as technology develops, and it will eventually force the State to adapt with it.

Albert Einstein was able to spot the innate flaws in the education system even back in 1936, but it’s doubtful he could have fathomed how far things would go:

“I want to oppose the idea that the school has to teach directly that special knowledge and those accomplishments which one has to use later directly in life. The demands of life are much too manifold to let such a specialized training in school appear possible…The development of general ability for independent thinking and judgment should always be placed foremost.”

Those who do achieve their degrees often do so without developing important skills like critical thinking and individual discernment. The scariest part about this revelation is that almost 90% of outstanding private loans are co-signed by parents, making this an intergenerational problem. As the instability of pension funds, social security, and economic conditions continue, any additional burdens passed onto the baby boomers could have far-reaching ramifications. The vast distortions in information that this report exposes should motivate everyone to become an independent fact checker. The only way to reform this broken system is to shift the pursuit of knowledge towards the direction of each individual’s passion instead of creating more cogs for the machine.

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nuubee's picture

But it's "OK" because this is just debt we owe ourselves, so it'll all work out, right?
--- Stupid apologists for bankers.

bobbbny's picture

Yeah, what could possibly go wrong?

GUS100CORRINA's picture

I believe this CHART is wrong.

The correct number is 1.3 TRILLION give or take a couple of billion.

American Psycho's picture

"As an added bonus, outstanding student loans account for 45% of the government’s financial assets" .  Non-performing assests 

MalteseFalcon's picture

"The same safety net that delays the anxiety of the future also ensures that monthly payments will be owed for decades to come."

The payments may be owed, but will they ever be paid?

Where is the justice for those that eschewed college debt, lived simple lives while a student, and/or worked thru college?

What kind of accounting is used to evaluate this debt, net 5,000 days?

The underwriters of these loans should be held responsible starting now.

The government has to exit this business entirely.

College degrees that lead to vocational careers e.g. teacher, accountant or nursing should be limited to 2 years and should not be offered at full universities.

College degrees for purely political purposes e.g. racial studies, gender studies and "queer" studies should be discontinued altogether.

Heavy's picture

Bankruptcy law used to keep lenders honest...

D Nyle's picture

Interesting. It starts shooting throught the roof right about when Obama elected.

TBT or not TBT's picture

The snowflakes with BA's in genderfluid basket weaving can discharge their debt to the nation on some battlefield.   That was John Kerry's view of the poorly educated, so.  

Dental Floss Tycoon's picture

1.3 Trillion seems about right in view of the fact that the chart ends at 2015.

2_legs_bahhhhhd's picture looks like the only students paying tuition are foreigners.....suckers!!

peddling-fiction's picture

Why is the student debt chart only up till 2015 ?

I am sure lots of damage was done on his way out.

Antifaschistische's picture

Here's what will happen.  Eventually there will be some program that allows for some level of forgiveness of this debt.   

What will IMMEDIATELY happen, is schools like Texas Southern University, Prarie View A&M, etc...will have seminars and workshops where EVERYONE at their school will apply for forgiveness.  They will immediately socialize all the check boxes and lies that need to be told to qualify.

hey, to the victor goes the spoils I guess.

MFL5591's picture

Everything ignored by the bum for the past 8 years now all come to a head?  Really?  Does the tribe really think we are this stupid? 

rf80412's picture

If it's debt we owe ourselves then what's stopping us from just canceling it all?  OK, so in the end the taxpayers just paid to send all these kids to college, but the taxpayers could do worse.

But creditors consider debt to be an asset - and a guaranteed income stream at that - so any debt relief worthy of the name would be damned as destroying trillions of dollars in paper wealth.

scraping_by's picture

It's actually considered very good asset, since the borrower can't discharge it with bankruptcy. The people non-current on their payments are considered criminals, and can expect a visit from the Department of Education SWAT teams. Thank you, Obama!

Rainman's picture

Bush actually approved the non dischargeable feature, 2005

N2OJoe's picture

Discharge? Nah, you ate the cake now pay for it.

I'd rather fine to death and jail those who participated in the fraud and auction off their assets when they declare bankruptcy.

HenryHall's picture

However, the borrower can discharge it by emigration. The first $98kpa of overseas income is excluded for overseas residents resulting in unlimited deferment of obligation to pay. And loan forgiveness after 20 years.

