Loan Shark Nation: Forcing Our Kids To Choose Between Student Loans And Everything Else

Authored by John Rubino via DollarCollapse.com,

It’s mid-winter, which means millions of high school seniors are winding up their childhoods and planning for what comes next. For many this next stage is college.

But in yet another example of how we baby boomers have rigged the system in our favor at the expense of pretty much everyone else, student loans – barely necessary when most boomers graduated 40 years ago – have become a life-defining problem for our kids and grandkids.

A college degree is now so expensive that for most students it requires massive borrowing. But the starting salary in most fields has risen so slowly that growing numbers of indebted grads can’t reduce – let alone pay off – their loans. From today’s Wall Street Journal:

Jumbo Loans Are New Threat in U.S. Student Debt Market

During the housing boom of the 2000s, jumbo mortgages with very large balances became a flashpoint for a brewing crisis. Now, researchers are zeroing in on a related crack but in the student debt market: very large student loans with balances exceeding $50,000.

A study released Friday by the Brookings Institution finds that most borrowers who left school owing at least $50,000 in student loans in 2010 had failed to pay down any of their debt four years later. Instead, their balances had on average risen by 5% as interest accrued on their debt.

As of 2014 there were about 5 million borrowers with such large loan balances, out of 40 million Americans total with student debt. Large-balance borrowers represented 17% of student borrowers leaving college or grad school in 2014, up from 2% of all borrowers in 1990 after adjusting for inflation. Large-balance borrowers now owe 58% of the nation’s $1.4 trillion in outstanding student debt.

“This is comparable to mortgage lending, where a subset of high-income borrowers hold the majority of outstanding balances,” write Adam Looney of Brookings and Constantine Yannelis of New York University.

“A relatively small share of borrowers accounts for the majority of outstanding student-loan dollars, so the outcomes of this small group of individuals has outsized implications for the loan system and for taxpayers,” the authors say.

The problem is particularly acute among borrowers from graduate schools, who don’t face the kinds of federal loan limits faced by undergraduate students. Half of today’s big balance borrowers attended graduate school. The other half went to college only or are parents who helped pay for their children’s education.

Grad school borrowers tend to be among the best at paying off student debt because they typically earn more than those with lesser degrees. But the rising balances unearthed in the latest study suggest that pattern might be changing.

Overall across the U.S., one-third of borrowers who left grad school in 2009 hadn’t paid down any of their debt after five years, compared to just over half of undergraduate students who hadn’t, federal data show.

The findings on graduate schools are particularly noteworthy because the government offers little information on the loan performance of grad students, who account for about 14% of students at universities but nearly 40% of the $1.4 trillion in outstanding student debt.

Now, a 25-year-old with massive student debt probably doesn’t qualify for a mortgage. But they might be able to get a car loan, which partially explains why auto loans are rising right along with student loans. A car is necessary to get to work, and borrowing is the only way to get a car if a big piece of your income is going towards student loan interest.

So that’s our world: Stocks, bonds and real estate – long since acquired by baby boomers who graduated college with minimal student debt and therefore had the cash flow to invest – are way up, making us the richest generation ever. Meanwhile our kids and grandkids are going ever deeper in debt with no apparent way out.

Of course there is an eventual way out: Someday they’ll inherit our manipulated wealth. But in the meantime their inability to cover our Social Security and Medicare is forcing the government to pick up the slack with trillion-dollar deficits as far as the eye can see, more or less offsetting the value of our estates.

The only real solution? A massive devaluation that shifts resources away from owners of financial assets like bonds and towards debtors who get to discharge their loans with cheaper currency. All roads, in short, lead to currency crisis — and soaring gold and silver.

Comments

Captain Nemo d… DownWithYogaPants Sat, 02/17/2018 - 18:06 Permalink

The laws of economics are what you make them, there are no "natural" laws like those governing the motion planets. That is why we have had a variety of systems.

The only law is that if you set up a system that makes things intolerably miserable for most, things will go bad. Unless of course you have drugged them via their tap water and have addicted them to the internet. Hmm ...time for me to log off.

In reply to by DownWithYogaPants

Handful of Dust Captain Nemo d… Sat, 02/17/2018 - 18:16 Permalink

First, student loans should NOT be backed by taxpayer who had nothing to do with making the loan contract in the first place.

