Federal Report: The College Debt Bubble Is Collapsing

Mac Slavo

With all of that job creation being claimed by the Obama administration and disseminated by mainstream media outlets as signs of a sustained recovery you’d think most college graduates would have no trouble keeping up with their bills.

But new data released by the Department of Education tell a different story.

According to the report as many as 33% of American college grads with student loan debt are now in delinquent status on their repayments.

The American Bankers Association and the Quiet War on Students

Devon Douglas-Bowers

College students and graduates around the nation are buried in debt and trying to succeed in an extremely difficult and competitive economic environment. Many people are graduating only to find that they are unable to get the jobs they want either due to the small number of available positions or, more usually, the problem that they lack "experience" – and are thus reduced to working menial jobs while paying back exorbitant loans.

So far very little legislation has been passed to aid students in paying back their loans, and many blame politicians. However, the situation goes deeper than this and lies, in part, with a little-known institution called the American Bankers Association.

The Student Loan Delinquency Rate In The United States Has Hit A Brand New Record High

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Michael Snyder

37 million Americans currently have outstanding student loans, and the delinquency rate on those student loans has now reached a level never seen before.  According to a new report that was just released by the U.S. Department of Education, 11 percent of all student loans are at least 90 days delinquent.  That is a brand new record high, and it is almost double the rate of a decade ago. Total student loan debt exceeds a trillion dollars, and it is now the second largest category of consumer debt after home mortgages.

The student loan debt bubble has been growing particularly rapidly in recent years.  According to the Federal Reserve, the total amount of student loan debt has risen by 275 percent since 2003.  That is a staggering figure.  Millions upon millions of young college graduates are entering the "real world" only to discover that they are already financially crippled for decades to come by oppressive student loan debt burdens.  Large numbers of young people are even putting off buying homes or getting married simply because of student loan debt.

So why is this happening?

The Student Loan Debt Bubble Is Creating Millions Of Modern Day Serfs

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Michael Snyder, Contributor

Every single year, millions of young adults head off to colleges and universities all over America full of hopes and dreams. But what most of those fresh-faced youngsters do not realize is that by taking on student loan debt they are signing up for a life of debt slavery. Student loan debt has become a trillion dollar bubblewhich has shattered the financial lives of tens of millions of young college graduates.  

When you are just starting out and you are not making a lot of money, having to make payments on tens of thousands of dollars of student loan debt can be absolutely crippling. The total amount of student loan debt in the United States has now surpassed the total amount of credit card debt, and student loan debt is much harder to get rid of. Many young people view college as a "five year party", but when the party is over millions of those young people basically end up as modern day serfs as they struggle to pay off all of the debt that they have accumulated during their party years. 

Bankruptcy laws have been changed to make it incredibly difficult to get rid of student loan debt, so once you have it you are basically faced with two choices: either you are going to pay it or you are going to die with it.

The Next Bubble Is About to Burst: College Grads Face Dwindling Jobs and Mounting Loans

Today's graduates face miserable job prospects, and experts say the student loan crisis could be worse than the credit card or housing bubbles.

Sarah Jaffe
AlterNet

It's the beginning of summer: warmer weather, longer days, the end of the school year. And that means graduation for thousands of young people across the U.S.; graduation with more student debt than ever before, and into a job market that is anything but promising.

Young people between the ages of 16 and 24 face an unemployment rate nearly twice that of the rest of the population, according to data from the Economic Policy Institute. 2010's 18.4 percent rate for youth was the worst in the 60 years that economists have collected such data. ColorLines notes that in 2010, 8.4 percent of white college graduates were unemployed, 13.8 percent of Latino graduates, and a dismal 19 percent of black graduates.

Bad Education: College Debt No Longer Economical

Wikimedia image

Malcolm Harris
N+1 Magazine

The Project On Student Debt estimates that the average college senior in 2009 graduated with $24,000 in outstanding loans. Last August, student loans surpassed credit cards as the nation’s single largest source of debt, edging ever closer to $1 trillion. Yet for all the moralizing about American consumer debt by both parties, no one dares call higher education a bad investment. The nearly axiomatic good of a university degree in American society has allowed a higher education bubble to expand to the point of bursting.

Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the US economy,  then the global one, increased only fifty points above the Consumer Price Index during those years. But while college applicants’ faith in the value of higher education has only increased, employers’ has declined. According to Richard Rothstein at The Economic Policy Institute, wages for college-educated workers outside of the inflated finance industry have stagnated or diminished. Unemployment has hit recent graduates especially hard, nearly doubling in the post-2007 recession. The result is that the most indebted generation in history is without the dependable jobs it needs to escape debt.

Newly Graduated And Drowning In Six Figures Of Student Loan Debt

College Graduates Wikimedia Image

Amanda M. Fairbanks
Huffington Post

NEW YORK -- Hardly a day goes by where Ashley Angello doesn’t fret about her student loan debt.

Angello thinks about it at night, when packing tomorrow's lunch means a few saved dollars. And she worries about it the next morning when deciding what to wear to work, since she hasn’t been able to afford any new clothes since starting her job.

“I used to joke when I was in college that I’d be paying off these loans for the rest of my life,” says Angello, 22. She graduated nearly a year ago from Ithaca College, where she majored in communications. “Little did I realize that I actually will be.”

Angello is on the hook for about $120,000. With six-figures in debt, she has little choice but to save every little bit that trickles in. And still, it's a struggle.

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CAUGHT ON TAPE: Former SEIU Official Reveals Secret Plan To Destroy JP Morgan, Crash The Stock Market, And Redistribute Wealth In America

Stephen Lerner, formerly of SEIU.

Editor's Note:  The "Corporate Media" will not waste anytime before they label Mr. Lerner a domestic terrorist.

BUSINESS INSIDER-A former official of one of the country's most-powerful unions, SEIU, has a secret plan to "destabilize" the country.

The plan is designed to destroy JP Morgan, nuke the stock market, and weaken Wall Street's grip on power, thus creating the conditions necessary for a redistribution of wealth and a change in government.

The former SEIU official, Stephen Lerner, spoke in a closed session at a Pace University forum last weekend.

The Blaze procured what appears to be a tape of Lerner's remarks. Many Americans will undoubtely sympathize with and support them. Still, the "destabilization" plan is startling in its specificity, especially coming so close on the heels of the financial crisis.

Lerner said that unions and community organizations are, for all intents and purposes, dead. The only way to achieve their goals, therefore--the redistribution of wealth and the return of "$17 trillion" stolen from the middle class by Wall Street--is to "destabilize the country."

Lerner's plan is to organize a mass, coordinated "strike" on mortgage, student loan, and local government debt payments--thus bringing the banks to the edge of insolvency and forcing them to renegotiate the terms of the loans.  This destabilization and turmoil, Lerner hopes, will also crash the stock market, isolating the banking class and allowing for a transfer of power.

Lerner's plan starts by attacking JP Morgan Chase in early May, with demonstrations on Wall Street, protests at the annual shareholder meeting, and then calls for a coordinated mortgage strike.

Lerner also says explicitly that, although the attack will benefit labor unions, it cannot be seen as being organized by them. It must therefore be run by community organizations.

Lerner was ousted from SEIU last November, reportedly for spending millions of the union's dollars trying to pursue a plan like the one he details here.  It is not clear what, if any, power and influence he currently wields. His main message--that Wall Street won the financial crisis, that inequality in this country is hitting record levels, and that there appears to be no other way to stop the trend--will almost certainly resonate.

A transcript of Lerner's full reported remarks is below, courtesy of The Blaze. We have heard the tape, but we have not independently verified that the voice is Lerner's.  You can listen to the tape here.

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Police must not be seen as arm of the state, warns top officer

Sir Hugh Orde warns that repeated clashes with demonstrators risks damaging reputation of police force

Vikram Dood
Guardian

Police fear becoming the focus of public anger at government cuts and that repeated clashes with demonstrators risk damaging their reputation, a top officer has told the Guardian.

Sir Hugh Orde, president of the Association of Chief Police Officers, said it was crucial that police do not appear to be "an arm of the state" who are being used to allow the government to "impose cuts".

His comments came as the Metropolitan police force faced questions over its handling of violent student protests.


Police expect a string of future demonstrations as government spending cuts begin to bite. While they have started with students, public sector workers are facing mass sackings.

Past protests have damaged the police's reputation with sections of the community, notably the 1980s miners' strike.

