Student Loan Debt Slaves

CNBC recently aired a special report titled, “Price of Admission: America’s College Debt Crisis”, which explored the nearly 1 trillion dollar debt burden faced by college graduates. The program highlighted the experiences of several average Americans who took out fairly standard student loans to get their degrees, and now find themselves with a mountain of debt, disappointing job prospects, and no recourse to get out from under their massive debt burden. The show presented some compelling facts and figures to demonstrate the extent of the problem and exposed how “for profit” colleges like University of Phoenix use aggressive sales tactics to coax people into loans they can not afford.

But as I watched the program I found myself pleading to the television, “Just get to the root of it– why are college tuitions so high and why are so many students becoming debt slaves?” The very moment that thought popped into my head, the narrator said it, “So why are college tuitions so high?” Ok. Here it comes, I thought. Lay it on us. So why are college tuitions so high? Wait for it… rock climbing walls!

What!? CNBC’s analysis of the skyrocketing costs of college tuition led to the conclusion that colleges across the country were building lavish facilities, such as an expensive gym with a rock climbing wall, to attract students to their campuses. For good measure, the program spent about 5 minutes chasing a red herring in the form of a lavish conference for college administrators at a fancy winery in Napa Valley.

While it’s great that CNBC is bringing to light a serious problem that adds one more ingredient to the bubbling cauldron of crap that is our debt based economy, it is mind-boggling that a business network could fail to understand why we are in this mess to begin with. So why are we in this mess? First, why are college tuitions so high? Second, how did millions of Americans allow themselves to become debt slaves?

Why are college tuitions so high?

The chart on the right shows that since 1978, college tuitions have increased at three times the rate of inflation. How could that be? The advent of computers and the internet should be bringing the cost of education down as record keeping and administration has become much easier. Sure, colleges are spending money on new buildings such as fancy gyms, but they’ve always done that. Most colleges already have a good portion of their buildings already in place and fully owned. Not to mention, enrollment is rising to pay for new infrastructure. Competition from online colleges should be forcing brick and mortar Universities to keep prices low. Could it be that something else is going on? The chart below is very informative. It tracks the price of tuition, room and board at Yale University since 1787.

Whoa! What the heck happened in 1950 and 1979? The federal government got involved, that’s what. In 1951 Yale received its first research grant from the federal government. In 1958, the government started its first student loan program, the National Defense Education Act. Then in 1979, the government created the Department of Education (ED or DoED) which administers financial aid such as Pell Grants, and provides government backed student loans. (It should also be noted that leaving the gold standard in 1971 caused inflation to rise accounting for a good portion of the price increase, but as the first chart shows, college tuitions rose much faster than inflation during that timeframe.)

Like most government social programs, the Department of Education was created with the best of intentions– to help all Americans earn a degree, especially those who could least afford college tuitions. And like most government social programs, the DoED has made life worse for the very people it intended to help. According to Richard Vedder, economics professor and author of Going Broke by Degree: Why College Costs so Much, the percentage of low-income students is lower today than it was in the 1970’s before Pell Grants and government backed loans kicked in.

In 1950, it was not uncommon for people to put themselves through college. The tuition at Yale in 1950 was $600 per year. That equates to $5315 in 2011 dollars using the BLS inflation numbers. (To be fair, it equates to $17,421 using the shadowstats real inflation numbers which I often cite when discussing inflation.) The price of tuition for many public schools at the time was under $100 ($886 in 2011 dollars). Students could wait tables at night or get a summer job to pay their tuition, room and board. Today, tuition at Yale is $36,500 per year and the national average tuition is $26,273 at private universities and $7020 for in-state students at public universities. It’s much harder for a person to work their way through college today than before federal aid began.

If you follow the steps, it’s easy to see why federal aid and government backed student loans boost tuitions. Peter Schiff recently interviewed Kelli Space, a college graduate who created the website in an effort to solicit donations to help pay off her nearly $200,000 in student loan debt. (You can listen to it here.) In the interview, he goes all Socratic method on her to help her realize why her tuition was so high. It went something like this:

Schiff: If you couldn’t get the loans, what would you have done?
Space: I would have worked. (She later mentioned she could have lived at home and gone to a local college.)
Schiff: And would you be better off?
Space: Oh, so much better off.
Schiff: So all this aid didn’t help?
Space: No.
Schiff: But you know who got helped? Northwestern.
Space: Of course.
Schiff: They got that $20,000 (per year) that absent these loans they never would have got. How many of your friends were getting these loans?
Space: Pretty much everyone.
Schiff: What if nobody could get a loan to go to Northeastern?
Space: I think the student body would dwindle.
Schiff: And what would be the response by Northwestern?
Space: Umm… maybe lower tuition?
Schiff: Absolutely. You hit the nail on the head. They would lower tuition to the point where people could afford it. In fact, if government loans didn’t exist, you may have gone to Northwestern anyway because the tuition would be more affordable.

