# Is the US Student Debt Bubble About to Burst?



## Fleetfoot (May 9, 2011)

Interesting read. And video.

Is the US student debt bubble about to burst? - Inside Story Americas - Al Jazeera English

In my mind this has seemed like only a matter of time when I became informed of the loaning system my sophomore year, maybe a few years too late. 


Thoughts?


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## Hurricane Matthew (Nov 9, 2012)

It really needs to just burst apart or it'll keep getting more expensive. The cost of college in the US is so high it should be considered immoral.


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## Snakecharmer (Oct 26, 2010)

Get government out of higher education financing = lower costs and less debt


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## RobynC (Jun 10, 2011)

I think we need to go no further than Comedy Central: The Colbert Report

1: Watch all the episodes Colbert put up about how to create a SuperPAC
2: Post that data on this forum: It should explain what you have to do and be sufficiently easy to understand that a child could do it.
3: Find sites where students could make use of this information
4: Use that data to instruct students how to create SuperPAC's

Sound good?


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## PowerShell (Feb 3, 2013)

Snakecharmer said:


> Get government out of higher education financing = lower costs and less debt


That and also make it so you can absolve the loans through bankruptcy. Basically not allowing that makes it so private lenders essentially have no risk in making the loans and are essentially doing the same they did with the sub-prime mortgages but in this case there is even less risk for them.

Another big thing is getting these worthless "guidance" counselors to understand that a 4 year college degree isn't everything. They need to make students realize what they are doing is essentially a business deal and return on investment, as well as opportunity costs need to be weighed in the decision. The feel good, "do what you like," is BS and doesn't pay the bills in a lot of cases.

For me I knew college was expensive so I started working 40 hour week summers when I was 14. By the time I was a senior in high school I was working 25-30 hours a week during school and when I turned 18 I went full time. Basically I went to high school and worked full time. I also worked full time through college. I did take the interest free loans because they were essentially free money while the money I earned was gaining interest. When the loan came due, I wrote an over $22,500 check to cover it. Imagine being 21 years old (It took 2.5 years for my bachelor's degree and I actually had it at 20 years old) and writing a check that big!

Regardless of working full time, my degree paid for itself in 2 years (1 year if you accounted I had an employer that paid for half of my degree). I chose to work in IT and that was an industry in demand. I don't understand how people can accrue such huge loans for degrees that are pretty much worthless. I went to a private college that was specialized in IT and the total cost of my education was around $45,000.

What pisses me off is I worked so hard and now all these people who weren't smart with their money and investment (education is an investment) are now wanting a handout and have their loans paid for ultimately by people like me who were responsible. I agree the cost of college is expensive as heck and do agree we need to fund our colleges and public education better. I just don't agree with the way the loans are structured because they are creating a huge bubble that has caused the prices to skyrocket in the first place.


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## Outside_The_Box (Apr 17, 2013)

I think it's a big problem since the economy is in the toilet. Most of the jobs being created are low paying service sector jobs, and many graduates are having a really hard time finding work in their field. When things are good then it's fine to go to college for pretty much whatever, but when the economy is contracting you're going to have a hell of a time finding a job in less important fields. People in fields like IT and medicine will be fine, but if you took out tens of thousands of dollars in loans to study underwater basket weaving in 3rd century BC Carthage, then you're pretty screwed. Fascinating as it may be, it has no importance in the real economy. I do believe that the less critical subjects (art, history, sociology, gender studies, etc) are important for society from an intellectual perspective, but you need to be able to recognize when society is in expansion mode vs survival mode. Nice-ities take a back seat when we're in survival mode. Sure, we need _some _people in those fields all the time, but not more than we really need. Plus that's all stuff that you can just learn on your own anyway, provided you can read and retain what you read. It's not like it's higher mathematics or particle physics. And, you can learn all you want and take it as far as you want since you're not limited to the rigidity and abbreviated nature of a classroom setting. 

As for the debt itself, it wouldn't be a problem if the economy were healthy and people's earnings kept pace with inflation, but it isn't, and they don't. Either we sit through a massive deflationary cycle, or we raise people's pay. From a scientific/mathematical standpoint, either will do. The debate over which one stems from differing economic schools of thought, but that's a topic of another discussion. The point is that something has to give eventually, and if policy makers don't make a decision, then mother nature will make the decision for us. She always has the last word, even in finance and economics. The student debt bubble will never deflate all the way though (unless school becomes free). Just by virtue of the fact that we have an inflationary economy, all charts will move from the lower left to the upper right over time, whether it's the Dow Jones Industrial Average, gold, crude oil, real estate, consumer credit, the price of a new car, a Jamba Juice, or student debt.

Here's a chart of student debt from late last year. That's a pretty steep grade. LOL












And here's a sharp rise in student loan delinquencies. That's what happens when people have to choose between paying their bills and eating. 










