<p>Also, if you end up not liking or not being able to afford the car, you can sell it, and recoup your costs, to a certain extent. You can’t sell back your college loan. </p>
<p>I tend to agree that these days, such a loan is a very scary business.</p>
<p>accm205 - I am an alternative physician (meaning I spend more time with patients and earn less money by choice). I am 55 years old and am still paying off the last bit of my medical school loans. I am from a blue collar family and had to borrow money every step of the way. I went to undergraduate school (a state school) for 5 years and then did a masters degree for 12 months. I worked and went to night school to prepare for medical school. Med school debt was 120K on top of my undergrad/grad school debt. My retirement plan is to keep working until I can no longer work. I have one child who starts college in September and I hope to help him with his loans. Don’t get me wrong - I love my work but I have had to give up alot in my life because of the decisions I’ve made. Ultimately, it depends on your future plans. Most likely to get ahead these days you’ll need a graduate degree of some kind. Most employers are impressed by the LAST school you went to, the graduate program that has the most relevance to your chosen profession. Do well as an undergrad at a less costly institution and get into a good graduate program. Some people are helped by family or through marriage, etc. It is very frustrating every month to find out that you have rent or mortgage, utilities, car payments, etc and then on top of that your student loans. Some people also handle this through military service. I have several med school clasmates who delayed the start of their careers by having to pay back the military for 4 years, but ended up ahead because when they did start their careers, they had no debt and were getting paid a salary while in the military. I always used to say, “follow your bliss”. Now I say, “follow your bliss but consult a financial adviser” !!!</p>
<p>accm205 - drdom has just given you a very valuable gift.</p>
<p>drdom, well written expression of what the current situation is for many professionals.
Concerning education lasting for a lifetime, well so can the bills from the student loan companies.
And as could be divined from previous postings, I am an academic. And like many in my field the costs of education are scarcely commiserate with the actual salaries. And it gets worse for those poor condemned souls, the adjuncts.
As such, I have heard repeatedly all the platitudes uttered by the colleges and it wears thin. Under current conditions…“lifelong learners” will be lifelong debtors…“education is an investment”, but for cost to benefit maybe not…and “education may last a lifetime” but so do the debts and resentment if it fails.
And because of the unholy intercourse between academia and the student loan industry the old sureties and associated platitudes are rapidly becoming as irrelevant as a moldy old Horatio Alger story. And word is out about the actual truth of how much education works versus the often damning costs. And it catches students in a horrible psychological dichotomy, they wish to follow their ambition and do as society expects. But they can see many of their friends and family struggling and living like postmodern sharecroppers because they did obtain an education. And for those of us in academia, a very difficult balancing act between teaching good minds and knowing that some will be damned as a result of their ambitions. And not being able to directly tell students that some of it all is a shell game after money and nothing else.
It cannot last, already in some places the word of the street is whispering that education and debt is a fools game. That’s what happens when a system for the public good is co-opted by profiteers. Somebody makes a killing, but its not the students…</p>
<p>It took us many years to pay our $45K debts after H finished B school. We were in the unenvied position of paying private nursery school tuition while still paying off loans. And that was with a high paying job and with 2 incomes. We did not get a new car for years.</p>
<p>cptothehouse, </p>
<p>And that’s why the situation has to be changed. The 45k you paid, could have been better applied to the general economy. And in countries where they are aware of the proper social worth of education…the productive efforts of the educated are applied productively. Here in the US our system knows the value of education, but not its worth.
For upcoming students a college education shouldn’t be at the sufferance of this overtly predatory system.
For those who’ve been in its maw, proper protections are needed. And as the economy continues to struggle to ignore the problems caused by academia’s collusion with the SL industry could be disastrous. Potentially worse than the mortgage mess. But to this point all that is being done is to ensure the gold continues to ring into already full coffers. For the common man who did get caught in the education shell game potential forms of debt relief, be it by service or otherwise will soon be imperative. If this situation isn’t remedied we’ll lose too many of our nations best and most intelligent. And no system can survive long if that condition is permitted.
If nothing is done an increasing amount of a struggling economy will go nowhere but into the maw of massive educational special interest corporations. And those forms of macro-parasitic endeavors draw too much and produce nothing of social value. And they will drag the rest of the economy down as they count their billions. Financial feeding frenzies and bubbles especially those which co-opt beneficial systems are always socially destructive nor can they last. </p>
<p>Really despite all the talk of making education available or affordable, much of the American system for funding higher education has been little more than a disguised system for feeding corporations. And these do not even have the credibility of competing, insofar was they have become a protected monopoly fostered by the government. And that’s the predominant poison which arose from the abrogation of our governments obligation to educate its people.