The fact is, without the government guaranteeing the loans of students like Kelli, there is no way any lending institution would lend huge sums of money to an 18-year-old high school graduate with no job and in many cases no clear career path. With the government guarantees (and since 2010, direct government loans), any prospective student can get a loan, which vastly increases the money pool to pay for tuitions and allows colleges to jack up their prices. When the money doesn’t have to come out of the student’s pocket and instead is in the form of an abstract loan that needs to be paid at some future time, prospective students are naturally less sensitive to price.

As government sponsored student loans make college more expensive, they simultaneously degrade the value of a college degree. Easy access to loans coaxed many students to attend college who may otherwise have chosen not to. A high school degree used to be worth something in the job market and a college degree was special. Today, with seemingly everyone choosing to go to college, a college degree no longer sets a person apart, but has become a prerequisite for a decent job. This trend almost forces people to attend college. Dr. Vedder estimates that 17 million college grads are doing jobs that could be done by high school students. I’m sure there are many more employees who have learned on the job in a profession that has nothing to do with their college degree.

But while the artificially high price of tuition is a problem, the bigger problem for many graduates is the oppressive debt burden they find themselves in upon graduation.

How did millions of students become debt slaves?

According to CNBC, in 2009, 67% of students graduated with debt averaging $24,000. The total outstanding student loan debt is over $880 billion. The official default rate on student loans is 7%, but that number only measures defaults in the first 2 years. Meanwhile, students can legally defer their loans for 3 years to postpone default. If all defaults were counted, CNBC estimates the default rate at 1 in 3.

The cost of these defaults is partially borne by the taxpayers, but the real damage is done to the students themselves. Student loans are a particularly insidious type of loan. If a borrower defaults on a home loan, the bank gets the collateral (the house), and the borrower loses her equity, but the loan is retired. In the case of student loans, if the borrower defaults, he continues to accrue interest costs and the lender can garnish his wages. The loan can’t be wiped out by bankruptcy. In fact, it can even outlive the student if the parents co-sign the loan. So why would so many people choose such an option?

[Before I continue, let me be clear that I am a huge proponent for going to college. It’s lots of fun, there are tons of girls running around (or guys if you prefer), you can drink beer and stay out late without your parents hassling you. You can even learn some stuff. For many, a college degree or even a post-graduate degree is essential to enter their desired profession. For others, the general knowledge they receive, the people they meet, and their collegiate track record and degree will play important roles in their career paths. There are many factors involved in choosing to attend college and which college to attend. The discussion below simply deals with the financing aspect of the decision but by no means implies that it is the most important factor to consider.]

The CNBC special does an excellent job of highlighting the psychology behind the decision to go to the best college at any price. But the special fails to point out that it is a lack of financial education that allows students and their families to get into such financial trouble. (I view this as a failure of our educational system, but that’s another topic.) The fact is, students coming out of high school have very little understanding about how debt works or the time value of money. As the CNBC documentary demonstrates, many times their parents don’t understand those topics either.

The social forces in our society are all aligned to push students toward a decision to do whatever it takes to attend the school of their dreams, regardless of price.

The government wants to be able to claim they helped millions of students go to college so they’re more than happy to promote student loans. It’s the DoED’s main reason for existing.

The Colleges love this government sponsored windfall. The CNBC special highlights the aggressive and deceptive sales pitches of the “for profit” colleges that coax the poorest applicants to get financial aid and take out huge student loans to attend their colleges. But even traditional colleges have a strong incentive to up-sell the benefits of their school while downplaying the costs of student loans.

The Parents want the best for their children and are willing to make whatever financial sacrifices it takes to get them into the best schools.

The Students, of course, want to go to their favorite school. To an eighteen-year-old, the expense of financing a loan four years down the road is an abstract concept; but attending the school of their dreams is a concept that is very real.

