Tag archives: College Debt

The Washington Times Discusses College Debt

by Chris Gacek

December 12, 2012

Last week the Washington Times (12/5/2012) discussed the “student debt explosion” in this editorial which provides an excellent overview of the matter.  The numbers are getting more and more grim.

Of course, there will be increasing political pressure to write off these loans.  Why not?  We can just have the fed monetize some more debt in our funny money world.  No problemo.

Nevertheless, conservatives should not be tempted to say that this is not a huge problem.  Nor should we start blaming the victims.  The college debt crisis is another example of welfare state policies run amok.  Young debtors who wouldn’t be allowed to get a credit card have been allowed to pile up massive college loans.  The subsidization of higher ed is producing massive wealth transfers from the middle class to academic institutions.  The Academy is becoming the modern version of Standard Oil.

Conservatives need to offer hope to the young by using their influence both political and commercial to develop alternative tracks for academic credentialing for jobs.  Simultaneously, we need to push hard for online alternatives to brick and mortar schools.  It won’t be perfect, but this is a sector of the economy that desperately needs a couple decades of Schumpeterian “creative destruction.”

Important Article on the College Debt Scene & Is the Bubble Exploding

by Chris Gacek

December 3, 2012

Recently released statistics by the Federal Reserve are causing some to wonder if the rapidly escalating rate of troubled college loans indicate a bursting debt bubble. Tyler Durden of Zero Hedge has this post; John Hayward at the Human Events Blog has this excellent comment on the Zero Hedge analysis.

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Student debt is a problem that is hurting many people over age sixty:

In the first three months of this year, the number of borrowers of student loans age 60 and older was 2.2 million, a figure that has tripled since 2005. That makes them the fastest-growing age group for college debt. All told, those borrowers owed $43 billion, up from $8 billion seven years ago, according to the Federal Reserve Bank of New York.

Almost 10 percent of the borrowers over 60 were at least 90 days delinquent on their payments during the first quarter of 2012, compared with 6 percent in 2005. ….

Some are losing part of their Social Security retirement benefits. Read about a “boomerang” parent – in this case, a mother who had to move in with her daughter due to college loans assumed by the parent on behalf of the child. See the story. (The focus here is “Parent Plus” loans not co-signed loans.)

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Another story discusses the drag that student loan debt may have on the housing market:

Naroff said another major factor weighing on young adults is student loan debt, which is approaching $1 trillion by some estimates. The burden of those monthly payments may be keeping some younger adults from paying the rent on their own, let alone buying a house, even if they do have a job.

You have a lot of the kids coming out with debt, and they’re not going out and buying houses, and that may be pushing out the whole process,” he said.

Naroff said it’s not yet clear how much of the problem is a cyclical one, caused by the high unemployment rate among young adults, and how much is a structural problem caused the increased burden of student loan debts leaving less money for things like homes.

You can find the NBC News story by Alison Linn here.

What do the Waiters at Red Lobster and Some Adjunct Profs Have in Common? Obamacare.

by Chris Gacek

November 23, 2012

Sometimes you just dont see one coming. Before the election, I had heard the news that Darden Restaurants (Red Lobster, Oliver Garden, Longhorn Steakhouse) announced that it was going to reduce the hours of its staff to less than thirty hours per week to keep these employees from coming within the reach of Obamacare. This was one of those pesky unintended consequences of socialism. Very unfortunate, but many of us tried to stop it.

Yet, I didnt expect the same employer strategm to reach beyond the ranks of traditional hourly workers. Then, a friend sent me this article about the Community College of Alleghany County (CCAC). The administration there has made this decision regarding its four-hundred adjunct professors:

On Tuesday, CCAC employees were notified that Obamacare defines full-time employees as those working 30 hours or more per week and that on Dec. 31 temporary part-time employees will be cut back to 25 hours. The move will save an estimated $6 million.

While it is of course the colleges preference to provide coverage to these positions, there simply are not funds available to do so, said CCAC spokesperson David Hoovler. Several years of cuts or largely flat funding from our government supporters have led to significant cost reductions by CCAC, leaving little room to trim the colleges budget further.

Wow, I never thought I would see college faculty being treated like this. Just missed it. When it comes down to it, adjunct professors are hourly employees also. I wonder what percentage of the CCAC adjunct faculty voted for Romney??