In terms of the student loan situation privatization was little more then veiled predation.</p>
<p>I heard that the average student graduates with 20,000 dollars in student loan debt. Now since everything is going up i’m sure that will too.</p>
<p>No, $40k is not an excessive amount of debt, but is on the high end of reason. Payments on a 10 year loan at 6% are $440/month. If you can avoid the debt load, do so.</p>
<p>A note to those advising the OP to save the money for grad school — it depends on the field of study. Assitantships in the sciences and engineering are plentiful, and only a tiny fraction of all grad students pay anything for their degree.</p>
<p>One other thing that went away in the 90s was the generosity of companies to pay for higher education. Perhaps it was the rising costs or maybe it was tax breaks that weren’t renewed.</p>
<p>Atana basically describes student debt as slavery. I’ve always thought of debt that way but it’s frequently hard to paint the picture given the freedoms in our lives. My negative experience with debt was back in the mortgage bubble that popped in the 1980s. We were way upside-down on our mortgage but we bought a very inexpensive house (the mortgage company said that we could have borrowed much more). The popping of the mortgage bubble back then scared homeowners, renters and bankers and provided a strong encouragement to save and rebuild personal balance sheets. This set the stage for the boom years of the 1990s which was beneficial. Unfortunately, the boom continued into another housing bubble.</p>
<p>The analogy here to student loans should be obvious. If you take out smaller loans (or preferably no loans), major economic problems that appear when you graduate will be easier to deal with if you have a smaller millstone to carry around.</p>
<p>The road to wealth (outside of hitting the lottery or getting it from your relatives) is to set up cash flows that require a minimum of time and effort where those cash flows can then set up their own cash flows. You can get rich slowly with this approach. Cash flows away, including cell phone bills, cable tv bills, car payments, house payments, daily latte bills, student loan payments, etc. do just the opposite. They make you poor (as in negative net assets) and enrich those that you are sending cash flows to.</p>
<p>Some here have been burned by debt. It’s not hard to find people that are being burned by debt right now. Those big numbers of foreclosures are generating a lot of misery. Many of these people that were so happy when they were approved and when they moved in now have to deal with figuring out how to find cheaper housing, transportation and in telling their kids that they’re going to lose their friends and schools.</p>
<p>One other thing: in the late 1990s in the heydey of the tech bubbles, with kids coming out of college getting rich starting packages (it was amazing to see the number of new BMWs in our parking lot during those days), I’m sure that there were kids going into CS and CE programs that expected a big payday after graduation. Imagine their shock when the tech bubble imploded, companies went bankrupt and surviving companies start outsourcing high-value work. It’s pretty hard to predict how the world will be in four or six years and keeping your liabilities low (unless you have a guaranteed income in your dad’s company) is a safer way to go.</p>
<p>Perhaps not slavery, but very close to indenture. The cost of college has been going up an average of 6% a year since the late 90’s. And since the beginning of this decade the relative amount of non debt aid has been reduced proportionally. And of course after the privatizing of subsidized loans various entities moved in knowing they had a ensured market. And with special privileges given them by many in Congress and the executive which stripped common debtors protections away…they had a bound market.
The problem is given the reduction of non loan support, and the financing shell games permitted these companies its very easy for a reasonable debt to explode into a disastrous form of economic servitude. Some of our representatives are finally receiving enough hue and cry from the common to finally realize that there is a problem. Others do not, handing complaints over to people who were placed in the education department by the same entities that they are supposedly there to regulate. But for a decade many of our representatives have been bought by massive strategic donations and lobbying by these same companies. And being bought is not too strong a word. A little research into how much money has been strategically placed by the SL lobbyists and to what committee members bears out the use of the word bought. The extent to which they have been blinded by tarnished silver was made very evident by the Nelnet attempt to improperly over charge the government for loan processing. This amount was close to 300 million, and aside from some short rumblings in Congress and the GAO, nothing was done to properly investigate the matter. The press such as On Point covered it all, but our representatives and their appointees chose to let the money go. Wonder why? Especially since the amount of loopholed money would have paid for the first 2 years of college via grants for all the students a moderately sized state.
The decision for our representatives will be who they chose to make their enemies, powerful and protected corporations which they deliberately or unintentional let slip or the electorate. And that decision is coming, economic pressures will ensure that sometime this year or early next year that it will.
