College Bubble

[Alex Linder]

Student Loan Consequences: Real, Costly, and Personal

Written by Bob Adelmann

The consequences of making low-interest loans to unqualified buyers created the real-estate bubble that popped in 2007, resulting in the Great Recession. According to Gary Jason at the American Thinker, it’s about to happen again, only this time over student loans. He wrote: “This bubble has been fueled by the federal government’s lavish subsidization of the student loan program … in a way similar to how the housing bubble was fueled by government agencies pushing subprime mortgages.”

Under the Student Aid and Fiscal Responsibility Act (SAFRA) signed into law as part of ObamaCare in March of 2010, students may borrow money directly from the federal government regardless of their credit score or any other financial “issues” they may be facing. They are not priced according to any “individualized measure of risk” nor are there loan limits. They are instead politically determined by Congress with undergraduates receiving lower interest rates than graduate students, but graduate students allowed to borrow more than undergrads.

This forced entry by the government into what was once a private market transaction has numerous consequences, nearly all of them negative, and most of them predictable.

First, private lenders disappeared from the market as they could not compete with taxpayer funds and taxpayer guarantees and the resulting below-market interest rates that became available.

Second, the growth in the education industry expanded far beyond what was normal as college administrations saw their opportunity to dip into the “honey bucket” of federal funds, with the consequent growth in administration overhead and higher tuition fees. According to a study by Bain & Company (yes, Mitt Romney’s Bain), “operating expenses are getting higher [at major colleges and universities such as Cornell, Harvard, and Princeton] and they’re running out of cash to cover it.” According to that study, the growth in those colleges’ debt and rate of spending on new buildings and equipment rose far faster than did their spending on actual education itself. Said Bain, "Boards of trustees and presidents need to put their collective foot down on the growth of support and maintenance costs. In no other industry would overhead costs be allowed to grow at this rate — executives would lose their jobs."

Thirdly, this growth in the cost of obtaining what was once a coveted possession, a college degree, makes any mathematical justification or cost-benefit analysis highly questionable. Many students are entering a job market with degrees that over-qualify them for what the market is able to provide. According to Jason, “over half of all recent college grads are unemployed (or employed only at jobs not requiring a college education).”

The unnatural increase in the flow of funds into the education industry has predictably driven prices higher. As Jason Bower pointed out at The Freeman,

Since 2000, tuition at public, four-year colleges has risen by an inflation-adjusted 72 percent, and over the past 25 years it has increased at an annual rate 6 percentage points higher than the cost of living. [Emphases added.]

Fourth, when the deferred payments on these loans start, the newly-minted grads without work cannot make them and they go into default. In a recent Department of Education study, loan default rates have risen in each of the last five years, and at an increasing rate, touching almost one in every seven students with a loan.

Fifth, those loans cannot be dissolved or forgiven in bankruptcy except in extreme circumstances, leaving students in a figurative “debtors’ prison” interminably. As The New American noted,

Inasmuch as the student borrowers are uniquely required by law to repay under [nearly] any circumstances, the student loan business is the closest thing … to debtor prison in modern society.

With such a debt burden, students are forced to make, or avoid making, life choices, such as getting married or buying a home. Who would want to take on a partner who owes tens of thousands to the federal government on the day of the wedding?

And then there is the issue of bribery and insider-dealing. Lenders found ways to entice school officials to direct students needing money to them in exchange for incentives. In addition, administration officials found it profitable to support candidates willing to enhance the loan programs for the benefit of the schools. Peter Wood, executive director of the National Association of Scholars, put the matter succinctly:

The "free market" in this case was never anything close to lean and efficient. To the contrary, it was (and still is) inefficient and frequently corrupt, dominated by players who found it easy to bribe college officials, wring favors from politicians by means of campaign contributions, bilk the Department of Education, and live off generous subsidies.

All of these consequences come from first causes: the belief that the government has the right to impose its ideological position onto students and then force taxpayers to pay for those consequences when they inevitably arrive. As Kevin Villani, former chief economist at Freddie Mac, wrote in the American Banker, the progression from ideology to practice is fraught with danger. First, he says, the government must

declare that the opportunity to … go to college, is a basic right. Then [set] a goal for … college attendance well above private individual demand. When budgets become tight, have government lenders replace private lenders.

This cements into place the “moral hazard” that provides government loans to students without concern about how they might be paid back, because ultimately all government promises are backed by the taxpayer.

The ultimate consequence is borne by the student himself. Once he realizes his predicament — like a lobster trap — it’s too late.

