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12 Disturbing Facts about the over a TRILLION Dollars in Student Loan Debt. Is this the next financial crisis as tuition is up nearly 500% in the past decade?

Student Loan Debt by the Numbers

  • $1.1 TRILLION : Approximate amount of outstanding student loan debt—second only to mortgages in household debt.
  • 60% of the $1 Trillion is owed by Americans OVER the age of 30.
  • 37 Million people have outstanding student loans.
  • 1-in-5: U.S. households that have student loans.
  • $26,682: Average outstanding balance for a borrower with student debt.
  • 1-in-8: Share of borrowers with more than $50,000 in student debt.
  • 40 % : Share of American households headed by someone under 35 that have student loan debt.
  • 25 % : Share of borrowers under age 30 that spend more than 10 percent of their income on student loan payments.
  • 30 % : Share of borrowers in repayment that are delinquent on a student loan.
  • 6.7 Million: Number of borrowers who are more than 90 days delinquent on a student loan.
  • 9.1% : The number of people who defaulted on their loans in 2012
  • 31 %: Percentage increase in the number of student loan borrowers between 2007 and 2012.
    Source: ConsumerFinance.gov

 

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College Grads: The New Debt Slaves

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Despite growing evidence of unemployed college graduates, under-employed college graduates (working a job that doesn’t require an advanced degree), and over a TRILLION dollars in College Debt, it concerns me that a “4-year College Education” is still being sold to high school students as their ONLY hope for success after graduation. Are students being sold into college debt slavery?

The college tuition costs of today are NOT the costs of yesteryear for many who advise young people AND, there are so many different options for learning, earning, and enjoying a career. [Full Disclosure:  All three of my own children attended college and, there was preliminary awareness and a plan in place prior.]

If a college graduate can’t get a job or, the job they do get doesn’t pay well, they’re not going to be able to pay on their expensive student loans. The consequences can have a long term impact never imagined–maybe even resulting in wage garnishments, judgments, or as the recent trend: Colleges Suing Their Own Students For Repayment.

What’s the solution?

I came across this article by Chriss W. Street and thought the supporting evidence from financial institution sites to be a compelling in confirming a scary, financial scenario.

 College Graduates Are the New Debt Slaves

With the estimated cost of attending a four year state college in America at $120,000, the average family of four should expect their children’s college to cost more than buying a home.  Even though only 24% of Americans believe college is affordable, 97% still believe getting a college degree is financially important to improve your life.  This optimism regarding the value of education has provided the justification for 60% of the 20 million students in college last year to borrow $42 billion from the United States government this year to stay in school.  But with the reward for a college degree falling and default rates sky-rocketing, many students and their parents will end up as the student loan debt slaves.

College tuitions since 1986 have risen by a breath taking 498%, compared to 115% for general price inflation.  The main driver for this hyper-inflation was the dramatic expansion of the Federal Stafford Loans since 1992, following Congress’ elimination of requirement that government-backed student loans be subject to parental income restrictions.  The most enticing aspect of these sub-prime loans is that repayment is deferred while a student is enrolled as at least a half-time student, then are subject to a grace period for six months after the student leaves school either by graduating, dropping below half-time enrollment, or withdraws.  The sudden access to billions of dollars in “free money” allowed highly unionized colleges to dramatically increase tuition rates without fear of driving away financially strapped under-graduates.

For students graduating this year with a four year degree, college sounded like a good financial investment when they first enrolled in 2008.  At that time, the median annual earnings of young adults with bachelor’s degrees was $46,000, versus only $30,000 for those with high school diplomas or equivalencies.   This means that on average, the bachelor’s degree salary beat a high school diploma by 53%.  But average salary means that half of graduates make more than $46,000 and half make less.  Eliminate engineering, economics and accounting degrees, the starting salary drops below $42,000.  Graduate with an education, sociology or creative arts degree and the starting salary drops below to $36,000.

In 1970, when the overall unemployment rate was 4.9 percent, unemployment among college graduates was negligible, at 1.2 percent.  The Bureau of Labor Statistics reports that with the current national unemployment rate of 7.9%, unemployment for college graduates is substantially better at 3.7%.  But many college graduates over the Great Recession have been forced to “trade down” to take $9 an hour starting jobs at Wal-Mart, FedEx and Starbucks.

Student loans just passed the $1 trillion dollar mark and continue to be the fastest growing consumer debt in the United States.  The total percentage of Americans with 1 or more student loans has increased from 12.1% to 19% over the last seven years.  Average student loan debt was $17,233 in 2005, but the level has swelled by 58% to $27,253 in 2012.  In contrast, outstanding consumer credit cards and car loans balances in the U.S. actually shrank during the same period.

Lending to people who did not have to qualify to borrow and will not begin paying money back until after they have consumed the product, has created a colossal new sub-prime lending crisis.  Over the last two years, the default rate on student loans, according to the New York Federal Reserve’s quarterly credit report, rose from 8.5% in 2011, to 11% by September 2012.   The U.S. Department of Education reports the current default rate is 13.4% and estimates that 40% of student debt required to be in repayment status is not performing according to the original loan terms.