Second, the colleges and teachers's pension fund should guarantee those loans. This would be incentive for them to actually teach something constructive and practical.

If no one will guarantee the loan to teach some student "The History of Beyonce's Music" or "How to Resist Trump,"  then maybe they should not be taught.

 

In reply to by Captain Nemo d…

D503 Handful of Dust Sat, 02/17/2018 - 18:37 Permalink

The vast majority of those loans were just early twenties daycare for women to get liberal arts babysitting degrees. Those women will never secure paying work and millennial men have no intention of marrying them and paying their debts. 

Women are making an increasing percentage of the college population. Not because a much more massive volume of women are attending, but because men aren't going. 

I don't see women marrying down any time soon.

In reply to by Handful of Dust

GunnerySgtHartman DownWithYogaPants Sat, 02/17/2018 - 23:02 Permalink

Exactly.  I don't feel sorry for people who insist on going to a 'dream college' (WTF is that, anyway) and go into huge amounts of debt studying something that won't even put food in their mouth or a roof over their head, much less pay off those loans.

These days, I recommend someone learning a trade.  You'll never go hungry if you are willing to work with your hands.

In reply to by DownWithYogaPants

Jeffersonian Liberal DownWithYogaPants Sun, 02/18/2018 - 11:02 Permalink

It is all for the greed and monopoly of Big Ed.

Ironic that one of Big Ed's missions is to indoctrinate their 'customers' to graduate as hard-left activists protesting any vestige of Capitalism and free markets. They demonize Big Oil, for example, all the while gobbling up more and more real estate around their campuses and colluding with the government so that any school that accepts student loans must accept the federal curriculum.

Time to shut down Big Ed.

In reply to by DownWithYogaPants

Endgame Napoleon DownWithYogaPants Sun, 02/18/2018 - 12:04 Permalink

When I think about how my ex and I paid our business loan, with no guarantee that paying the loan would pay off for us in any way other than a basic living, I do not feel sorry for them.

We had as much to pay back as them, and we had to pay it back in 5 years, not stretched out over 20 years. We also had to pay the overhead on a shop, twice-as-high SS tax and all of our living expenses. We had to give up a lot of things to do it.

The college kids I see—like their dual-earner parents in the many professional and not-so-professional jobs, staffed with near-100% crony parents—are on a ton of expensive and lengthy vacations.

I, by contrast, have not been on a vacation since 2005. That was just a 3-day stint in a nearby resort town, as we could not keep our shop doors closed for long. We needed every sale. We shared an old Eighties car for years. 

Now, when I was in college, I had a little more pocket money than after I started working—first in funemployment jobs, then in my shop and, finally, in the over-sold, hyped and un-lucrative world of so-called “real jobs” (office jobs).

Here is the truth, kids: Unless you are in a handful of high-paying fields, mostly in scientific (medical) or technical areas, the pay is LOW, low, low, low and, worse, sporadic, even when (especially when) you come to work every day, stay all day and meet the account-generation and account-retention quotas every month. That is a good way to get used to beef up the babyvacationing manager’s numbers and churned, with the manager keeping your back-watching and, likewise, frequently absentee crony-parent colleagues. 

The important thing is being a “culture fit,” a culture fit who dresses up for the Halloween dress-up day and decorates a bulletin board with relish in a baby-mommy-look-alike-bulletin-board-decorating contest. Work is more and more social. There is a reason for it. The reason is not that most human labor / human education is more valuable.

In most office jobs, a handful of managers are the only ones getting paid enough to sustain a mortgage, a student loan or even rent, which absorbs more than half of most individuals’ earned-only income, and the vast bulk of employees are not covering their major bills with the wages. They have 1) spousal income, 2) child support that covers rent or 3) welfare that covers rent and groceries and now-doubled [EITC] refundable child tax credits that used to max out at $6,444. 

These debt-laden students could try to get the few management positions. They will be surprised to find out that many of the managers across various fields do not have degrees, like most of their staff, and, in those cases, a degree is sometimes even less valuable, although you need to smile and nod convincingly when managers, with desks, walls and screens plastered with baby pics, tell you their ultra-smart kids are going to college.

