Submitted by Charles Hugh Smith from Of Two Minds
Our "Let's Pretend" Economy: Let's Pretend Student Loans Are About Education
Let's pretend student loans aren't just a stupendous and highly profitable scam being run on the youth of America. Of course pretending doesn't make it so.
We have a "let's pretend" economy: let's pretend the unemployment rate actually reflects the number of people with full-time jobs and the number of people seeking jobs, let's pretend the Federal government borrowing 10% of the GDP every year is sustainable without any consequences, let's pretend the stock market actually reflects the economy rather than Federal Reserve monetary intervention, and so on.
We also have a "let's pretend" education/student-loan game running: let's pretend college is "worth" the investment, and let's pretend student loans are about education. There are three dirty little secrets buried under the education/student-loan complex's high-gloss sheen:
1. Student loans have little to do with education and everything to do with creating a new profit center for subprime-type lenders guaranteed by the Savior State.
2. A college diploma's value in the real world of getting a job and earning a good salary in a post-financialization economy has been grossly oversold.
3. Many people are taking out student loans just to live; the loans are essentially a form of "State funding" a.k.a. welfare that must be paid back.
We've got a lot of charts that reflect reality rather than hype, so let's get started. Despite all the bleating rationalizations issued by the Education Complex, higher education costs have outstripped the rest of the economy's cost structure. Funny how nobody ever asks if there is any real competitive pressure in the Education Complex; there isn't, and why should there be when students can borrow $30,000 a year?
Student loans are skyrocketing--yes, America, we have a growth industry and it's called debt-serfdom. Debt serfdom is most effective when it starts young, so graduating with $100K in student loans and a couple thousand in high-interest credit card debt is the perfect start:
This is a chart from Zero Hedge drawn from a Federal Reserve spreadsheet: Name The Bubble. Of related interest: Student Loan Bubble To Exceed $1 Trillion: "It's Going To Create A Generation Of Wage Slavery" And Another Taxpayer Bailout.
Though we pretend a college degree promises a middle-class income, the reality is somewhat less rosy: earnings are flat to stagnant. Since about 30% of the workforce has a college degree now, the "edge" provided by a diploma has dulled considerably. It's supply and demand: the supply of those with college degrees exceeds the demand.
Student loans enable young people to "stay in school" or "go back to school". Waiting for the economy to pick up may or may not be a good strategy, but piling up debt to do so is a horrendously bad strategy--yet it is the one we enable and encourage.
Here's a snapshot of the employment picture. The bogus "unemployment" rate can drop to zero but that won't mean more jobs are being created.
The "engine of growth," small business, is in a tailspin. Gee, could it have anything to do with the supremacy of crony-cartel capitalism, over-regulation imposed by the Central State and local government, and skyrocketing healthcare costs?
Here's the reality. Large global firms, i.e. corporations, have been the major source of job creation in recent years. But due to a number of thorny issues such as skyrocketing costs of sickcare insurance in the U.S. and the need to develop resources within overseas markets, global companies are hiring overseas, not in the U.S., except for those with high-level experience in specific computer-software skillsets.
Even having a computer science degree isn't enough any more; employers want years of experience with a suite of software tools and they would rather poach an experienced coder from a competitor than go through the trouble of training a FOOS (fresh out of school) CS major.
The truly pathetic part of the student loan scam is that is often the only State funding available to marginalized populations. Here is an on-the-ground report from Dr. M.H., who serves the woefully under-served segment of the populace with severe mental health and poverty issues:
An amazingly large portion of my patients ( drug and alcohol addicted and the psychiatrically ill) are fleeing into student loans and grants to escape homelessness.
I even have previously middle-class patients ( many with previously missed "soft" bipolar illness which has got them into deep trouble due to depression and impulsiveness), some in their sixties, who are taking this route for want of any plausible alternative.
Student loans are a $1 trillion "business." Here is a "clock" of student debt.
$1 trillion is equivalent to the external (national) debt of Canada. (List of countries by external debt.) So let's pretend that loading up our students and future taxpayers with a debt load equivalent to that of an entire nation is an excellent strategy for furthering future growth and education.
What that $1 trillion does further is profits and debt serfdom. Here are a few other resources to review:
The $1 trillion student loan market begins to implode Department of Education shows two-year default rates at for-profit colleges up to 15 percent. Student loan debt increasing at a rate of $170,000 per minute.
Grading Student Loans (Federal Reserve Bank of New York)