One thing could be to forgive the student debt, and if Obama were a true progressive, he'd do it, or at least try. But, he isn't. That would free up a shit load of money to start being spent in the actual economy, and business would pick up quite nicely. The ancient Hebrews used to have a debt jubilee every half a century or so, and it seemed to work nicely for them and their economy. That's also (strangely) about the same periodicity as the Kondratieff Cycle. Makes you wonder. It's basically a very long term inflationary/deflationary cycle of debt building up and then being worked off. Every once in a while you have to clear the rot from the system. I think of it like pulling weeds. Get rid of the bad stuff so you can grow more of the good stuff.


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## Dauntless (Nov 3, 2010)

I saw this yesterday, what do you think? I would do it:

Oregon's innovative plan to eliminate student loan debt | Take Two | 89.3 KPCC


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## PowerShell (Feb 3, 2013)

Outside_The_Box said:


> One thing could be to forgive the student debt, and if Obama were a true progressive, he'd do it, or at least try. But, he isn't.


And thankfully he isn't. Basically doing that would be a handout and essentially encourage the next generation to keep going for stupid things like underwater basket weaving. Maybe they can restructure the debt or something, but flat out forgiving the debt is BS in my opinion.


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## Husgark (Nov 14, 2012)

The high level of student debt is just a part of a much bigger problem. The total amount of private debt is too high and is a problem that hasn't received enough attention. The debt level needs to be reduced somehow, but that's unlikely to happen. The amount of debt is closely linked to the size of the banking sector(more debt means more interest income), meaning that reducing private debt levels would mean that banks would have to go bankrupt or be turned into "zombie banks". The Fed certainly won't allow banks to go under, and the idea of "zombie banks", which we have seen in Japan, is not too appealing either.


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## Outside_The_Box (Apr 17, 2013)

PowerShell said:


> And thankfully he isn't. Basically doing that would be a handout and essentially encourage the next generation to keep going for stupid things like underwater basket weaving. Maybe they can restructure the debt or something, but flat out forgiving the debt is BS in my opinion.


I'd be in favor of restructuring. I am a pretty merciful guy, but I also believe in personal responsibility (it has to come in somewhere...). And honestly, I'd be in favor of totally overhauling the education system. I think with a lot of subjects, the internet and online book stores have made college obsolete. I still advocate college for people who want to go into medicine and IT and other areas that require actual instruction and hands-on learning, but with a lot of things I think self study is way better. I think a good idea would be for universities to allow people to take tests in things like history and get a degree just from passing the tests online, or at a regional testing facility so they can make sure you're not cheating. I don't know about you, but I don't need to be spoon fed facts that I can learn on my own. I don't need a professor to tell me that Rome was founded in 753 BC (let alone pay thousands of dollars for it) when I can just read a book that I bought used online for 5 bucks plus shipping. LOL 

I also don't like how colleges will make you take courses that are unrelated to your field of study. The core classes are fine, basic reading, writing, computer, and math skills are obviously good to have (but perhaps we need to make sure high school students are already proficient in these?), but if I'm studying to be a chemist, classes in public speaking are pretty useless and irrelevant. Trim the fat. 

Another thing that chaps my ass is employers who require college degrees for jobs that an 8th grader could do. Do we really need to have secretaries with BA's? I think not. What is it about answering phones and playing on the computer that is so advanced that higher education is required for it? Is filing really that complicated? If it the spread sheets? The coffee maker? I remember when I got out of the air force (I had a medical background) I applied at a local hospital for a job transporting patients around in wheel chairs and on stretchers. I listed all my qualifications like National Registry EMT-B, HAZMAT Technician, current CPR card, the list goes on. Anyway, I get an email reply saying I'm not qualified for the position. I was in shock. Really? Someone with 4 years experience saving people's lives isn't qualified to push people around in wheel chairs? Fuck you I'm not qualified. LOL I don't think YOU'RE qualified to make decisions about who is qualified for what. How about that? LOL Luckily I work for myself these days, so I've been absconded from the plantation and don't have to put up with garbage like this anymore. Whew!


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## bel (Dec 2, 2012)

More students need to look at alternatives to the 4 year (or 5 or 6 year) uni scheme. They should try out a local community college and then transfer credits or look at programs that specifically interest them.

I will disagree with the statement that it college is just a business deal. The practicality business model is pretty shitty by itself without consideration to other factors, @_PowerShell_. Good that it worked for you, but not everyone in the world is like you. Doing what you like in college can lead to good grades which can lead to post-college success. Your college degree doesn't pigeon-hole you for life.