Kids - move to Canada while you still can!

techpriest's picture

IIRC that door is already closed.

hongdo's picture

Yes.  Go expat.  But there are better places than Canada (ref South Park).

Savvy's picture

We do not want your snowflakes, not enough plow trucks as it is.

Buck Johnson's picture

They should do what they told the Japanese to do back in the late 80's and 90's right off the debt, they didn't take our advice.  And we won't take our advice.

There is a reason why ancient times knew of debt as the nation destroyer.


SoDamnMad's picture

Gee, do you think the previous administration was lyin all those 8 years and manipulating data to show things were rosier than they are?

Whodda thought.

NoPension's picture

Take the money, and buy Facebook stock.

They get out, in debt....and find they are competing for a job...against an ,H1b visa Dothead with a free 6 to a room.

  And THEN!!!!! Go marching in the fucking streets for the Dotheads and Wetbacks! 

  I can't believe the schools manage to fuck these kids this thoroughly in only 4 years.

Dear God..we're fucked.

DogeCoin's picture

America, land of fraud and home of debt slaves.

1stepcloser's picture

Debt is money and money is debt... 

NurseRatched's picture

Just for yucks, I would love to see this debt default study broken down by race/ethnicity of borrower and the type of institute of higher learning they attended. I am guessing that the cosmetology and nail tech schools are quite a scam.

"Equal Access" to loans is a fancy way of saying "no standards at all."

Steaming_Wookie_Doo's picture

I think from a $$ perspective that liberal arts colleges soak the most, but I'll give a nod to culinary schools for racking 40-50k on schlubs who will still be making 10-15/hr at best. I did cooking as part of working my way thru school-- hard gig, there's never going to be glamour or money in it for 99%. This is why I now hate cooking shows as much as DIY TV. It sets completely unrealistic standards, as well as falling down to the level of reality tv antics, no real tech of cooking you can use.

The ones who spend 150k on "music therapy" degrees and forgot to notice that such jobs also pay 15/hr means that the cooking school guys are at least 3-4x better off in terms of debt and cooks have a chance of being useful.

I've said this before, but it bears repeating. If you want your education financed, you'll have to maintain good grades and be studying in a field that needs people. I was floored to see that loans were not contingent on proof of transcripts, that $$ could be used for non-study expenses, etc. Slowly or quickly, this bloated, ineffective university system has to be cut back. No more "diversity requirements", and basically the first 2-3 years of study being mostly bullshit. Critical thinking, accounting, now those are "breadth" courses I can get behind. Even traditional art classes (not that performance art psycho bullshit) are valid for an engineering student to give him some new perspective, but let's face it, he's there to learn how to build things! There are far too many who already graduate who can't get out a transom and measure a space and figure out how to build a bridge.

Jack's Raging Bile Duct's picture

I was excited for high school, because I thought the real learning would be begin. Then I was excited for college, because only the people who wanted to be there would go, and then the true learning would begin. So dissapointed. The first two years of college were a repeat of high school. High school was no more challenging than middle school.

hongdo's picture

You are missing the point.  "Educational Loans" were actually helicopter money to stimulate the economy with the added bonus of  serfing the total milennial generation.  The serfs could then be activated as an asset class for demonstrations, blogging, MSM reporters, and other lower level cannon fodder functions.  Added bonus of economically capturing the university elite administrators and lecturers to provide an "expert" blather of plausible theoretical justification for loony projects like equality of doorknobs and elimination of cash to facilitate negative interest rates.  It all makes perfect sense if you know the objective.

secretonfire's picture

People have to get proper training to get licensed in nearly all states. Have no idea re tuition at cosmetology schools v other tech schools, but manicurists / cosmetologists can make a decent living. And they rarely go out of biz. Monsieur Hollande's paid his hair stylist about $10,000 per month!

SubjectivObject's picture

I have been pointing out the parental cosigner liability for long years.

Some signatory parents were surprised by this information.

Intergenerational stupidity/ignorance/credulity, and the financialization sharks take full advantage feasting on the chum[ps] in the water [over their head]

Steaming_Wookie_Doo's picture

Some parents (or grandparents) are finding out that their social security will be docked to repay the loans. There's another interesting twist on retirement.

George Carlin was likely right when he commented that they wanted us just smart enough to operate the machines, but not smart enough to know we're getting a shit deal...we need to make stu loans dischargable and/or you can only forcibly collect the principle not interest. Maybe then the lending institutions will apply some sense in doling out cash for college.