The only thing counter-balancing these social forces is reality. The first reality is that we all don’t have the academic credentials to get into whichever school we prefer. (I was informed of that by some of the finest schools on the East Coast.) The second reality is that we can’t always afford our top choice. Without government student loans, it would be fairly obvious to people if they could afford a particular school or not. However, with easy loans guaranteed by the government and a lack of financial education to understand all of the ramifications of the loans, it’s easy to see why many people get into trouble.

Instead of making a prudent decision based on economic reality, students and families are swayed by the platitudes of guidance counselors and loan officers that proclaim, “Money should never stop you from going to the best school you can.” Really? Never? What if the career you’re interested in doesn’t really require a college education? What if a less-expensive school offers a comparable education at a fraction of the price? What if the price of tuition puts you in a debt hole from which you can never dig your way out?

The graph below can help shed light on some of the ways people’s perception of the value of college can be distorted. The graph makes a compelling economic case for education; in fact, the more the better. From a financial standpoint it clearly looks like a student would be justified in taking out a substantial loan to get more education. If you become a doctor or a lawyer you’re pretty much guaranteed a job with a high salary to pay down your loan.

But lets examine the graph a little closer.

The left side of the graph shows unemployment rate. While it tells us that 97.5% of people with doctoral degrees have jobs, it doesn’t tell us how many are actually doctors. Some may be assistants, teachers, or employed in some entirely unrelated field. A recent article in the New York Times titled, “Is Law School a Losing Game?” shows that even lawyers aren’t exempt from the debt trap as many recent law graduates can’t find jobs as lawyers and can’t pay their high loan expense.

The right side of the graph depicts median weekly earnings. In many ways this is a good measure because if they used mean weekly earnings, super high earners like Bill Gates, Mark Zuckerberg and Serge Brin, might skew the results to show “some college, no degree” as being the road to riches. However, all that the graph tells us is that the median worker, who most likely is working as a doctor or lawyer, is getting a good salary. It doesn’t account for the person with a doctorate degree who is working as a teacher or writer or is unemployed. Professionals make very good money, but unless they patent a cure for cancer or bring class-action suits against tobacco companies they don’t have as high of an upside as some other career paths.

The next thing that is important to note is that the chart doesn’t account for differences in the circumstances and abilities of the people in each category. It’s safe to assume that on average, high school dropouts are less intelligent, less motivated, come from a background with fewer opportunities, are more likely to get involved with drugs, etc. than the people who strive to become doctors or lawyers. We would expect the high school dropout population to have less job success than the doctorate population regardless of formal education. A more accurate gage of the impact of education would be to examine the employment statistics for people of similar backgrounds, personalities and abilities, who chose different levels of education. Unfortunately, this data is harder to accurately track.

That being said, it is certainly an advantage to have a college degree on a resume when competing for limited jobs. However, this advantage also tends to be skewed as people compare apples to oranges. For example, a college graduate entering the workforce in 2011 will have a huge advantage over a 2011 high school graduate applying for the same job. However, it’s less clear what the college grad’s advantage is over a high school graduate with four years of work experience in the desired field. It could be that many prospective employers would rather hire someone with four years of proven work experience, than someone with four years experience drinking beer and getting ok grades. Not to mention, the employee with work experience is probably already in the work force, and it’s a lot easier to keep your job than to get hired.

Another consideration that chart fails to point out is that the higher the salary (and presumably the debt), the higher the stakes for being unemployed. If a lawyer can’t get a job or has to settle for a much lower paying job, servicing the debt becomes impossible and the debt continues to rise. If the high school grad has to take a lower paying job, the difference isn’t as noticeable, and they’re not saddled with oppressive debt. The real risk of not being able to get a job right out of college, especially in today’s economy, is rarely factored into the financing equation.

Finally, the chart doesn’t take into account the four (or more) year head start in salary that a high school grad has over a college grad. In a world of compounding interest, time is money. The high school grad can save and invest immediately, while the college student is racking up and then paying down debt. Let’s take the example of a student at the average priced private college with ten-year student loan at 6.8%. We’ll assume Mom and Dad are footing the bill for room and board. Ten years after graduation they would have paid $104k to the school and nearly $40k to the bank in interest. The college graduate will presumably get a higher salary than his non-college counterpart, but he will also pay more in taxes both on a percentage basis and a total dollar basis. The high school grad will have had a roughly 14 year head start to begin saving and investing for retirement.

