Tag: Student Debt

Saturday Soother – August 27, 2022

The Daily Escape:

Super moon over Lake Champlain, Burlington, VT – August 2022 photo by Adam Silverman Photography

Republicans are outraged this week about Biden’s cancellation of student loan debt! Americans now owe a total of more than $1.6 trillion for higher education. From the WaPo: (emphasis by Wrongo)

“The result is one of the most significant changes to American higher education policy in decades — and a new cornerstone of the president’s economic legacy. Biden’s decision will dramatically change the financial circumstances of tens of millions of Americans, fully erasing the student loans of roughly 20 million people.”

Student debt played a minor role in American life through the 1960s when Wrongo accrued his $5k of college debt while attending Georgetown. But it increased during the Reagan administration. It then shot up after the 2007-2009 Great Recession as states made huge cuts to funding for their college systems.

But the argument that “tuition has gone up because public support for higher education has declined” isn’t the only one. While it’s valid for some institutions, it doesn’t explain the “arms race” among colleges and universities to add student amenities and layers of administrative staff over the past 10 years.

Over the last decade, revenue at independent (non-religious) private colleges and universities in the US has increased by 148% on an inflation-adjusted (real) per student basis. At religiously affiliated private colleges and universities revenue has increased by 87% in real per-student terms over the last 10 years.

Meanwhile, at public institutions, revenue has increased by just 23.4% on the same basis. However, this is still 36% greater than per capita GDP growth over the same 10 years.

The headline is that our elite educational institutions have gotten obscenely wealthy. And many of our second tier institutions chased after them, causing education budgets everywhere to explode.

It’s become another example of America’s new gilded age.

Opinions differ about the ethics of loan forgiveness for student debt, and that’s understandable. The general thrust of the Republican railing about the educational loan forgiveness is about how unfair it is when one group of Americans is getting a benefit at the cost of other Americans.

This tweet from former Trump White House press secretary Sarah Huckabee Sanders is on point for most of the GOP:

“Joe Biden wants those who didn’t go to school, didn’t take out loans, or already paid off their loans to pay off $300 billion of other people’s debts…..It’s socialism, it’s un-American, and only makes his record-setting inflation worse.”

But it isn’t socialism when our government bails out one group at the expense of another; it happens all the time. No Republican complained about the Trump tax cuts which were directed at America’s wealthy and its corporations. No Republican complained about the bank bailout in 2008. No Republican objected when Trump gave $16 billion to farmers hurt by the Trump tariffs.

Second, despite what the GOP is saying, the $300 billion in loan forgiveness isn’t inflationary. It’s true that it’s money that student borrowers won’t be paying back. But because of the student debt moratorium, they had already stopped payments in 2020, so there’s no change going forward. They simply won’t have to restart making payments on that $10,000 of debt.

It isn’t clear that there will be much impact to inflation or the Consumer Price Index. Since they weren’t making payments, it’s likely they were already spending those funds that might have gone to loan repayments. So no new spending.

We can have a debate about how much higher education should cost per student. We live in a society that is a whole lot wealthier than it was 40 years ago, but many of our students do not come from those few wealthy families.

The political calculus of Biden’s decision will be seen in November. The WaPo reported that a majority of Americans support limited debt forgiveness. Biden’s pollster, John Anzalone said:

“This is a motivator for young people….It’s a huge issue for young people — the support levels for them are in the high 60s.”

Let’s hope they turn out to vote on November 8.

Now, it’s time for our Saturday Soother, where we decompress from another week of body blows to America and find a few moments to gather ourselves for the week to come.

Here on the Fields of Wrong, we had a day of very satisfying brush clearing although we’re still waiting for rain.

Go get a big mug of decaf cold brew coffee and grab a chair in the shade. Now listen to Schubert’s “Impromptu in G flat Op. 90 No. 3”, written in 1827, and played here in 2012 by Olga Jegunova at the Bishopsgate Institute in London:

Schubert really understood how to capture emotion in his music.

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College Enrollment is Down, Student Debt is Way Up

The Daily Escape:

Cathedral Rock at sunset, Sedona AZ – 2019 photo by microadventures

The Student Clearing House reports that the college student headcount of undergraduate and graduate students combined fell by 1.3% in the fall semester of 2019 over the same semester last year. That equals 231,000 fewer students compared to 2018.

This is the continuation of a long decline. The peak year was the fall semester of 2011, when 20.14 million students were enrolled. Since then, enrollment has dropped by 10.8%, or by 2.17 million students. Here’s a helpful graph by Wolf Richter:

The report covers 97% of enrollments at degree-granting post secondary institutions that are eligible to receive federal financial aid. It does not include international students, who account for just under 5% of total student enrollment in the US.

Women by far outnumbered men in total enrollment in the fall semester of 2019 with 10.63 million women enrolled, compared to 7.61 million men, meaning that overall there are now 40% more women in college than men.