Asked if there was a danger to the police's reputation by repeated clashes at demonstrations, Orde told the Guardian: "Yes, if it is allowed to be played as the cops acting as an arm of the state, delivering the elected government's will, rather than protecting the rights of the citizen.

"We need to be clear we are doing it as operationally independent, and not subject to influence by anyone as to how we do it.

"As long as that is maintained we can rebut any allegations that we are doing what we are told by our political masters to advance a political agenda. The police are not against anybody."

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Is the College Debt Bubble Ready to Explode?

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Laura Rowley
Yahoo! Finance

Kelli Space, 23, graduated from Northeastern University in 2009 with a bachelor's in sociology — and a whopping $200,000 in student loan debt. Space, who lives with her parents and works full-time, put up a Web site calledTwoHundredThou.com soliciting donations to help meet her debt obligation, which is $891 a month. That number jumps to $1,600 next November.

In creating the site, Space, of course is hoping to ease her financial burden, but it's "mainly to inform others on the dangers of how quickly student loans add up," she said. So far she's raised $6,671.56, according to her site.

Space is just one example — albeit an extreme one — of a student loan bubble that may be about to burst. Over the last decade, private lenders, abetted by college financial aid offices, eagerly handed young people hundreds of thousands of dollars to earn bachelor's degrees. As a result of easy credit, declining grants and soaring tuitions, more than two-thirds of students graduated with debt in 2008 — up from 45 percent in 1993. The average debt load is $24,000, according to the Project on Student Debt.

In some respects, the student loan crisis looks remarkably like the subprime mortgage crisis. First, outstanding student loan debt has ballooned: It grew roughly four-fold in the last decade to $833 billion as of June — surpassing outstanding credit-card debt for the first time.


Secondly, defaults have soared amid a difficult job market. In 2008, the most recent year for which data are available, nearly 3.4 million borrowers began repayment, and more than 238,000 defaulted on their loans. The number of loans that went into forbearance or deferment (when borrowers receive temporary relief from payments) rose to 22 percent in 2007, from 10 percent a decade earlier, according to The Chronicle of Higher Education. Over a 15-year period, default rates range from 20 percent for federal loans to 40 percent on loans to students who attend for-profit schools, The Chronicle found.

Just as lenders offered easy no-money-down mortgages to unqualified borrowers during the housing boom, private student loan firms offered instant online approval for up to 100 percent of college costs to students, in some cases for four consecutive years. In early 2007, half of loans made by Sallie Mae, one of the industry's biggest players, were to students with no co-signers, according to Mark Kantrowitz, founder of informational Web site finaid.org.

As tuition costs have outpaced the caps on federal loans, more families have turned to private loans, which carry higher interest rates and stricter repayment rules. Last year private lenders supplied about $10 billion in loans (compared with $100 billion in federal loans). A study by the College Board found about a third of graduates in 2007-2008 had private loans. About two dozen private lenders offer student loans, and their business is growing at 25 percent annually, after a temporary decline amid the recent credit crisis, according to finaid.org.

Space, for instance, took out $12,000 in federal loans and borrowed $189,000 from private lender Sallie Mae. In an email interview, Space said she spent the money on tuition and room and board for four years; two summer semesters; a three-month study abroad program in Ireland; and books for three semesters. Some $20,000 of her debt is accrued interest. (Interest rates on her loans range from 3 percent to 9 percent.)

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Why Did 17 Million Students Go to College?

Richard Vedder
Chronicle

Two sets of information were presented to me in the last 24 hours that have dramatically reinforced my feeling that diminishing returns have set in to investments in higher education, with increasing evidence suggesting that we are in one respect “overinvesting” in the field. First, following up on information provided by former student Douglas Himes at the Bureau of Labor Statistics (BLS), my sidekick Chris Matgouranis showed me the table reproduced below (And for more see this).

Over 317,000 waiters and waitresses have college degrees (over 8,000 of them have doctoral or professional degrees), along with over 80,000 bartenders, and over 18,000 parking lot attendants. All told, some 17,000,000 Americans with college degrees are doing jobs that the BLS says require less than the skill levels associated with a bachelor’s degree.

I have long been a proponent of Charles Murray’s thesis that an increasing number of people attending college do not have the cognitive abilities or other attributes usually necessary for success at higher levels of learning. As more and more try to attend colleges, either college degrees will be watered down (something already happening I suspect) or drop-out rates will rise.

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