Obviously, this is not a complete analysis of all of the financial considerations of choosing a college. For example, an expensive private school or highly rated school may offer an environment where students can meet other smart, rich, well-connected people who may be instrumental in their career. There are all sorts of factors to consider.

The point of this exercise is merely to show how there is a bias towards over-valuing a degree which can lure people into the tempting loans made available by the government. Unfortunately, as tuitions continue to rise dramatically, from a strictly financial standpoint, college makes sense for less and less people.

How do we get out of this mess?

So basically, we have a government agency, the Department of Education, that has jacked up the price of college, diminished the value of a college degree, decreased the percentage of low-income student enrollment, and created a generation of debt slaves. And all of that at a cost of only $70 billion dollars a year to the taxpayers. As the congress is struggling to find even a billion dollars to cut out of our enormous budget, here’s $70 billion on a silver platter.

Would higher education cease to exist if we didn’t have a federal government department to run it? On the contrary; it would thrive. Perhaps there would be a short transition period where the DoED would scale down the federal loans over four years. Some private companies would step in to provide loans but they would be much more realistic. Colleges would likely vendor finance new students to some extent much like car companies provide loans to attract car buyers. Colleges seeking diverse student bodies and the very best students would increase their scholarships for bright, low-income students. Without a steady stream of guaranteed students, colleges would face an increasing need to innovate, become more efficient, and create programs and offerings students desired. But the biggest outcome would be that colleges would cut tuitions dramatically which would enable people to once again work their way through college or save up for a few years to pay for college without condemning themselves to a life of indentured servitude.

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43 Responses to Student Loan Debt Slaves

  1. Ross Siegel says:

    Interesting piece. I’ve heard the argument before that debt creates higher admissions costs. I still don’t see the causality, honestly, but it is a tidy notion to believe that student debt begets institutional debt. I think this is only part of the story.
    The other part is a huge, undeniable building arms-race on college campuses that is creating massive debt for universities. Sadly, I think this arms race to accommodate growing enrollments with fancier dorms, high tech infrastructure, and gleaming research facilities is the bigger issue.
    At least at the two schools with which I was affiliated this was the case.

    • The building arms-race contributes, but it’s a bit of a chicken and egg. In the past five years colleges spent an average of around $14B per year on infrastructure projects. However, students took out $446B in loans in that time period. Without that extra $446B added to the revenue pool colleges would be cutting back on expenses (not building shiny new libraries for one) and slashing tuitions to compete for students.

  2. Excellent article. Shows the benefits of the Free MARKET. Laissez Faire for me.

  3. Mister Rumbles says:

    This is a great article on an problem that’s going to become more and more disastrous to our nation as time goes on.

  4. Sara says:

    Sergey (note the ‘y’; he’s Russian, not French) Brin actually finished his undergraduate degree. It’s his Ph.D. studies that he suspended when he co-founded Google.

  5. Rich Clarke says:

    Great Job!

  6. Will Hobson says:

    The system is a little bit more then screwed up. There are a lot of poor students, which the federal loan programs are “designed” to help that don’t even qualify, like me.

    So, I’m finally out of high school. I didn’t get good grades in school until my senior year, when I finally started taking responsibility for them and other things. So no scholarships were to be forthcoming because of my performance and, because I’m a white male, no other scholarships based solely on the fact that my demographic is thought of as not needing any help. It was then told to me, “Well, at least you’re poor, there is no way you don’t qualify for federal student aid.” (I should probably point out that my parents are separated and were dirt poor for most of my childhood, no college money was waiting for me when I got out of high school).

    So, I try to apply for the FAFSA, and I find out I can not. Why? Because before you turn 24, you must file your parents tax information to prove that you’re poor enough to receive the money, even if you are out on your own, which I was. Since my parents were separated I tried to see if I could just file one of them. I couldn’t file with my mom, because my stepfather is a native American and receives so much money from his tribe(via casinos) that I wouldn’t qualify under them (not that my stepdad would ever pay for my college, which is fair…I’m not his kid). I couldn’t file under my father because, even though he made what would be considered acceptable wages for me to get money, he never files his taxes, and thus was impossible to use him without any tax information from him.

    So, even though I was out on my own, my own apartment, barely making it on a minimum wage job in my early 20’s, I couldn’t go to college. There was no way I could pay the bloated cost of the tuition and still be able to pay for food and rent. I had to wait till I was 24 before I could claim only myself.