I think college should be free for the tippy-top students, particularly for those in harder fields, in which there are said to be shortages, although I am not sure that I believe shortages really exist. I have seen too many people with grad degrees, never getting a permanent, tenured position as a college professor or a high-quality professional job in government or the corporate world. 

We have educated way more people than in past eras, including far more women, leading to an oversupply of degree holders, including an oversupply of advanced-degree holders. It reduced the value of degrees, and it concentrated the wealth from professional jobs in fewer households due to assortative mating.

This cut the middle class in half.

If more educated, dual-high-earner households had a stay-at-home mom, raising her own kids, rather than farming that important work out to $9-per-hour daycare workers and babysitters with NannyCams, there would be more decent-paying jobs for these student-debt holders, including for those who took out loans to get graduate degrees, putting in extra effort that should be rewarded. It would be if one of the parents in dual-high-earner households raised the kids, rather than taking another high-paying job out of the economy, when a spouse makes enough to sustain a middle-class lifestyle. 

Shhhhh, we can’t have that.

Whether it is an ordinary job or a professional-level job, “the talent” must be in workplaces or, when frequently not, on another lengthy and excused babyvavation for busy-working families.

The real reason working parents are getting away with so much crony, excused absenteeism is the fact that machines do more of the work all the time—even the more sophisticated work—meaning that most degrees will be even less valuable in the future.

I hate it because I love the idea of college, and our colleges are much better than our secondary schools. It is ironic that too much emphasis on college is one factor, reducing the value of one college degree and even multiple college degrees. 

You can bet your bottom dollar that, while dual-earner parents [verbally] celebrate parenthood 24/7 in workplaces, while shirking the actual work of raising their own kids, they will continue to dominate the ever-scarcer good-paying jobs @ 2 per household, passing them from crony parent (with a big spousal income) to crony parent (with a big spousal income)—i.e. making sure that the people who “need the jobs” have them and making sure that it is harder for other households to pay anything, whether that is a student loan or any other major life expense.

Except in a few rarified tech fields, every job requiring most types of basic or advanced degrees will have 77 applicants, with even the $50 piecework gigs having 55 rock-bottom bids from college-educated humans, and the jobs open to everyone will continue to have between 325 and 600 applicants, many with spousal income, child support or free rent, free EBT food, free electricity, monthly cash assistance and a $6,444 refundable child tax credit for reproducing while single, making it easy for them to undercut all college grads and non college grads who must cover all household bills with one stream of earned-only income. 

 

 

In reply to by DownWithYogaPants

NoDebt Sat, 02/17/2018 - 16:52 Permalink

Small number of rich, large number of poor and just enough middle class to service the rich.  As it has been in most societies throughout most of human history.  We're doing one gigantic mean reversion from the aberrant 20th century.

The elites saw what happened in the 20th century when suddenly a large number of people gained the economic freedom to make their own choices.  They'll never let that happen again.

 

strayaway NoDebt Sat, 02/17/2018 - 17:53 Permalink

Cheaper imported foreign labor now does a lot of work that used to be done by students in restaurants, resorts, landscaping, and construction for less money. Not only do young Americans have fewer opportunities to earn college money, they don't get to try out the real world or learn about bad bosses and hard dirty work. They emerge from college as debt laden snowflakes.

In reply to by NoDebt

NumberNone strayaway Sat, 02/17/2018 - 19:53 Permalink

These kids don’t think they will ever really have to pay it off. There is collusion between the colleges and political leadership to let this all happen with the understanding that at some point the dumbass American taxpayers will foot the entire tab. 

 

In in case anyone forgot, cankles ran on a $115 Billion  in college loan forgiveness. Dims didn’t care about his but care about a whole $20 Billion for a border wall. 

In reply to by strayaway

Bemused Observer NoDebt Sun, 02/18/2018 - 10:50 Permalink

Well, that just proves how stupid they are. That 20th century 'aberration' is the whole reason behind their current wealth. Without it, the basis for their 'wealth' goes away too. It isn't just 'we the people' who have benefitted, you know.

And they may want to read up on those good old days...Anyone with an appreciation for stuff like central heating, electricity, paved roads, etc, will find that life as an 'elite' in the days of old only meant that YOUR unheated home was bigger than the peasants, you got to eat an extra meal or two, and you'd probably get a decent burial after your own untimely death from something stupid.