So yes, it could be difficult to call it slavery and rightly so. But it is something which this country has not seen, nor does it know how to handle. And it is building up to an economic disaster.</p>
<p>I just wanted to say Atana, that I read and appreciate every one of your posts. I think you’re performing a tremendous service by putting all of this out there (here). Thank you.</p>
<p>Thank you. And for such as you who also post on these issues I much appreciate your effort and thoughts.
What our society has done in regards to student loans and education is inexcusable. What has happened is that we take our most intelligent, ambiguous, and willing to serve society and compel them to live under a form of indentured economic bondage. Something is very wrong that this was ever allowed to develop, and especially so since the only ones who benefit are the financiers. And as such it is a form of malice, one which has its will borne by the written word, and secret deal. But it is still a malice, only differing in kind from that brought by the sword or rod.
And from a moral basis, this situation sullies the noble hopes of such as Dr. King, Du Bois, Dewey and others. The content of a mans character cannot aspire if the means to do so have to be bought at such an unfair toll.
And that belies any rationalization which the defenders of our current educational funding system can utter.</p>
<p>The debt and asset bubbles that we’ve seen lately always remind me of the Kondreytieff Cycle. Only this time we really didn’t have a debt washout when it was due. The debt washout is the reminder to society that debt is a dangerous thing. But washouts aren’t politically acceptable so we push them off as long as possible.</p>
<p>Perhaps you could start a blog: the student loan bubble blog. This would be something similar to the housing bubble blog which was a considerable readership. I’ve been on the housing bubble blog for many years and the student loan stuff gets discussed from time to time. It’s also discussed on financial trading boards as the education industry is a driver to the overall economy.</p>
<p>Good idea about the blog it would be useful to have several writing on such a effort, that would seem to be a means to convey the concerns about the whole SL situation. And such a blog could be made more useful if such as BC and Mattsmom would be available.
And the Kondreyteiff cycle seems to be disturbing, insofar as the implication of cyclical boom and bust. But it is no doubt correct. Although any assessment on my part is limited, economics not being my field.
The problem is those who get crushed in the tides as credit bubbles burst and debt repudiation rises may not be in a position to rebuild the economy when its all over. Especially since the regulations have been written in such a way to exclude SL debts from the usual debt resolution processes. And since the federal and state governments have often lent their ability to locate people to these companies…there wouldn’t be a California as the new horizon to begin anew. In that regard it would be very different from the 30’s.
And if that is the case, where will the intelligent and trained people be to rebuild from the upcoming credit and economic collapse partially caused by the SL industries activities? People who’ve been attacked by excessive and predatory debt, may be terminally lowered and marginalized by the systems pressures or will chose to leave it and not return.
And if that is the case, after the wave recedes will there be enough of the educated left with enough status to rebuild it all, and would they even choose to do so?
If these conditions do arise, then some SL CEO’s private golf course, and the unprecedented profits of these companies could mirror the same poisoned glitter of Marie Antoinette’s diamonds. In either case the costs were too much to bear.</p>
<p>The below is from Fortune Magazine, albeit its a few years back, but nothing has really changed. Which is why it may be a useful example, as we now obviously are in a much worse economy than just a few short years ago. BCEagle would the following be an example of the crest of a Kondreyteiff cycle? If it is what would be the expected outcome after the debt repudiation or the bursting of the bubble? And what would be the best means to protect those who’ve been caught in these manner of manipulations after the cycle crashes? If this questionable arena of the finance industry is compared to the mortgage collapse it would seem that a forced correction is not too far away.
