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Student Loans Could Be Next Financial Bubble

(ajagendorf25/Flickr)

(ajagendorf25/Flickr)

After finally graduating from college, the work actually begins for many students. Balancing an unpaid internship with multiple jobs, scrimping and saving just to keep above water, many college graduates find themselves saddled with thousands of dollars of unpaid student loans.

As unemployment numbers hold steady and students face their first loan payments, what happens when they have no money to pay?

Some economists worry that the student debt weight may start to drag the U.S. economy down even farther.

According to an article in The Root by Dara Sharif, outstanding student loans totaled about $805 billion as of March 30. In a July report quoted by Sharif, the credit-rating firm Moody’s Analytics worries that the inability to pay back student loans could trigger the next economic crisis.

“Rising tuition costs, a soft job market and troublingly low graduation rates at many schools cast doubt on whether a growing number of people will be able to pay those loans back,” Sharif wrote.

Trouble with student loans may only exacerbate economic woes for both middle class and minority families. With African American unemployment well-above the national rate, some analysts fear that a college loan bubble burst could be especially hard on the black community.

All hope is not lost for new college graduates, however. For some, college loans are an investment that will pay off. The problem — according to Joseph B. Moore, president of Lesley University — is that we’re on an unsustainable track.

Are you struggling under mountains of debt? How will escalating student debt affect Boston, the capital of U.S. higher education? How can we alleviate the student debt crisis?

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  • Kathy

    I’ll be listening, but none of these shows seems to push the notion that we need more non-loan financial aid and lower college costs. They always seem to about how only the rich should be going to college and everyone else should be a plumber–hint if we all became plumbers they would no longer be making the money they do now.

    • Anonymous

       I agree Kathy. Robert Reich had a great idea on how college education should be free and paid for from a kind of endowment that is based from income earned after college over a long period of time.
      I’m not sure how this would work and I’m also giving my take on what he said in a talk at Dartmouth.
      He is right however, I think college should be free and we also need more trade schools for those who do not want to go to college or have the aptitude.

  • Dh001g

    There are two issues. One issue is the For-Profit institutions which are not interested in the education they provide students. Much like there are two financial systems for poor vs. middle class people, we have also allowed two different educational systems to develop. University of Phoenix and their ilk are the Chex Cashed and One Stop Mortgage equivilant in higher education. The high cost for private vs. public non profit institutions are a different case. I went to Private school for Undergrad and ended up with loan debt. True I wish I would have better career counseling, and more counseling about student loan debt, but really it was worth it. Its true that the tuition increased when I was in the middle getting my degree but my education was first rate. I am in grad school at a public school now. The education is also great and I think we should put more money into our public education system but really students need to figure out which institution is the best fit for them. My mom worked at a very small, unknown, liberal arts college and they were affordable and were in some sense the best of both worlds.

  • steve

    I ve worked for the for profits and it was just a funnel to wall street.
    steve

  • Anonymous

    Lesley was just listed as an underwriter during the last break.

  • bossoccer

    I’m still paying my law school loans.  I graduated in 1993 and went into public interest law . . ..  At least the interest rate isn’t terrible, but it’s definitely a drag on my spending powers!

  • Matt

    I am moving to Canada in a few months due to the student loans in the US, which I cannot pay and can no longer defer, as well as because of a job market that provides no job with income sufficient to pay back those loans.  Having completed my undgrad degree and law school, my loans now total over 200K.  With law school tuition roughly $43,000/year on average and living expenses(rent) being $10,000/year, law school easily accounts for most of my loan balance.  After having taken the bar and applied to over 10,000 jobs(yes, 10,000) within the past year, I have only been able to find temporary work that pays $15-20/hr, which in no way covers my loan payments, which alone are over $1600/month.  Seriously, the MATH IS NOT THERE.  I work two jobs now and can’t make it here.  All of this nonsense about the American Dream and social mobility and the value of education is GARBAGE. 

    Some people have even suggested that I should have worked my way through school or saved up the money for law school!!! HA!!  If I had a job that allowed me to save up over 200K for law school, don’t you think that I would have stayed in THAT job. 

    Others have suggested that I should have anticipated the risks.  Well, no one tells you that the law school fraudulently manipulate the number they release to US News and World Report.  Having now worked in the admissions office at Georgetown Law School, I can tell you that the school cherry picks the data to only use the high-paying individuals….and then actually has the never to hire people part time in a temp position for 4 weeks so that they can count those people as employed for the purpose of the survey.  Further still, the count people working in fast food and who have no legal jobs as employed for the purpose of the survey.   THAT IS FRAUD.  Basically, I along with many people were sold on lies and dishonest stats, which we used as the basis for our investment/risk.  

    Move to Canada where the US has NO JURISDICTION over your loans.  Start life anew and watch the US economy collapse under the weight of its own lies.  Enjoy this life; this is the only one you have.  I chose to follow the rules and believe the popular mythology about education debt being good debt.  Rather than squander year and year….month after month….trying to find solace in entertainment, books, music, friends, family and that old adage “things will work out”….wake up and get the hell out while you can. You owe it to yourself as a HUMAN to have no allegience to anything or anyone that would suppress your humanity, making you a slave to an orchestrated, bureaucratic fraud that is so large that the contemplation of it likely makes even my short message here seem exaggerated. 

    Don’t trick yourself into saying this is all YOU.  You know what you are feeling, and your brain has already made you keenly aware of what is not working.  The powers-that-be have already fooled you once. Don’t go on fooling yourself. 

    WAKE UP and get out.

    Yes, it is that bad.  (Remember, DO NOT FOOL YOURSELF…USE YOUR BRAIN and YOUR SENSES)

    It is time to follow your own path rather than follow the misguided directions of others that served only to line the pockets of your schools and the bankers, who now make interest on the money that was loaned out. 

    You can punish them by listening to yourself. 

    • Educated yet indentured

      Matt, you should definitely check out alleducationmatters.blogspot.com. This site deals with the student lending crisis and is a community for, as we call ourselves, the Indentured Educated Class.

      You are really not alone. Many of us feel completely “shafted” out of the American Dream by being tricked or coerced or mislead into taking out too many student loans – the onerousness of which we have no recourse for.

      This country is going to, if it hasn’t alread, experience a severe brain drain as many of the Indentured Educated Class are expatriating. Hang in there – all the best.

  • http://www.facebook.com/people/C-Cryn-Johannsen/1146475160 C Cryn Johannsen

    Good piece, Ms. Alpert. Here’s my only criticism, the crisis isn’t on its way. It’s here. I’ve been writing and researching the topic for nearly 2 1/2 years. And outstanding student loan debt is now at a whopping $937 BILLION. By June of 2012, it will hit $1 TRILLION. 

    -Cryn Johannsen
    Founder & Exec. Dir.
    All Education Matters

  • http://www.facebook.com/people/C-Cryn-Johannsen/1146475160 C Cryn Johannsen

    Thanks so much for mentioning my work – I greatly appreciate it. I will be posting my multi-solution proposal tomorrow. 

    And, Matt, hang in there. You’re not alone. We are an army, and we’re organized. Feel free to find me on Facebook, too. My page is dedicated entirely to the student lending crisis. 

  • Donedamage

    they should have thought about this before the affluent missed up the economy. you sell false dreams ans yet people run for those dreams because they want better. so you know what, if people cannot pay their student loans, congress is going to cut its loses, due to their own ignorance

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