The Wrongologist

What’s
Wrong today:

Going to
college these days brings with it the potential of a lifetime of massive student
debt. Sadly debts can accumulate over time in a variety of ways. Fortunately, the debt relief offered by debtconsolidation.co can be very useful to people in this position.

The Federal Reserve
Bank of New York has a recent analysis of individual credit data by Donghoon Lee. It
shows that student loans are the only category of household debt that continued
to rise during the Great Recession. At the end of 2012, student loans amounted
to $966 billion, more than credit card debt, auto loans, or home equity lines
of credit.

That amount has
increased from $390 billion at the end of 2005. During the same time frame, the
number of borrowers has increased from 24.8 million to 38.8 million debtors. The
chart below is from Lee
(2013):

(HELOC on the above
means Home Equity Line of Credit)

Lee also found that
17.5% of the student loans are currently delinquent. That equals $169 billion that might need to be written off.
But an additional 44% of loans are not yet even scheduled for repayment,
because the borrowers are still in school, or have graduated but have deferrals
that postpone regular payments.

We should remember
that by law, student loan debt is treated differently than other kinds of
consumer debt. Among the differences:  

• Student loan debt is not dissolved
  in bankruptcy

• Student loan debt cannot be
  refinanced (even if a new lender offers lower rates or better terms)

• Student loan lenders can garnish
  Social Security benefits without a court order

These “enhancements”
were passed in successive versions of the Higher Education Act over the past 15
years. The fact that the banking industry lobbied for the ability to garnish SS
benefits tells you they expected high losses on student debt. 

The Wrongologist reported about a year ago that 40% of delinquent
student loan debt was held by people over 40, while 4.8% of total delinquencies
were held by people over 60. Delinquencies continue to rise sharply: In 2005,
people under 30 accounted for 4.5% of delinquencies. Today they account for 8.9%, a growth of 198%! The over 60 cohort’s delinquencies
increased by 184% and delinquencies in the 50-59 group grew by 165% over the
same 7 year period.

What has caused the
rapid growth in student debt? The economy is part of the answer; parents cannot
borrow as much against their homes to support college costs. Unemployment is
causing more people to go to college or stay in school and pursue an advanced degree.
But the biggest problem is tuition costs growing much faster than the rest of
the economy:

(Source: Partners for Prosperity)

For-Profit
institutions continue to be bad actors in the student loan arena and thus
require close scrutiny regarding student debt. The New York Times quotes Sen. Harkin (D-IW) Chair of the Senate Committee on
Health, Education, Labor and Pensions, saying that for-profit colleges are an important subset of the student loan debt problem because they teach
only about 10% of students but receive 25% of the federal loan aid.

So, we have growing
costs, fewer employment prospects for college grads 5 1/2 years after the end of the Great Recession than were available in the past, and massive student debt that
cannot be discharged in bankruptcy hanging over the heads of recent graduates.

What’s the plan,
Congress?

In the 20th
century, no other institution could say that it had a greater ability to raise
people out of poverty or, to have contributed more to the development of a
robust American middle class than higher education. And yet in this century, Democrats and Republicans alike treat
higher education like a marginalized child.

For nearly 30 years, medical
care and higher education costs have risen at roughly the same rate. Since the
Clinton administration, Americans agree with the idea that health care is a
national policy concern that warrants serious public consideration.

Yet we fail to give
higher education the same degree of attention, notwithstanding the rising costs to
students, families, and now finally, to the US government.

This paucity of policy is
an insult beyond the injury it is inflicting on future graduates.