// //
Creative_Destruct's picture

"George Carlin was likely right when he commented that they wanted us just smart enough to operate the machines, but not smart enough to know we're getting a shit deal."

Yeah he's a funny guy and I like George. But that doesn't excuse indivdual resposibility. These are of-age adults. They have the responsibilty to know and honor what they are signing up to. We (the previous Obama admin and the Bernie Sanders free-shitters in particular)are amping up the culture of entitlement by excusing and pandering to this at every turn. Without responsibiltiy freedom disappears, as you delagate your welfare to Big Brother. 

As Frankl said in "Man's Search for Meaning"... "The Staute of Liberty on the east coast should be supplemented by a Statue of REsponsibilty on the west coast." 

Good location choice, Frankl. California could CERTAINLY benefit from reinforcing that idea!

11b40's picture

It was the adults - pandering politicians and money changers - who created this monster.  Some 19 year old kid, who is doing what he is told is the right thing for his future, gets enslaved for life by this adult created system.  Adults who are in positions of authority and trust.  Those are the ones who should be the losers.  I like the idea expressed about the debt, like any other debt, be discharged in a bankruptcy filing like it was before Bush the Lesser changed the rules.  Then, make the remaining loans interest free, or setting the interest rate at the same as the average passbook savings account if there was a government guarantee.  That ought to do it.

techpriest's picture

He was right, but the people who set up the education systems said it themselves. John Taylor Gatto has written extensively on this, and has the citations. "Weapons of Mass Instruction" is required reading.

CNONC's picture

Keep pointing it out, then.  This is a topic I consider myself well versed on, and I didn't know the cosign rate was that high.

hongdo's picture

Students are stupid, parents are stupid, where does it end? Used to be households had 3 or even 4 generations living together and had some collection of experience and common sense to share.  I heard all about the depression.  In a way we are going back to that with grads living at home.  But I doubt the cpllective real world experience, disipline, and dialog is the same.

Buck Johnson's picture

Yes we are the land of that.  Many of us are too dumb to figure that out.


Osmium's picture

Not sure why this matters?  US "markets" are up today.


Wow72's picture

NO SHIT? Plenty of opportunity kids, sign your life away right here, right at the starting gate of life!!! WOOOO WHOOOOO.

It will only get better from here....TRUST ME!!!

CRM114's picture

Oh, I think a lot of us realized, but I will admit that

"America's students' debt is far bigger than anyone in power was prepared to admit, and covered up with dodgy and just plain dishonest stats"

isn't such a punchy headline.

SilverRoofer's picture

As I am told by the"educated "rightous ones.I chose to not go to college and be in construction to pay for a child at the age of 18 so it's my fault I have to work like a dog to put meat on the table.

Well it goes like this you fucking signed up for it you chose to go waste 4 years of your life parting it up to get a degree so you fucking pay for it.dont feel sorry for any of you. You made the choice!

Pay your fucking bill 


ToSoft4Truth's picture

Rumor is, a bellhop working in a German hotel before Weimer inflation received a gold coin as a tip.  Later, the bellhop returned and purchased the hotel with the same gold coin, after hyper-inflation hit....  The Rota Fortunae.

SilverRoofer's picture

Common sense Vs Brain washing

ToSoft4Truth's picture

German buildings never traded for one ounce of gold?

HillaryOdor's picture

No that's not how it goes.  In a proper market, risk assessment is part of the responsibility of the creditor, not the debtor.  The government likes to pretend it has the power to eliminate all risk, but of course it's a giant lie.  They can only spread the risk around.  If the government comes in and backstops or guarantees a bunch of worthless loans, transferring that risk from the creditor to the taxpayer, then it is the fault of the electorate when all the defaults come due.  You idiots put up with this abomination of a government for so long.  It's your fault.  Now all the chickens are coming home to roost.  And all these kids who grew up not wanting this system imposed on them, not choosing it, and not accepting this one-sided social contract bullshit, well I don't think they have any moral responsibility to honor this arrangement.  Our rights have been violated our entire lives.  I've personally done jailtime for minor possession of marijuana.  This country (and humanity in general) deserves what it gets.  I'm sure more and more will just leave the country and default, as they should.  The people created this problem themselves.  Half these kids shouldn't have been pushed to go to college anyway.