Being the 'richest guy on the block' really doesn't mean anything until you get a good look at the rest of that block. Everything's relative. Be careful what you wish for, Fate has a warped sense of humor.

In reply to by NoDebt

Lost in translation 3-fingered_chemist Sat, 02/17/2018 - 17:56 Permalink

Just returned from an Enterprise 4 x 4 rental gone sideways.  One Hell of a mess.

CliffsNotes version:

The lion’s share of CS reps all seem to be recent university grads with newly-minted degrees (“I majored in Business!”) and 5 figures of debt.  Recent experiences leave me wondering if university was necessary for such a position, or if it even did them any good.

Two of three young men could not understand simple answers to simple questions.  EX:

Q: ”What time would you like to pick the truck up?”

A: “9 a.m.”

Q2: “9 a.m.?”

A2: “Yes please, pick up at 9 a.m.”

Q3: “So you want to pick it up at 9 a.m.?”

A3: “Yes please, when your office opens.”

”We open at 9 a.m.”

”Right, I know that, I’d like to pick the truck up at 9 a.m.”

Q4: “So, 9 a.m. is when you want it?”

A4: < facepalm >

___

Then there was the 22-year bottle-blonde that had NO IDEA how to read a map... NONE.

I could go on (and on...) about recent grads.  They’re a bankster’s dream-child...

 

In reply to by 3-fingered_chemist

BigCumulusClouds Sat, 02/17/2018 - 16:55 Permalink

I guess the public schools teach kids nothing about sound investments. Going $50 to $100k in debt for a liberal arts degree or a degree in biology is not going to give you a positive rate of return. And the parents who let their kids do this are no better than the schools. 

D503 CrabbyR Sat, 02/17/2018 - 18:51 Permalink

Bio? As in biochem? As in the most flooded market in all of stem? The one that pays less than 40k but requires the same amount of work as a petrochem degree?

I know a bunch of people with engineering degrees and we're all competing with H1b's for peanuts in an ever increasingly cannibalistic market where CAD automation and chunking is cutting the need for labor to the bone.

Engineers are "innovating" each other out of work just to keep their own jobs in the endless layoff and rolling buyout ownership industries.

If you aren't working on a project that eliminates hundreds of high paying jobs or hundreds of thousands of low paying jobs, you won't be working yourself much longer, or you'll be working for a major pay cut. 

In reply to by CrabbyR

PartofOne MedicalQuack Sat, 02/17/2018 - 17:25 Permalink

The man "paid" his debt to society (he was released for "time served"). 

The man used his time wisely while incarcerated. 

If you want a job in coding, you are free to use your time wisely and learn to code (https://learn.shayhowe.com/advanced-html-css/ & http://learnlayout.com/https://www.codecademy.com/).

If you understand anything about our economic system, you'll understand that he paid for his own incarceration (charges were levied against his juristic person and "your taxes" were credited to your juristic person).

Just because you don't understand something doesn't mean it's "wrong"...  Have you considered that you are ignorant and in need of further learning?  Start here: https://freedom-school.com/stuff/mastering-the-ucc.pdf

In reply to by MedicalQuack

rejected PartofOne Sat, 02/17/2018 - 18:21 Permalink

People make 'coding' out as some kind of god. It's about the easiest crap to do,,, especially these days. I have coded in Basic, Pascal, APL, Forth, C, C++, The POS Java, Assembly and what have you. None of it difficult.  For the life of me I can't see why a 'degree' is necessary. You can either do it or you can't. All the other horse hockey BS you had to take for your 'degree' was just money in someones pocket and has no bearing on programming as we used to call it. Some of the best hackers I've met are dropouts. I'd hire a dropout in a second before some idiot presenting his $50,000 useless degree. 

In reply to by PartofOne

crossroaddemon rejected Sat, 02/17/2018 - 18:29 Permalink

But you're the lone wolf. Most employers won't talk to a programmer without a degree. 

But: I'm also from a family of computer geeks. I am related to and/or acquainted with a lot of people with advanced careers in software engineering, including difficult low-level stuff like C++ and assembly. If you're describing that shit as easy I question whether you've ever actually done it. I don't know ANYBODY good at it who didn't spend a significant chunk of their teen years essentially living behind their computers. Since computing as a hobby is borderline dead, people learn those skills in college now.