Inside Higher Ed reports that community college enrollments declined by 3.4%. Four-year public institutions saw a drop of 0.9%. Four-year private institutions bucked the trend with an increase of 3.2%. However, the Student Clearing House said most of this increase was due to the conversion of large for-profit institutions to nonprofit status. Grand Canyon University, for example, successfully made the transition last year.

Wolf Richter says that the 10.8% decline in enrollment since 2011 comes even as student loan balances have surged 74% over the same period, from $940 billion to $1.64 trillion:

Looking at the two charts, it’s clear that over the last eight years, enrollment has declined in a straight line at about 1.35% per year. And over the same eight years, student loan debt has increased in a straight line at nearly $90 billion per year!

We’re seeing three trends: First, the decline in enrollments. Second the decline in men attending college. Third, the soaring costs of college leading to soaring student debt.

No one has the answers to all three, but the decline in enrollments may have a demographic element. We are approaching the tail end of the college-aged millennial generation. Higher education has been facing demographic headwinds for a decade. The post-millennial generation is simply smaller than the previous generation.

Meanwhile, a big part of the enrollment peak spike in 2009-2012 period was due to people choosing education to avoid unemployment during the Great Recession. And 25% of the enrollment decline is due to the for-profit diploma mills losing their government support after years of robbing their “students” blind.

The rapidly increasing costs of college are a burden that can also drive down enrollments. The numbers do not favor investing in a college degree as much as they used to. Back in the day, a good entry level job’s salary was about 4 times the annual tuition. Now it’s under 2 times. If you check out some of the terrible numbers for 20-year net Return on Investment (ROI) on payscale.com, it’s clear that many colleges and universities have negative or relatively small ROIs.

OTOH, there’s still a massive income gap between people with a college degree and those without one. And outside of a few small business owners, there’s no way around it. College is the only reliable way to get into the middle class, and stay there.

The college industrial complex knows that it has a stranglehold on your future, and it will try to suck as much money out of you as possible.

The solutions involve some of the things that Sanders, Warren and others are talking about. Wrongo is for making college free for all. He isn’t for debt forgiveness, but for granting interest-free loans to students. Those loans should be carried only by the federal government.

Cost containment is the biggest issue. Online education is now readily available, and saves on both tuition and room and board. The economy is stronger, so on-the-job training is returning, and a lot of specific how-to knowledge is now available online.

Except for the male-female imbalance, much of this is solvable.

Finally, higher education serves many purposes in our society. As a people, we need it for its practical value, but also for sharpening our ideals, nurturing our growth, advancing our knowledge, and our arts.

Despite a popular subculture of anti-intellectualism and doubt, we should still know that a people without ideals are lost.

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Sunday Cartoon Blogging – May 26, 2019

In another “elections have consequences” story, The Economic Policy Institute (EPI), has a new report about how states can blunt the 2018 Supreme Court decision in Epic Systems v. Lewis. In that case, the court ruled that employers can use forced arbitration clauses to strip workers of their right to join together in court to fight wage theft, discrimination, or harassment. The EPI forecasts that by 2024, more than 80% of private-sector, nonunion workers will be covered by forced arbitration clauses.

They argue that, given the current very conservative Supreme Court, it will be up to individual states to pass “whistleblower enforcement” laws like those introduced in Massachusetts, Maine, New York, Oregon, Vermont, and Washington, to empower workers who need to sue law-breaking employers, including those covered by arbitration clauses.

On to cartoons. Here’s a look at abortion from the GOP white male perspective:

Trump won’t (can’t?) deal:

GOP’s accomplishments are transparent, even if they are not:

The Parties see things differently:

Summer replacement series doesn’t get raves:

Graduation speakers aren’t created equal:

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We’re Too Short to be on This Ride

The Daily Escape:

Lion’s Head, Capetown South Africa, viewed from Tabletop Mountain – 2012 photo by Wrongo

A WaPo report said that Donald Trump discussed giving Janet Yellen another term as head of the Federal Reserve, but was concerned that she was too short. He thought that at 5 feet, 3 inches, she just wasn’t tall enough to get the job done.

Wrongo thinks Yellen’s performance was about the same as her predecessor, Ben Bernanke, and her successor, Jerome Powell. Shouldn’t the real question be: Do we know what’s wrong with our economy, and do we have people in place with enough strength and/or courage to fix it? They can also be short, as long as they have ability and vision.

And it isn’t only in the US: (brackets by Wrongo)

Income inequality has increased in nearly all regions of the world over the past four decades, according to the World Inequality Report 2018. Since 1980, the global top 1% of earners have…[garnered] twice as much of the global growth as have the poorest 50%.

More from the World Inequality Report: (emphasis by Wrongo)

Such acute economic imbalances can lead to political, economic, and social catastrophes if they are not properly monitored and addressed….Governments need to do more to keep society fair…Public services, taxation, social safety nets – all of these have a role to play.

We’re seeing a slow-rolling social catastrophe in the US. We’re seeing alienation across class, race, age and gender. We’re divided as never before, with the possible exception of the pre-Civil War period.

Aren’t we all too short to be on this ride?

Central banks play an integral part in the global economy, and their performance (including the Fed’s) during the 2008 Great Recession was for the most part, admirable.