I presume you refer to specific Bachelor of Liberal Arts that you personally don't see as valuable. It's fine that you might think they are worthless. And to be fair, more people do need to weigh out the money they take out and how they expect to pay it back post-degree. Yet, you speak like certain degrees ban you from the corporate world and that's simply not true. If anything, the focus needs to turn from "practicality" to networking friends, family members, and uni resource centers to meet people with the power to hire you or who can direct you to hiring employers. Build the network.


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## PowerShell (Feb 3, 2013)

@*bel *How is going to college NOT a business deal? You are trading your time that you could otherwise be working (opportunity cost) or obtain skills\credentials that make you marketable in a certain area. I agree it's not a "pigeonhole" that sets you for life and after a certain amount of time, a degree means nothing because experience eventually overrules a degree.

Degrees provide an entry point in a lot of careers. For example, I am a Systems Administrator. I have a bachelor's degree in Technology Management. If I was coming out of school with no experience, my degree would be an indication that I knew something about IT and technology. If I had just an Art degree, it wouldn't indicate that I knew anything about the job. Now if I was fresh out of school with my degree versus someone with an Art degree that had 15 years of experience, then the person with an Art degree would probably be hired.

The point is making an entry and gaining experience in your field. Nowadays you pretty much have to network and have the right credentials such as a degree. There are ways to enter a given field with an unrelated degree but in a lot of cases it's way harder. It's not impossible but much harder.


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## bel (Dec 2, 2012)

PowerShell said:


> Degrees provide an entry point in a lot of careers. For example, I am a Systems Administrator. I have a bachelor's degree in Technology Management. If I was coming out of school with no experience, my degree would be an indication that I knew something about IT and technology. If I had just an Art degree, it wouldn't indicate that I knew anything about the job. Now if I was fresh out of school with my degree versus someone with an Art degree that had 15 years of experience, then the person with an Art degree would probably be hired.
> 
> The point is making an entry and gaining experience in your field. Nowadays you pretty much have to network and have the right credentials such as a degree. There are ways to enter a given field with an unrelated degree but in a lot of cases it's way harder. It's not impossible but much harder.


It varies from field to field. However, to overextend your points to all other fields just creates job hunting stinkin' thinkin': I got a degree in X, so I MUST do X; I have experience in Y, so I must be Y. In times of economic instability, that require flexibility, your approach advocates inflexibility.

Also worth noting that degrees don't provide other aspects necessary for careers: plays well with others, good written/communication skills, etc.


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## PowerShell (Feb 3, 2013)

Degrees are part of the equation. That aren't an end all solution. If 2 candidates have equal credentials but one has a degree in the field or job I am hiring for versus another that doesn't, the person who has the degree in the field, gets the job.


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## bel (Dec 2, 2012)

PowerShell said:


> If 2 candidates have equal credentials but one has a degree in the field or job I am hiring for versus another that doesn't, the person who has the degree in the field, gets the job.


And that's okay, but that's _you_. You do not speak for every employer.


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## PowerShell (Feb 3, 2013)

bel said:


> And that's okay, but that's _you_. You do not speak for every employer.


I speak for common sense and what is the norm. What employers won't hire the best qualified employee? A degree is a credential and it's part of the equation of credentials that get you hired. Like I said if there were 2 equal candidates but the only thing separating them was a degree in the job the employer was hiring for, the employer would most likely hire the person with the degree since they'd have more background in that job. There are one-off situations but for the most part that degree is a major credential that will get you started out. Now if you somehow break in without the degree, eventually experience will trump the degree.


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## bel (Dec 2, 2012)

PowerShell said:


> I speak for common sense and what is the norm. What employers won't hire the best qualified employee? *A degree is a credential* and* it's part of the equation of credentials* that get you hired. Like I said if there were 2 equal candidates but the only thing separating them was a degree in the job the employer was hiring for, the employer would most likely hire the person with the degree since they'd have more background in that job. There are one-off situations but for the most part that degree is a major credential that will get you started out. Now if you somehow break in without the degree, eventually experience will trump the degree.


Why do we keep beating a dead horse. You admit:

A degree is a credential (It's true; plenty of jobs look for someone to have a college degree, but not a specific type of degree).

A degree is a part of the package

However, that doesn't mean a specific type is required for jobs, especially for plenty of corporate entry-level jobs out there. We can keep rinsing and repeating or you can bring something else to the table. You spoke from your *subjective experience* as a Systems Admin and what you look for in a job candidate. Your experience does not dictate "common sense" or all corporate "norms"


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## Slider (Nov 17, 2009)

PowerShell said:


> That and also make it so you can absolve the loans through bankruptcy. Basically not allowing that makes it so private lenders essentially have no risk in making the loans and are essentially doing the same they did with the sub-prime mortgages but in this case there is even less risk for them.
> 
> Another big thing is getting these worthless "guidance" counselors to understand that a 4 year college degree isn't everything. They need to make students realize what they are doing is essentially a business deal and return on investment, as well as opportunity costs need to be weighed in the decision. The feel good, "do what you like," is BS and doesn't pay the bills in a lot of cases.
> 
> ...