For 36-year-old Nick Keith, it’s too late.

When he decided to go to culinary school, Keith was persuaded that he could indulge his interest in food by learning the food service industry. The school provided him with all the answers to his questions (for which the school later was successfully sued for making false statements but far too late to help Keith), and pointed him to the sources to lend him the money.

Said Keith, “I should have seen all the signs. [The campus tour guide] had a used car salesman’s answer for everything,” including the lie that 99 percent of all graduates found work after graduation. It turned out later — much later — that the real number was closer to 48 percent, and that counted graduates who had to find work outside of food service. Keith’s first job upon graduation was working on a meal assembly line, making $10 an hour.

But that’s when his student loan payment program kicked in. He had to make a choice: Pay the rent, or his student loan, but not both.

It’s now nearly a decade since his graduation. His debt, with interest compounded upon interest, is $142,000 at a 17-percent interest rate. He can’t get out:

I get my groceries at the local food bank. I have sold or lost 99 percent of everything I ever owned.

He can’t get work because his bad credit turns off prospective employers. He lives in an aged minivan, relies on the Salvation Army for meals, and parks his van at highway truck stops. For all intents and purposes, he is homeless.

Solutions abound, at least in theory. The government should get out of the student loan business altogether and let the private market take over. And Congress should allow students to declare bankruptcy over their loans when necessary. Even there, however, the consequences are towering. There is more than $1 trillion in student loan debt. Almost 15 percent of loans are already in default. The Department of Education would have to receive special funding from Congress — the taxpayer — to be able to write off the bad loans that would result.

The costs of college education would rise to more normal, market-driven levels, keeping some qualified students away. Colleges and universities would have to make massive, perhaps draconian, cuts in their overhead. It would take years for some semblance of balance between supply and demand to return to the education industry. And changing the laws would have precious little immediate impact on people such as Keith.

Restoring freedom through private markets, however, is worth the effort despite the pain. The alternative — a continuing debtors’ prison for students and a continuing of the corrupt educational cartel and its incestuous relationship with politicians — is unthinkable.

A graduate of Cornell University and a former investment advisor, Bob is a regular contributor to The New American and blogs frequently at www.LightFromTheRight.com, primarily on economics and politics. He can be reached at [email protected].

http://www.thenewamerican.com/econom...y-and-personal

[Alex Linder]

College sometimes make sense for the top 15% intellectually. For others, it rarely makes sense. Stay out of debt, work, save your money, get rich. Once you're rich, you can have a lot of influence - see jews buying Congress, buying media. If you don't have any special talent, and you want to aid the white cause, this is the way to do it - on the business side. On the personal side, get married and have children. It's really pretty simple, but most people don't want to do it. It doesn't take a great job or a great partner to make it work either, a job at McDonalds and an ugly woman will do just as well, just take a little longer on the money side.

[Rick Ronsavelle]

honey bucket (slang):

A honey bucket is a bucket that is used as a toilet in communities that lack a water-borne sewage system. The honey bucket sits under a wooden frame affixed with a toilet seat lid and may be lined with a plastic bag. These are often the same type of plastic five-gallon (19 litre) buckets used for shipping many paints, cleaners, and solvents, as well as institutional quantities of food products. Honeywagon is the traditional general term for a cart, wagon or truck for collecting and carrying excrement or manure.



A modern plastic honey bucket

Jest the facts, ma'am. Jest the facts.

[zoomcopter]

Originally Posted by Alex Linder

Fifth, those loans cannot be dissolved or forgiven in bankruptcy except in extreme circumstances, leaving students in a figurative “debtors’ prison” interminably.

It’s now nearly a decade since his graduation. His debt, with interest compounded upon interest, is $142,000 at a 17-percent interest rate. He can’t get out:

I'm sure our government will come up with a forgiveness plan, maybe work the debt off by being a sniper in Tehran, or for young white women, giving pole dancing lessons in the inner cities.

[Marse Supial]

The 15% in default that they're citing is the technical default rate. Huge numbers of student loans are not technically in default because the borrowers are utilizing the income contingent repayment program (ICRP) whereby they pay a certain percentage of their income above the poverty level for their family size. This can be as little as $10 per month in some cases. The loans are never going to be repaid -- they'll die owing them. The payments being made don't even service the interest, so the amount owed increases each year. But they're not counted as defaulted because the borrowers are paying, even if it's only a token amount. The real number is probably more like 40% to 50%, counting the loans that have no hope of ever being repaid.

The worst thing you could ever do to your college-aged kid is to let them get buried in student loan debt.