A generation of Americans has gone deep into debt for their education.  Some will pay-off their loans, but many will default or seek loan modifications.  Those defaulting on a student loans will face dire consequences, beyond a bad credit record — which can tarnish hopes of getting a car, an apartment or even a job.  Under law, the U.S. government can attach their wages, tax refunds and even inheritance.  Unlike other consumer borrowers with onerous debt, student loans are specifically ineligible for compromise or rejection under the United States Bankruptcy Code.  Going to college may still be the best time of a person’s life, but millions of students and their families are doomed to a life as student loan debt slaves.

From where I sit, it feels like the study of the liberal arts and the culmination of that education—the liberal arts and sciences degrees—are being challenged like never before. State governors, top business executives, and parents are questioning the end products that come from liberal arts institutions. In a recent Washington Post article, a managing director of a major financial management company complained that a liberal arts education mainly created “incredibly interesting, well-rounded cocktail party guests” but not graduates who are likely to find jobs.

Unfortunately, I think that a too-narrow focus on first jobs for graduates has these folks missing the bigger point—liberal arts institutions educate for employment, but they also educate for success. That’s the “plus” in our system, our game changer, and I will come back to that later.

I must say that the frustration of critics is completely understandable: unemployment rates remain high, and college education, already shockingly expensive, is growing ever more so. Students are graduating with unprecedented debt. People are concerned about the value—the return on investment of a college degree. It’s no surprise to me when high school students and their parents approach our admissions counselors asking, “So, what kind of job will Susie be able to get with her bachelor of arts degree?” or more pointedly, “Do you offer STEM education?”

Without question, STEM (science, technology, engineering, and mathematics) is the new buzzword for those anxious about post-graduation employment. These are all disciplines in which America must excel if it is to retain its industrial and economic strength. In his February 2013 State of the Union address, President Obama urged that we double-down on science and technology education starting in our secondary schools. To give the argument even more traction, some would widen the list of STEM professions to include educators, technicians, managers, social scientists, and health care professionals. Indeed, the talk these days in my state of Virginia is about STEM-H (for healthcare).

According to the U.S. Department of Commerce, the STEM job sector is growing at twice the rate of non-STEM occupations, but we should note some caveats. First, let’s remember that STEM workers, as identified by the Commerce Department, comprise only 5.5% of the workforce. Second, while STEM workers overall may earn 26% more than their counterparts, the greatest differential is seen in the lowest-level jobs; the higher the terminal degree, the less the earnings difference.

Moreover, it is not a given that the only path to STEM job success is to obtain a STEM degree.

  • About one-third of college-educated workers in STEM professions do not hold degrees in STEM.
  • Two-thirds of people holding STEM undergraduate degrees work in non-STEM jobs.
  • One-fifth of math majors, for instance, end up working in education. (That is a good thing, I would argue.)
  • Nearly 40% of STEM managers hold non-STEM degrees.

Continue Reading…

One of EdTech’s 50 must-read IT bloggers speaks out on the issues in higher education that are shaping the future.

Kevin Corbett is an online learning program developer with a keen interest in social media, gamification and mobile learning.

Kevin Corbett“E-learning will continue to increase and be leveraged in universities to extend learning,” says educator Kevin Corbett.

Corbett’s self-titled blog provides educators with invaluable advice about technology today, along with how-tos they might not get from their institutions. It was recently named one of EdTech’s 2015 “50 Must-Read Higher Ed IT Blogs.”

EdTech recently had the chance to discuss Corbett’s origins as an educator, what piques his interest in the world of educational technology and where he sees institutions leaning in the future.

EDTECH: How did you get started in education, and what has kept you in it?

CORBETT:  During college, I had the opportunity to coach local youth. I was energized at helping young people succeed and inspired with their personal transformation when they earned success. Going into education was important to me for four reasons: because I wanted every student to be successful, to have them feel the personal pride of accomplishment in the classroom, help them develop their interests, and achieve their individual goals.

I’ve stayed in education because I’ve been fortunate to have exceptional administrators who have given me the trust, freedom, and power to develop cutting-edge transformative programs, so students and teachers have positive outcomes and experiences.

EDTECH: Higher education is facing a series of crises — some financial, some regarding the shape of its future iterations. How do you see the higher education world adapting to these challenges? And what role will e-learning play in those changes?

CORBETT:  The complexity and variability of cost models related to higher education make it a difficult problem to understand. Simply, as public subsidies are reduced and tuition increases, it’s problematic for both the institutions and its students. (See: Delta Cost Project)

Tweet this! E-learning will continue to increase and be leveraged in universities to extend learning. I’m please to see some growth in meaningful certifications (when accepted by industry) and competency- based learning, which has potential to reduce per- student overall costs.

