Having been one of the very first sources for in-depth analysis about what has become a $1.3 trillion problem, we’ve happily watched as the mainstream financial news media has gone on what seems like a student loan debt story binge over the past several months. Indeed not a day goes by without a someone else commenting on either the inexorable rise in student debt, soaring tuition rates, or the rather dismal job prospects for recent graduates.
Here’s a remarkably concise recap of everything that’s happened in the past three months. With student debt soaring out of control (and government projections suggesting the burden may grow to $3.3 trillion by 2025), the White House is assessing ways to tackle the problem even as it closes down for-profit schools costing taxpayers hundreds of millions. Low oil prices are forcing Louisiana to consider deep cuts to education funding, which, if realized would send LSU to the edge of bankruptcy. We’ve been pounding the table on delinquency rates, arguing that if deferments, forbearance, and IBR are taken into account, actual delinquencies are probably above 40%, a sentiment echoed by Moody’s who warned that $3 billion in student loan-backed paper is at risk for default. Finally, a Georgetown study shows that if you want to survive in the post-crisis world, you’ll major in petroleum engineering and if you want to go broke once the student loan checks stop coming in, you’ll major in childhood education.
With that, we bring you the latest bit of news from the world of trillion-dollar education bubbles and it comes from WSJ who notes that the class of 2015 has something to be proud of: it’s the most indebted class of all time.
The class of 2015 is reaching new heights, though perhaps not the way it had hoped.
College graduates this year are leaving school as the most indebted class ever, a title they’ll hold exclusively for all of about 12 months if current trends hold.
The average class of 2015 graduate with student-loan debt will have to pay back a little more than $35,000, according to an analysis of government data by Mark Kantrowitz, publisher at Edvisors, a group of websites about planning and paying for college. Even adjusted for inflation, that’s still more than twice the amount borrowers had to pay back two decades earlier.
All together, total education debt–including federal and private education loans–will tally nearly $68 billion this year for graduates with a bachelor’s degree and their parents, Mr. Kantrowitz estimates, a more than 10-fold increase since 1994…
* * *
Dear Class of 2015,
Because we recognize your plight, allow us to provide you with a bit of friendly advice as it realtes to your student loans. Once you are uncerimoniously thrown from your dorm into the less-than robust US jobs market, you will likely discover that contrary to what you were told in your economics courses, the US economy is but a shadow of its former self. Because you probably didn't study to become a petroleum engineer, you will likely find your student debt burden to be quite onerous. The key to having it discharged is to make just enough money to stay clear of bankruptcy, but not enough to really survive above the poverty line. This is because it's hard to have student debt discharged in the event you go completely broke. However, if your discretionary income is so small as to render you incapable of making payments, the government will start you on a program whereby a monthly payment of zero dollars counts towards the 300 "payments" you need to make to have your debt forgiven. Toe this line carefully (i.e. don't slip up and start making too much discretionary income) and the entirety of your student debt will be forgiven in 25 short years without your ever having to pay a dime.