Debt and Liberty

by Family Research Council

September 5, 2012

Debt is a major problem in America. Ballooning governmental and individual debt threaten our financial stability. Debt undermines one of the inalienable rights of our Declaration of Independence, liberty. The Scripture says in Proverbs 22:7 that the borrower is a slave to the lender. This connection between debt and slavery is important, though regularly overlooked in public policy and personal pocketbook decisions. Owing money to a financial institution is not nearly the same as slavery but there are parallels.

When individuals exchange freedom for temporary comfort it is a sacrifice of their liberty. Sadly many exchange financial freedom for what they consider to be indispensable luxuries such as televisions, automobiles, degrees, and clothing. These things are purchased by the borrower with a promise that he will work for the lender in the future to pay back the debt. Often times this promise has dire consequences for not just the borrower but for his family as well. Many marriages are harmed due to financial strains. And many people suffer a lower quality of life due to unwise or impulsive purchases.

One of the most costly sources of debt is college education. It has even received special attention as a separate category in FRCs recent Social Conservative Review. Many people begin new jobs and new families with high debt loads due to their education. At some of the most vulnerable points in their life they are burdened by creditors. Some say a college education is the path to get a good paying job which will then make you a happy and productive citizen. If someone cant afford college, then loan agencies (often the Federal Government) will be more than happy to help. Some students live at home or even go on government aid programs to help with the expenses. Unfortunately, in todays economy, students finish four or five years of college only to struggle to locate a full-time job after graduation. Regardless of the job they do eventually find, many graduates must then allocate a large portion of their take-home pay to cover their debt, or else pay it off over many years. As graduates feel the pressure of their debt, they bypass opportunities to gain valuable experience in their chosen field through an entrylevel job, because they must find a job any job- that will pay more.

Having gone to college as well as graduate school I am well aware of the temptation and the burden of debt. Thankfully my wife and I are currently debt-free although we have taken some careful measures to get there. Freedom from debt has allowed me to pursue my calling from the Lord to work as salt and light in our nations public policy arena. Having things immediately at the cost of enslavement by debt is not worth the price when compared to the value of liberty. I can give to my church or another charity, work at an entry level position in a field I enjoy, and slowly save for special purchases, without the constant burden of debt on my shoulders.

Being debt free means living differently than many of my peers, eating a sack lunch every day, driving older cars, and living in a very small apartment. But I still have one possession for which our founders pledged their lives, their fortunes and their sacred honor. Freedom. And that is worth more than anything a loan could buy.

The College Debt Story Gets Worse: Medical School Graduates

by Chris Gacek

July 24, 2012

And I thought things were bad for recent college grads with outstanding debt (average for undergrads about $25,000). Now comes a great article from the Seattle Times by Suzanne Monson about an ophthalmology resident, Dr. Sharel Ongchin. She appears to be a brilliant physician carrying $240,000 in debt with an interest rate of 4.9% — the annual interest payments alone would total $11,760. The article provides this important information:

… One recent study by the American Association of Medical Colleges shows that more than 86 percent of med-school graduates have debt; the average 2010 debt for newly graduated docs was $158,000.

In fact, the AAMC reports that the cost of private medical schools rose 165 percent while public med-school costs soared 312 percent over the past 20 years. Figures from the American Medical Association show that these costs far outpace the rate of inflation.

These are staggering facts. Specialists like Dr. Ongchin probably, as she does, have a higher level of indebtedness on average. When one considers the uncertainty that Obamacare has cast over the healthcare industry, one has to wonder who would be willing to assume this debt risk to attend med school and then work under government-mandated wage controls.

One Nurses Travails with Student Debt Paints a Bigger Picture

by Chris Gacek

June 26, 2012

Its not very often when I spot a great article on college debt and then see it posted by another writer who focuses on this social disaster. However, that is what happened yesterday when I read Ken Serranos article (Massive College Debt Can Burden Graduates for Decades) which appeared in USA Today and soon saw a link to it on Glenn Reynolds Instapundit cite. (Reynolds is quoted in the article.)

Most poignant is the story of Kathleen Bijas, 27, an emergency room nurse from New Jersey who makes $60,000 per year and has $160,000 in student loans. Her monthly loan payments total $1,608. Two paragraphs capture much about the financial situation in which she now finds herself:

Saddled with $160,000 in student loans, the emergency room nurse from Ocean Township uses about half of her take-home pay to whittle down her debt, she said. At 27, she lives at home with her parents while the $1,608-a-month payments take their toll despite a stable job and comfortable salary.

