Scot McKnight (as usual…) is up on this one. He pointed it out on his very good blog today…student loans for college education have increased exponentially over the years. I don't think a week goes by where I don't have a conversation with a family member, former or current student or another faculty member who doesn't remark about this alarming issue. Here's a flashback – I attended a private, religous-based college. At the time, the tuition and costs were higher than any other educational opportunties that I had…I walked away from undergrad and graduate work with student loan debt. But paying $30 to $40 a month (in addition to the same amount per quarter with another loan) for 10 years was a burden but NOTHING compared with some I know who are leaving college with $40K, $50K up to $100K in loan debt. Now, I am a HUGE educational proponent…but the quesitons that some of this information is forcing us to answer is significant. What is a college education really worth? Is it worth a student entering the adult world after four or five years with essentially a home mortgage? How do or can families even help these days? With 401Ks and other investment issues tanking over the past few years, how can a family save up to $100-300K per student to cover JUST an undergrad degree? How can we make education more affordable? Is it even possible? How are the financial pressures from these types of obligations going to cripple a young person's growing life through critical first years of emerging adulthood? I don't have answers…this is a complicated issue. As the article also points out (you can see a sample of another article below), there is not "bankrupcy" out of this debt…the government will still go after you if you attempt to default. This is a signficant crisis…definitely worth your attention!
If you want to get a name as an economic seer, try this one. The next subprime crisis will come from defaults on student debts, starting with for-profit colleges and rising to the Ivy League. The parallels with housing are striking. In both, the written warnings aren’t understood, especially on penalties and interest rates. And in both, it’s assumed that what’s being bought will rise in value, in one case the real estate, in the other the salaries which will accrue with a degree. One bubble has burst; the second is already losing air.
Still, there’s a difference. With mortgage defaults, banks seize and resell the home. But if a degree can’t be sold, that doesn’t deter the banks. They essentially wrote the student loan law, in which the fine-print says they aren’t “dischargable.” So even if you file for bankruptcy, the payments continue due. Hence these stern word from Barmak Nassirian of the American Association of College Registrars and Admissions Officers. “You will be hounded for life,” he warns. “They will garnish your wages. They will intercept your tax refunds. You become ineligible for federal employment.” He adds that any professional license can be revoked and Social Security checks docked when you retire. We can’t think of any other statute with such sadistic provisions.