[Alex Linder]

Originally Posted by General_Lee

The 15% in default that they're citing is the technical default rate. Huge numbers of student loans are not technically in default because the borrowers are utilizing the income contingent repayment program (ICRP) whereby they pay a certain percentage of their income above the poverty level for their family size. This can be as little as $10 per month in some cases. The loans are never going to be repaid -- they'll die owing them. The payments being made don't even service the interest, so the amount owed increases each year. But they're not counted as defaulted because the borrowers are paying, even if it's only a token amount. The real number is probably more like 40% to 50%, counting the loans that have no hope of ever being repaid.

The worst thing you could ever do to your college-aged kid is to let them get buried in student loan debt.

Thanks, I thought that seemed like a low number.

This article doesn't even mention the online college debt scam, which has taken in millions of prole women.

If anyone ever finds a good, in-depth piece about the online college industry, please post. I have not come across one in my usual sources.

[H.B.]

Originally Posted by Alex Linder

Student Loan Consequences: Real, Costly, and Personal
Under the Student Aid and Fiscal Responsibility Act (SAFRA) signed into law as part of ObamaCare in March of 2010, students may borrow money directly from the federal government regardless of their credit score or any other financial “issues” they may be facing. They are not priced according to any “individualized measure of risk” nor are there loan limits.

This is absolute lunacy. This will inflate the costs of diploma mill "credentialing" at an even faster pace.

Unless someone else is paying for it, the best advise is to stay as far away as possible from the diploma mills, develop meaningful job skills and work very hard.

[ernst blofeld]

There are lots of sad personal stories on this site
regarding student loan debt. I'd rather owe money to
a mafia loan shark!

http://occupystudentdebt.com/

[Leonard Rouse]

Originally Posted by ernst blofeld

There are lots of sad personal stories on this site
regarding student loan debt. I'd rather owe money to
a mafia loan shark!

http://occupystudentdebt.com/

A couple of favorites of mine:

http://www.jdunderground.com

http://thirdtierreality.blogspot.com

Those are law-specific, but it's the same phenomenon.

Ironically,

http://www.studentdoctor.net

is full of idiots so pumped full of pretense that they don't realize they're being taken for a financial ride--and they've got the medieval residency scam plus 'socialized' medicine on top of it, any one of which being sufficient reason to GTFO yesterday. At least they won't actually starve if they stay the course, unlike art school graduates and unconnected law grads outside T14.

[H.B.]

Originally Posted by ernst blofeld

There are lots of sad personal stories on this site
regarding student loan debt. I'd rather owe money to
a mafia loan shark!

http://occupystudentdebt.com/

The demon George Soros taught his followers well: whine, complain, be weak and defeatist when lashing out against "the establishment."

I agree since the "establishment" to them is "White, Christian, heterosexual and Gentile." Let them give us wimpy "opposition" so we can turn them around and convert them into militant nationalists against the jews.

In all seriousness, college is a scam. A "degree" may get you an entry level job in a good company. From there, you are on your own to work hard and develop meaningful skills to get beyond that. A high school diploma used to get you that, but you would grow up faster that way. ZOG wants wimpy, whiny beta males and females who defer adult responsibilities and live an extended adolescence.

No bank in its right mind would give an unemployed 18-year old with very little work experience a mortgage for a $150K. Yet, ZOG is more than happy to lend that same 18-year old $150K for a useless degree in exchange for four years of a soft, degenerate lifestyle without developing meaningful job skills.

Yet, the home has value you can measure. You can resell it or rent it out when you pay it off - or use it as collateral in a loan. The degree has no such value in resale, rent or as collateral. You can default on the mortgage in a bankruptcy (and get out of paying it) but you are indentured to pay the student loan debt until death.

That being said, those "woe is me" web-site are entertaining to read once in a while (to see how bad others are off compared to you) but very unhealthy to take part in them with their sob stories.

Stay out of the jew debt trap. If you find yourself entangled in it, work hard, be frugal and get yourself out. Then be rich and successful.

[Leonard Rouse]

Rate MY Plan:

paulcrudd (Jan 16, 2013 - 4:30 pm)

29 y/o male, 220k in student loan debt, making 45k a year.

Plan: take car, drive into lake.

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tdawg (Jan 16, 2013 - 4:34 pm)

Shit. You were a striver your whole life. Might as well aim for the biggest most memorable suicide possible.

Reply
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atheistlawyer (Jan 16, 2013 - 7:40 pm)

Mass elementary school shooting?