I wont be able to buy a home. I cant buy a car, said Bijas, who now makes about $60,000 a year. The idea of getting married and getting kids is frightening. If I can’t afford to move out of my parents house, how can I afford to raise someone? Its all going right out the window.

Ms. Bijas really hits the nail on the head. College loan indebtedness will affect the housing industry, the auto industry, and the formation of families for decades. It will slow any economic recovery.

It is time to stop increasing loan amounts and produce cost-saving alternatives to bricks-and-mortar colleges. As Professor Reynolds notes in the article, You shouldn’t have to borrow six figures to get a college education.


Some Interesting Info on College Debt at Michigan State

by Chris Gacek

June 5, 2012

Michigan States newspaper (The State News) has an informative article by a recent graduate, Caron Creighton, who accumulated $30,000 in debt. She writes, The American expectation that a student simply can get a summer job to pay for college and graduate with limited debt and countless job prospects is completely skewed and not at all applicable to todays society. She also points to information published by Bridge Magazine which presents a snapshot of college debt at Michigan State. It turns out that the change in the total amount of student loans at Michigan State increased 49% from 2007-2010.

The New York Times Makes a Splash on College Loan Debt

by Chris Gacek

May 15, 2012

Andrew Martin and Andrew Lehren have written a major story on college loan debt for the New York Times (5/12/2012). As the authors note: …. growing student hangs over the economy like a dark cloud for a generation of college graduates and indebted dropouts. One interesting aspect of the article is its discussion of the less than honest campaigns that non-profit colleges use to entice students to attend them. Another devastating insight: Many students and parents dont have a firm understanding of the cost of attending college, or the amount of debt they will incur. And most colleges arent much help. Oh, and one mother who co-signed loans for her daughter is taking out life insurance on her child. Thats when you know its getting serious.

Martin has a follow-up article that is first-rate. In it he speaks with E. Gordon Gee, president of Ohio State, who says that public colleges and universities need to devise a new business model to pay for the costs of education, beyond sticking students with higher tuition and greater debt” (in quotes - NYT summary of Gee’s thinking).


More from Glenn Reynolds on the Higher Education Bubble

by Chris Gacek

May 11, 2012

This past weekend Professor Glenn Reynolds, University of Tennessee Law School, published another newspaper article on the college debt bubble. Reynolds is one of the best writers on the college debt bubble as he calls it. He believes that the market for exorbitantly priced higher education is getting soft as market forces and public awareness take hold.

He also takes note of 21st Century alternatives to the old brick and mortar education model. He mentions a number of high-tech ventures that are taking off: Harvard/MIT edX, Minerva University, Stanford professor/Google bigwig Sebastian Thruns Udacity.

New thinking abounds: Glenn references Andrew Coulson (Cato Institute) who proposes that it is becoming more practical for students to educate themselves via online methods. See George Leefs brief discussion of Coulsons idea here.


Some News and Recent Articles on College Debt

by Chris Gacek

April 23, 2012

The College Debt issue is heating up. Last week, President Obama argued that interest rates on government-issued student loans should not increase from 3.4% to 6.8% — as would happen if a rate abatement were allowed to expire this year. See article.

Well, at an event today in Philadelphia with Sen. Marco Rubio, Governor Mitt Romney agreed with President Obama. Governor Romney stated that the poor job market for recent college graduates weighed heavily in his thinking. While one might argue that both are behaving badly here, I do have to wonder if the government wouldnt be making out like bandits with a 6.8% spread on their loan portfolio. Isnt that sort of the reason that the feds kicked out the private lenders they were making too much money?

There have been a number of interesting articles recently that have touched on the college debt problem facing the nation. The Wall Street Journal has an excellent story (and accompanying video) by Sue Shellenbarger describing the effect student loan debt is having on decisions to have a career, get married, and have children.

Thankfully, some schools are responding. As Thomas Lindsay notes in a piece for NRO, Texas A&MSan Antonio announced a plan to offer a four-year bachelors degree in applied arts and sciences in information technology for $10,000. Total not per year.

Finally, the student debt crisis is almost always analyzed in terms of the effects on students. Well, it turns out that many parents are being brutalized by the cost of college as well. This Dear Abby column reveals how one couple depleted their retirement accounts and deferred needed maintenance and repairs to their home.