In this case the CEO’s would obviously come out alright, they always seem to do so. But in just this one instance we’re looking at millions who are caught into a very questionable situation. And it would seem if they economically are driven under, or even a portion of them, it could have effects not dissimilar to a massive layoff, or major rise in the unemployment rate simply because of their not being able to spend in the general economy. </p>
<p>December 14, 2005: 3:03 PM EST
By Bethany McLean, FORTUNE senior writer</p>
<p>NEW YORK (FORTUNE) - For millions of Americans, the first big financial decision in life is whether to take on a student loan. Student loans are debt, of course, but they represent something different than credit card debt or a car loan: They are part of a quest for a better future.</p>
<p>And they can have lifelong consequences, both good and bad, because for the unwise or the plain unlucky, a student loan can become an inescapable burden. It can almost never be expunged in bankruptcy, and the Supreme Court just ruled that even Social Security income can be garnisheed to pay for defaulted student debt.</p>
<p>The giant of the student loan industry is the Student Loan Marketing Association, better known by its friendly-sounding nickname, Sallie Mae. Many people think that Sallie Mae, like Fannie Mae and Freddie Mac, is sponsored by the U.S. government. And until recently it was. But at the end of 2004, Sallie became an independent, publicly traded company, completing a process begun in 1996.</p>
<p>It is now radically different than it was even five years ago – an aggressive, highly profitable lender and a stock market superstar. Since 1995 its stock has returned over 1,900 percent, trouncing the S&P 500’s 228 percent gain. Today Sallie’s stock sells for 22 times earnings and almost ten times tangible book value, “an almost unheard-of valuation for a financial institution,” as a Criterion Research report noted.</p>
<p>Sallie’s dividend has risen at an average annual clip of 18 percent over the past ten years. And thanks to hefty helpings of stock options, Sallie’s top executives have earned fortunes. From 1999 to 2004, just-retired CEO Al Lord – now the lead investor in a group trying to purchase the Washington Nationals – received total compensation of $225 million. New CEO Thomas “Tim” Fitzpatrick made $145 million over the same period.</p>
<p>To produce those sorts of numbers, a company usually has to be obsessed with the bottom line, and Sallie is certainly that (a big chunk of its executives’ bonuses is based on Sallie’s profits). As good as that may be for shareholders, a growing number of critics contend that those profits are coming at the expense of Sallie’s other constituents: students and taxpayers.</p>
<p>“Sallie advocates policies we believe are frequently contrary to the interest of students,” says Luke Swarthout, a higher-education advisor to the U.S. Public Interest Research Groups. He charges that Sallie used its political clout to shape new legislation that will increase the cost of student loans.</p>
<p>Ira Rheingold, executive director of the National Association of Consumer Advocates, decries Sallie’s growing presence in the ugly business of collecting on defaulted debt. Pennsylvania state representative Doug Reichley alleges that Sallie is engaging in “predatory lending.”</p>
<p>Indeed, Sallie uses high interest rates and fees to charge students as much as 28 percent annual interest on loans. As a result, some have seen their school-loan debt balloon into six-figure delinquencies that they can’t hope to pay when the collection agency (which nowadays may be owned by Sallie) comes calling.</p>
<p>“Sallie Mae’s practices are in the best interests of students, schools, and taxpayers,” a spokesman says. “We were created 34 years ago to provide access to higher education for Americans, and that’s still the business we’re in. No one wins if a student borrower is unable to repay his or her loans.”</p>
<p>You could also argue that student loans are simply a business, like computers or laundry detergent – or maybe health care – and that Sallie’s sole responsibility is to deliver results for its shareholders. But lately there are even some doubts about Sallie’s ability to do that, given the increased risks it is taking to sustain its high profits.</p>
<p>Two Wall Street analysts actually rate Sallie’s stock underperform. Many investors buy the stock because they still see it as a safe, government-backed company. They may be in for a surprise.</p>
<p>To read the complete story on Fortune.com, click he</p>
<p>How much debt you are welling to incur depends on what you PLAN on making after graduation. A friend of my daughter wants to be an engineer after graduation, she is paying for school mostly out of loans (no scholarship). I think she is crazy because she’ll never be able to pay back. On the other hand if you are going into profession that have potential of big bonus or big upside in a short period, then $40,000 is very manageable. Not every person has the desire or ability to make a lot of money, and if that’s the case there is no need to put that much investment (debt) into college.</p>
<p>Greenspan knew about the Kondreytieff cycle before he became the FR Chairman and he said that he would defeat it with inflation. And he got his chance to do so. The thing is that we know about the cycle and the Fed has far more tools now than he did before to fight deflation. Of course the inflation creates bigger dislocations and always needs another bubble to create debt. The bankers win by charging fees for access to money/debt.</p>
<p>So the timing of the last one is up in the air. But a winter is supposed to be where everyone is sick of debt and it is something to be avoided at all costs.</p>
<p>One can never be sure as to what the world will look like in four years. What looks good right now might be a disaster four years from now. Enron and Worldcom looked really good in the late 1990s.</p>
<p>We never know what anything would look like a week, a month, a year or 100 years from now. Ebay, Amazon, Google, Facebook all seem like very strange concept 5-10 years ago.</p>
<p>I had hoped the picture would be better for this next generation. We have gone from our loans to have paid for our educations that put us back several years to taking out loans to pay for our children’s educations. Since the tuitions and COAs have gone up 10 fold since our time, it’s even more difficult. It was horrifying to us when we had those loans. Now I see kids with more than we had for combined for 3 degrees. It has not gotten better, but worse.</p>