    I’m 25 now and I have very little reason to want to go to college. Maybe to learn something useful, like another language. I think I’ve discovered more about the real world on my own then I ever could of hoped to on a college campus. I’ve had conversations with my peers that have gone to college and it just seems like it does something to their attitude and their philosophy that seems totally detached from the real world.

    Anyway, I don’t want this to sound like “sour grapes”, but I do want to agree with all of you that these are the unintended consequences of government trying to “help”.

  7. R says:

    Grrreat analysis… will definitely this on facebook…

  8. cpascal says:

    I wasn’t aware that college costs exploded after federal aid was introduced. As so many young people are taking out massive loans to finance college, and it’s uncertain whether they’ll ever be able to pay back these loans, I think that getting rid of the federal aid system might be an idea worth considering.

    It would also be a good thing if employers would stop insisting on college degrees for jobs which have nothing to do with the things you learn in college. In Europe, most people learn vocational skills through a combination of an apprenticeship and vocational school. As long as employers continue to only consider hiring college graduates, many young people will feel as though they have no choice but to start out in life by going into debt.

    • Geoff says:

      The reason employers tend to require degrees for employment is two fold; first it is a way of decreasing the number of applicants to sift through (this is slopy and lazy but true), and secondly, the education level of a high school graduate used to (emphass on USED TO) mean something. Now days between the unions and political correctness (not wanting anyone to fail and have them all look bad let alone having little Jonny self esteam hurt), crappy teachers and administrators protecting their jobs; if you hire someone with only a HS Deploma you are rolling the dice and risking your unimployment insurance rates when you find out they can’t read or reason above a 5th grade level. The way things are going you will need to have a PhD to work the counter at Micky Dee’s (after 6 weeks of training- retraining).

      • Geoff says:

        and this is what you get when you rely on spell check too damn much and forget to hit F7 be4 sending

  9. Barbara says:

    At these high costs the loans should be interest free or very low,say 1%. I have a student loan for about $40,000 and I am 58 years old. This loan will outlive me and I was the only one that signed for this loan. Wouldn’t it be wiser to charge me little interest so that this loan can get paid off?

  10. dspence says:

    I’m 46 with nearly 100K in student loan debt. When I got out of the military the old GI bill covered my little families monthly needs but the cost of school, housing and day care had me taking out loans and working night shifts to make it all work. I was not able to get into any standard state schools since housing was so expensive in the areas and the school assisted housing was reserved for graduate students so I had to attend a private college that was willing to provide housing for the whole family. Back then once I started back to school we could no longer get food stamps or WIC assistance either. I’ve been paying on my loans for 9 years now and have barely made a dent in the total amount since I have had to raise my family at the same time.
    Here is a simple suggestion. Let me pay my government student loans back directly from my pay check as a pre tax payment. For me paying nearly double what I do now in pre tax would make my income bracket change enough that I could make a larger payment and still live at the level of lower middle class like my other educated co-workers. Oh, and under that set up I probably could pay it all off before I retire and then have to claim hardship so I never pay any of it again.

  11. C says:

    Has the cost of college so dramatically increased in countries where higher education is directly publicly funded? I’m inclined to guess that it hasn’t and, if true, the real problem would be the mixture of government support and for-profit interests. If the US government had set up a complete system, a large part of the problem would not exist. In fact, when I just looked up tuition for colleges in Britain, I came up with 3,375 pounds, or about $5,440 US. Not bad! And when I looked up tuition in France, I found that a student pays about $540 and the government contributes about $16k. That’s about what we pay in NY per student for public K-12.

  12. debt says:

    I just got a bill from my student loan lender: it said I owed $6,347.58 per month.
    Are you serious? I’m moving to France.

  13. MO_Student_Debtor says:

    This was a really well done article. I’ve been dealing with a mountain of student debt for more than 10 years now. When I went to school for a Computer Science degree, I and everyone around thought I would always have a job- forever. Things were great for about 6 years out of college and then what most people don’t realize is there was a recession in certain industries around the year 2000. In part because it was after the big “gold rush” of the fear of the Y2K. But, the bigger part was so many of the jobs in IT were either being off shored or being given to people shipped in on visa’s willing to work for a fraction of what we were being paid. Layoffs were rampant, and finding another job was very difficult, much less anything even reasonably close to what the salaries should have paid.

    I originally borrowed $40,000 and because of layoffs over the years, my loans have had penalties and compounded interest added bringing them to currently around $180,000. The author is right about many things, but one of them specifically that young kids coming out of high school have no concept of the debt they are signing up for and the life altering consequences it can have.