In reply to by rejected

Umh crossroaddemon Sat, 02/17/2018 - 18:52 Permalink

It is easy if you have the aptitude. I am retired, but programming was something I basically fell into. I did end up with a degree just to satisify nonprogrammers further up the food chain. Over the course of my career I did IBM assembly on a few platforms, other low level languages HP's SPL, C, the ever present Cobol, firewalls, routers... The biggest reason for getting a degree is to have a better idea of what the customer wanted. On the other hand it is hard to even be interviewed without a degree. Hell, I looked for reasons when applicants did not have a degree.

In reply to by crossroaddemon

Golden Showers Umh Sat, 02/17/2018 - 20:13 Permalink

Know a guy, who, with an 8088 no college and a 4 year air force service went on to making 60k a year as head of IT network security for a major corporation back in the late 90s. In Iraq 2 he went to Iraq as a private contractor and got paid 250k tax free.

He worked at a toy store out of service and a divorce.

Some people have a gift and college only limits that gift. College is thought control.

In reply to by Umh

Moving and Grooving Golden Showers Sun, 02/18/2018 - 15:49 Permalink

'Some people have a gift and college only limits that gift'

 

The delightful Erroll Garner never had lessons. He just started playing piano as a child of 3. Later, he asked his manager what he thought about 'learning music', as despite being a prolific composer and a brilliant performer he couldn't read or write music. He told Garner not to do anything that might change the way he played. 

 

If only someone had convinced him to stop smoking cigarettes ... he died of emphysema complications at 53. 

 

.

In reply to by Golden Showers

HenryHall Sat, 02/17/2018 - 16:57 Permalink

As long as the student loans are Federally guaranteed loans then they are effectively wiped out if the former student emigrates for 20 or more years and earns his or her living in another country. Check the rules out:-)

navy62802 Sat, 02/17/2018 - 17:02 Permalink

The unacknowledged truth is that 95% of jobs in the US don't actually require a collegiate degree. We just like to think they do. Most jobs can be filled by people with only a high school education. The myth of the undergraduate and graduate degree is sold by the educational-industrial complex through a sophisticated and extensive propaganda campaign. Most employers would be able to fill their employment needs with high-school graduates if they weren't so blinded by propaganda.

Golden Showers HenryHall Sat, 02/17/2018 - 20:31 Permalink

Totally agree with that. Private citizen lawers who have the moral accountability to care about the spirit of law, the patience to learn precise definitions and protocol, and who appreciate the difference between lawful and legal are a rare breed. Anyone who goes to law school and sells their soul to the Bar ought to be prohibited from any public office with prejudice. One person can only serve one master.

Law schools are like religious schools. Ok. Jain, Buddhist, Sihk, Catholic (cistercian, fransiscan, jesuit...), really any fundamentally programmed law student is practicing a certain form or style of bullshit. My high school girlfriend's brother majored in zoology in undergrad. Then he went into law school and he got all kinds of offers. Fucking amzaing.

Just have to think of Shariah law to know that every last sand nigger piece of shit is judge jury and executioner to realize what the fuck is wrong with oath givers. You can only serve one master, and there can only be one Highlander.

Then you have the Pharisees. The money changers. The Kosher. The Sabbataens. Then you have Communists. All lawyers. OCD fanatic fundimantalist assholes. And they elect judges.

If that's not fucked up I don't know what is. Peace.

In reply to by HenryHall

Retired Guy HenryHall Sat, 02/17/2018 - 22:14 Permalink

Lawyers should be banned from reproducing. Why is it hard to get into medical school but relatively easy to attend law school? This is totally upside down.

I know a woman that attended MIT and brown. She ran up a big debt. As a vet she trims dog toe nails. The degrees are on the wall but sadly even if the dogs could read they would not be impressed. Cheaper degrees would have been fine.

Student's should shop carefully for their degrees. They only help on the first job interview. Later the questions are where do you work, what do you do and how much are you being paid.

If you aren't a productive worker expensive degrees aren't going to help.

PS don't blame high costs on boomers. Education inflation is a function of greedy administrators enabled by generous government loan programs.

In reply to by HenryHall

CrabbyR Sat, 02/17/2018 - 17:02 Permalink

We "Boomers" buddy  you don`t speak for an entire generation, millions of boomers have had their pockets picked clean by the same shark family