Shifting costs to students through rising tuition only, is troubling: 70 percent of students borrowing an average of $33,000; 30 percent in deferment and over $1 trillion dollars in student debt nationally. Tuition costs exceeding income are not indefinitely sustainable. It bothers me to see local high schools pushing every student to attend a four-year university with the myth that a college degree somehow guarantees success in life.

EDTECH: Your blog posts often cover your thoughts on gamification. What was your response to learning that it was being cut as an evolving trend on the 2015 NMC Horizon List? Is there a future for gamification, and how does it work in higher ed classrooms?

CORBETT: I’m not surprised by gamification being dropped from the 2015 NMC Horizon List. There is promise and peril in gamification as it relates to education. I find it’s generally not very well understood how to apply game principles to a course (versus playing a game being “game- based learning”) as it goes beyond simply adding points, badges and leader boards. Engagement and fun are the critical components. Additionally, it can be very time- consuming to develop on the front -end, and I’m not confident there is time or incentive to invest in its development, nor a platform that makes it easy to do so.

EDTECH: The past five years have been truly transformative for universities in the technology sector. Do you foresee a similarly turbulent future in terms of technological progress, or are we at a plateau?

CORBETT: Tweet this! I believe the transformational learning made possible through technology will continue to progress and has potential to improve the higher education learning space.

Any turbulence, I suspect, will come from policy discussions in two places. First, are the policies institutions will be forced to engage in as they confront global technological advances and the need to meet challenges from outside competing forces. Second, will be internal decisions around fundamental questions about how their institution organizes and operates, while also providing rich, engaging learning and teaching opportunities. Personally, I will be most interested in what instructors do during class when all the course content is online. One of my favorites that others could learn from would be Boise State University’s Jackie Gerstein.

EDTECH: You have a rich history in blogging. What advice would you offer those just starting out?

CORBETT: I think it’s important for an individual to establish their own online identity and control the message about themselves that they want public on the Internet. Reputation management can be troubling to professionals who find themselves maligned on the Internet and frustrated with the ease at which other people can post negative things about them. Educators worry about students’ “digital footprints” and “digital tattoos,” yet often neglect their own. Blogging under your own domain name gives you that control.

Here are my personal “Four C’s” for beginning bloggers:

  • Start first with CURATION, by re-posting other’s’ articles that interest you.
  • Next, post the article and COMMENT about it.
  • Third, CREATE your own original article.
  • Lastly, engage with others and CONVERSE with people about mutual interests.

Read more of Corbett’s thoughts on his blog, KevinCorbett.com.

SCYTHER5/THINKSTOCK

The tuition at our nation’s colleges are rising faster than inflation, medical costs, and importantly: the income of 99% of Americans. Four years at a private university now costs as much as a new Ferrari sports car, and a student from a public university can expect to graduate with $25,000 or more in student debt. But, did you ever wonder where all that money is going?

Higher Education Tuition Breakdown

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Original Source: http://radioopensource.org/college-budgets/

50 BILLION PROFIT Off Of Students

monopoly-manCollege Debt Crisis

“…the most profitable in the country”

I’ve written extensively about the high-cost of a 4-year college and whether high school educators are doing a DISservice to students in pushing them to a 4-year college– at any cost.

It’s NOT like it was in the old days when students could go to school and work a job to pay tuition. Tuition escalation is just too great to overcome. With the high rate of college graduate unemployment, and even higher UNDER-employment rates, an “educated” and rational person really has to wonder if the cost is worth the return and investigate other options.

Today’s USA Today article: Government projects to make $50B in student loan profit, highlights one of the problems as the United States government stands to PROFIT MORE than ExxonMobil, Apple, J.P. Morgan, or Fannie Mae.

According to the Congressional Budget Office’s latest projections, the federal government projects a record $50-billion profit on student loans this year. ExxonMobil made $44.9 billion in 2012, according to published reports, making it the most profitable company in the country. And if Congress doesn’t stop rates on some loans from doubling on July 1, that profit will rise more, up to an additional $21 billion, a recent report found. However, there are those who claim the projections don’t accurately reflect risk taken by the government and the profits are much smaller.

College Debt vs Student Loan Profits

IF a college-educated populace is a good thing for our society, nation, and humankind in general, why are the barriers so great?

The record-high profits on student loans come during a time of historically low interest rates on home mortgages and car loans. While a home buyer can get a 30-year mortgage at about 4.5% interest, the federal government is charging as much as 6.8% interest on unsubsidized student loans and is less than a month away from automatically doubling the interest rate on the loans headed to poor students unless Congress takes action.

“Because the government has almost ensured anyone who applies will get the loan they need, schools have been able to drive prices up with no concern as to where funding will come from,” Whaley said. “With prices skyrocketing, students are taking on way more debt than they can handle but have no other option to compete in the modern economy.”

Read the rest of the article here and please provide your views on college and how to battle rising costs in the comment section.

 

My other blog posts on College Debt.