Young people make mistakes.

They are stupid, ignorant, naïve, and impressionable. 

Not allowing them the opportunity to fix their mistakes, or at least a way to get out from under the debt they have accrued, will only make things worse.

If the goal is putting people to work, so they can start to buy stuff and pay their bills, then we have to create more opportunities.


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## Slider (Nov 17, 2009)

PowerShell said:


> @*bel *How is going to college NOT a business deal? You are trading your time that you could otherwise be working (opportunity cost) or obtain skills\credentials that make you marketable in a certain area. I agree it's not a "pigeonhole" that sets you for life and after a certain amount of time, a degree means nothing because experience eventually overrules a degree.
> 
> Degrees provide an entry point in a lot of careers. For example, I am a Systems Administrator. I have a bachelor's degree in Technology Management. If I was coming out of school with no experience, my degree would be an indication that I knew something about IT and technology. If I had just an Art degree, it wouldn't indicate that I knew anything about the job. Now if I was fresh out of school with my degree versus someone with an Art degree that had 15 years of experience, then the person with an Art degree would probably be hired.
> 
> The point is making an entry and gaining experience in your field. Nowadays you pretty much have to network and have the right credentials such as a degree. There are ways to enter a given field with an unrelated degree but in a lot of cases it's way harder. It's not impossible but much harder.



A lot of people consider college to be a social experiment or life experience that one must go through in order to achieve adulthood or some common form of maturity.

The foreboding sense of most money or business transactions is conveniently misunderstood or absent in the minds of young people. Often their parents play a role in providing financial assistance or even hold their hands and walk them through the loan application process. Very little is understood and fully realized until many years down the road when suddenly Sallie Mae calls and asks for an immediate payment of $372.91.

The point is, most high school graduates don't truly understand the cold reality of our culture, economy, and social structure. Many will be a societal inconvenience for the general public and a financial hindrance for their parents.

Perhaps things are slowly changing and youth are becoming edified on what to expect, but there still exists a large gap of people who missed out on those life lessons.

I like to believe the theory that about 10 years ago the economy reached a point where simply having a degree wasn't enough to get you a well-paying, secure job.

Many of our predecessors didn't have college degrees, but the ones who did were considered rare and instantly employable. Soon after, the market became saturated with people who had college degrees, invariably making the job market more competitive and structured around a plethora of new employer requirements.

Those of us who were in college at the time of this transition, did not become aware of the change until after graduation. When you are attending college, the environment you reside is often considered to be a bubble, in which the minds of students are protected from outside influences. I thought that my college degree exemplified hard work, determination, and commitment, but now it's simply a worthless piece of paper.

Of course, none of this matters if you know somebody or are related to somebody who is wealthy or in a powerful and influential position. You can be a completely useless human being, but if your daddy is rich it doesn't matter if you are educated or not (e.g. the Paris Hilton Paradox).


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## PowerShell (Feb 3, 2013)

Slider said:


> A lot of people consider college to be a social experiment or life experience that one must go through in order to achieve adulthood or some common form of maturity.


Some people the say the same thing about the military. If you were to give up a certain amount of time (opportunity cost) to do the military, that can also be a credential that can work in your favor. I hate how college is some "social experiment" that is supposed to "enlighten" and "enrich" you instead of preparing you to be employable. That's why I like the college I went to. It was career-focused and it allowed me to get a bachelor's degree in 2.5 years while working full time. When I wasn't working full time, I took 29 credits in a semester. People think I'm nuts. I just set getting in and out as a goal and obtained that goal.

If you want to go out and just party right out of high school, get a job and do it. That's how my parent's generation and the generations before it did it. You don't need to go to college to party. I've heard plenty of stories back in the day where people met up and partied without being in school.



> The foreboding sense of most money or business transactions is conveniently misunderstood or absent in the minds of young people. Often their parents play a role in providing financial assistance or even hold their hands and walk them through the loan application process. Very little is understood and fully realized until many years down the road when suddenly Sallie Mae calls and asks for an immediate payment of $372.91.


I understood it at 14 years old and worked as hard as I could to save as much money as I could. Prior to that I understood I needed to find something that would be practical and get me a job. When I was only 8-10 years old I wanted to be a computer programmer but saw how they were being outsourced at the time so I knew I had to focus on something that has to be done physically here. I always enjoyed computers and structured my high school curriculum and college major around this.

I agree most people have no conception of money. A lot of adults don't have it either. That's a separate issue that they need to address in middle and high school. I know my middle and high school had good classes that provided guidance that set us on the right path (maybe that's why Newsweek ranks it #1 or 2 in the state and #350 in the nation for top high schools).


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