Reply
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paulcrudd (Jan 16, 2013 - 7:43 pm)

ugh, that's horrifying

Reply
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atheistlawyer (Jan 17, 2013 - 12:18 am)

Too soon?

Reply
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docreviewsux (Jan 16, 2013 - 8:48 pm)

No...go for the local T3 law school instead....leave kiddies alone.


http://www.jdunderground.com/all/thr...threadId=39903

[Peer Fischer]

Does the loan always go directly to the school, or is it possible to get the loan put into one's own account? Just curious.

[Thad Charles]

Originally Posted by Peer Fischer

Does the loan always go directly to the school, or is it possible to get the loan put into one's own account? Just curious.

Any leftover financial aid will be dispersed to your account, yes. At that point I'm pretty sure you can spend it as you see fit.

[Fred O'Malley]

Not only do they use colleges to indoctrinate you with Marxist ideology, but they pay for you to go, so they can enslave the best minds with a lifetime of indebtedness to them for the honor of letting them enslave your minds. College is for idiots.

[ernst blofeld]

Back about 7 years ago I used to work with a guy who confided to me his student loan woes.
He had studied something ridiculous like comparative religion, which not surprising, ended up being completely useless.
The debt, about 40k, drove him into bouts of despair and depression.
Saddled with such debt he said he would never be able to get married or have kids. Then he would say that he was considering going back to school in the hopes of making more money to pay off this ball and chain.
Where I'm at now I meet a lot of tradespeople who never attended college:
plumbers, electricians, carpenters, mechanics, etc.
Even in this economy they always seem to do well.
Last year I called up someone from the yellow pages to fix my stove.
I was surprised when a young woman showed up. She was very efficient
and professional. She figured out the problem and installed the new part in a half hour. The bill was about $75. Not bad money for such little work I thought.
People will always need services like this.
If you have ever had to do without hot water because your water heater
is broken you realize very quickly that it's people like these who keep
civilization going more than college professors, corporate marketing executives, and niggerballers.

[zoomcopter]

Originally Posted by H.B.

No bank in its right mind would give an unemployed 18-year old with very little work experience a mortgage for a $150K. Yet, ZOG is more than happy to lend that same 18-year old $150K for a useless degree in exchange for four years of a soft, degenerate lifestyle without developing meaningful job skills.

Unless, the federal government guarantees the bankster will get his pound of flesh.

[The Bobster]

Originally Posted by Peer Fischer

Does the loan always go directly to the school, or is it possible to get the loan put into one's own account? Just curious.

My brother's in-laws took out a student loan for their daughter and used it to put in a swimmimg pool. They stuck him with paying for her education.

[Marse Supial]

The lawyer glut is testament to the power of television to short circuit common sense in people of otherwise ordinary intelligence.


L.A. Law, Law and Order, Ally McBeal etc.: beautiful, prestigious people working in beautiful offices with beautiful views out the windows, working on intensely interesting cases, apparently making great money judging from the beautiful cars they drive and the homes they drive them to. Hey -- I should go to law school so I can get a job like that and live like that. So what if I have to borrow $100,000+ to do it. I can easily pay that off in a couple of years with the kind of money I'll be making.


Life ain't like what they show on TV, as my dad would advise me as I watched the Brady Bunch.

[Hunter Morrow]

Oh yeah. The Jewmedia glamorizes Jew professions, bankers, lawyers, etc.

Everybody in the world has an MBA or a law degree. There are plenty of people who went 6 figures in the hole and spent 6 years of their life getting a law degree and because they aren't sufficiently tribed up they wind up out of work or doing boring grunt jobs for 30 grand a year.

[ernst blofeld]

I used to date an attractive blonde lawyer. She was one of the "lucky ones"
landing a job right after school with one of the top law firms(jew run) in Chicago.
She made over a $120k the first year but she worked 12 hour+ days so the jew partners definitely got their money's worth out of her.
Rent and nice clothes for work ain't cheap in the city.
She never had time to cook so most meals were bought in restaurants, again not cheap.
After taxes, in which she received hardly any deductions for being single, childless and a non home owner, her disposable income didn't seem like much, especially after her student loan payments that made this glamorous big city life
possible.
Most slackers who worked in record stores had a better quality life in terms of leisure time and less stress.
After a couple years of this she one day decided she didn't want to be a lawyer anymore and moved out west to work on a horse farm!

I remember that the head partner was this old jew who put more hours in than anyone. A Wyatt Mann must have used his face as the inspiration for many of his cartoons. God knows how much money he must have had but there he was, working until 9pm every night hustling for every possible shekel.