But central banks can only use monetary policy to partially solve issues of economic inequality. The most robust solutions lie in fiscal policy. Fiscal policy is how Congress and other elected officials influence the economy using spending, taxation and regulation.

Take student loans. Many of our university students are simply being led to the debt gallows. Currently, 44.5 million student loan borrowers in the US owe a total of $1.5 trillion. Student loans are the fastest growing segment of US household debt, seeing almost 157% growth since the Great Recession.

From Bloomberg:

Student loans are being issued at unprecedented rates as more American students pursue higher education. But the cost of tuition at both private and public institutions is touching all-time highs, while interest rates on student loans are also rising. Students are spending more time working instead of studying. (Some 85% of current students now work paid jobs while enrolled.)

Student loan debt has the highest “over 90 days” delinquency rate of all household debt. More than 10% of student borrowers are at least 90 days delinquent. Mortgages and auto loans have a 1.1% and 4% 90-day delinquency rate, respectively,

And if the student loan can’t be repaid, it isn’t expunged by bankruptcy. In fact, students can’t outlive their debt. The feds can garnish social security payments to repay a student’s outstanding debt.

As young adults struggle to pay back their loans, they’re forced to make financial choices that create a drag on the economy. Student debt has delayed marriages. It has led to a decline in home ownership. Sixteen percent of young workers aged 25 to 35 lived with their parents in 2017, up 4% from 10 years earlier.

We are only beginning to understand the social costs of our politics. We are in the midst of a brewing social disaster. And these are self-inflicted wounds, fixable with different government policies. But, most of today’s politicians are too short to get on that ride.

So, how to solve the simultaneous equations of high poverty rates, income inequality and an impending social disaster?

It won’t be easy, and it starts with politicians admitting that our economy doesn’t work for everyone, and that it must be reformed. Then, we can move beyond the tired rallying cries of “more tax cuts” to a capitalism which incorporates a social consciousness that can get people on the track to better paying, and more secure jobs.

An April 2018 study of survey data from 16 European countries found that economic deprivation increased right-wing populist tendencies. Sam van Noort, a co-author of the report said:

Individuals who “feel economically less well-off” were more likely to be attracted by the far right…and radical right respondents are more likely to be male, subjectively poorer, less educated [and] younger.

This will also happen here, unless the voters have determination, and even the short politicians have courage.

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Saturday Soother – June 24, 2017

The Daily Escape:

Waterton Park, part of Glacier International Peace Park – photo by Steve Coyle

Yesterday, we talked about the culture of anxiety that has developed in America in the last 40 years. One thing we didn’t discuss is the growing problem of “till debt do us part”. The average American is dying in debt. According to Bloomberg, the average total household debt in America is just over $132,500. And with the Federal Reserve’s recent rate increases, repayment of that debt will become increasingly more difficult. The more the debt increases, the worse credit scores become, making it even harder for American’s to borrow money when they need it. Individuals can get a credit card for no credit to help them when needed. This is a great is a lifeline for many, however, that credit card isn’t going to be able to pay $132,000 debt.

Difficult enough that most Americans will be saddled with a sizable chunk of it at the time of their death.

Credit.com has reported that Experian’s FileOne database includes 220 million consumers (there are about 242 million adults in the US). To determine the average debt people have when they die, Experian looked at consumers who, as of October 2016 were not deceased, but then were listed as deceased as of December 2016:

Among the 73% of consumers who had debt when they died, about 68% had credit card balances. The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%).

Those consumers carried an average total debt balance of $61,554, including mortgage debt. The breakdown of unpaid balances was as follows: credit cards, $4,531; auto loans, $17,111; personal loans (click here if you’re wondering how do payday loans work), $14,793; and student loans were the largest balance outstanding at $25,391.

Think about this: people who die with student loans outstanding owe $25k on average. That has to cause anxiety for the individual and any family member who guaranteed the debt. It can leave relatives in need of cash to pay off the outstanding amount due. Not everyone has $25,000 sitting around their home, so companies like King Of Cash are here to help.

Now, federal student loan debt can be cancelled upon a borrower’s death, but private student loan debt rarely offers the same benefit. They can go after the borrower’s estate for payment. Even then, family members are not then automatically responsible for the debt, but jointly-owned assets like the family home could be in jeopardy.

So, lots of anxiety when the average person is dying with $61.5k in debt. Considering that the median individual net worth in America is $81.1k, the average person is leaving just $20k behind when they die.

So the average American needs a lot of soothing for debt anxiety. To help with that, here are Anna Netrebko & El?na Garan?a performing “Barcarolle” from Offenbach’s “Tales of Hoffman”. Barcarolle is the most famous aria from the opera (Belle nuit, Ă´ nuit d’amour), performed in Act 2. The Barcarolle has been incorporated into many movies, including “Life Is Beautiful” and “Titanic”. Wrongo has featured Netrebko and Garanca before, and we return today to hear how beautifully and clearly their voices meld:

Those who read the Wrongologist in email can view the video here.

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