    My last comment is this. I get so outraged when I hear about these government programs like IBR and ICR being touted like the fix to everyone’s problems. There are nice little secrets they don’t tell you about until after you have already signed up, and maybe not even then for sometime. For example, they say, “oh, it’s great after 25 yrs on the ICR and then your remaining loan balance will be forgiven”. What they DON’T tell you is that whatever is left owing on your balance becomes immediate taxable income. Look out for that whopping tax bill cuz then you have Uncle Sam coming after you. The only difference between Uncle Sam and Aunt Sallie Mae is Uncle Sam might be willing to work out a deal- but rest assured he will still get the better end of the bargain…. one way or the other.

    Yeah, that’s just a great deal for all of us serving in the student loan debtors society!!

  14. Lady Dedlock says:

    This was a great, detailed and informative article. I’m 27 years old and have only recently started college. I waited to attend college until I was 24, mainly because of my uncertainty of what I wanted to study.

    After figuring out that bit, I enrolled and have spent the equivalent of one year studying via online at the Academy of Art University in San Francisco, CA, only to rack up 20K in that small amount of time. This is of course a “for-profit” school, which I was unfortunately uninformed about back when I enrolled.

    Only recently, I started to look at schools in Europe (my citizenship is there, and residency here in the States) and I am quite considering moving back and then studying there. Europe’s HE tuition costs a fraction of those here in the US. Even the UK’s recent spike in tuition due to the current recession – three times the amount of what tuition used to cost – still pales in comparison to our own. Let’s see, $16K to attend Cambridge or $40K for Harvard?! Lucky Europeans, I say!

    My time off from school has allowed me to reflect if I really want to rack up such a massive amount of debt in an uncertain job market. Up until this point, I have been a good saver, and the highest bill I’ve accrued has been the loan I took out for my Hyundai Accent, something I would not have been able to do had I started school when I was 18-years-old and un-sure of what career I’d like to pursue. And even paying that off has been a struggle and it was ONLY $15K.

    My plan now is to move to Europe, hoping to use my workforce experience I’ve garnered through the years to land a job in a field of my liking. Difficult enough yes, but a slightly smaller gamble than that of taking out so much money for a degree, in which field you may or may not be able to work within once you graduate.

    My time off as also made me realize that a simple business course could help me more than any BA degree can. Having the talent and the materials to create my own product and career – which is in Fashion, by the way – it seems rather silly to go to school to learn about past designers, when frankly I’ve done that homework all of my life, and there is very little they can teach me that I do not already know.

    Researching schools overseas has really put into perspective the costs and true worth of HE. While in most of Europe intelligence and hard work lends you a spot in college, in the US your wallet is what matters, making you spend the equivalent amount of a mortgage for what is now considered a sub-par level of education compared to that of the rest of the world.

    While I don’t rule out school altogether, especially if I manage to attend a European institution for quite a bit less, I’m going to bet my luck on the “some college” demographic there, and see if it takes me anywhere whiteout having to add up any more green to my current diminutive and useless loan.

    • Hi Lady,

      I’m glad you liked the article and thanks for your detailed comment. I’m also designer and while I did learn some valuable techniques in design school, it’s nothing I couldn’t have learned on the job, teaching myself, asking other designers and practicing my skills. If you were to apprentice with a few designers for a couple years instead of going to college, I’m sure you would learn more about design and business, have some great references, and maybe even make a couple bucks instead of paying tuition. You can always take classes at community college for particular skills like design software or sewing techniques.

      Design is 100 percent about your portfolio and zero percent about your degree or where you went to school. Actually, it’s half about your portfolio and half marketing. Just keep designing and document your designs in their best possible light.

      Good luck.

  15. Debt Overload says:

    I also made the mistake of going to a FOR PROFIT college. I was so naive thinking that all the money I borrowed would be so easily paid back. I had no clue what I was signing up for at the ripe age of 18. At that age, you have no concept of what it takes to pay back a college education. You just assume it will work out “somehow”. There is a reason the drinking age is 21- they have determined anyone younger than that is not mature enough to make good decisions with alcohol. But, somehow, we are mature enough to make decision that could have life long consequences of becoming a slave to the government with student debt.

    I started out owing $40,000 in student debt in 1996 in IT. Things were good for a few years and then I was laid off from Sprint because they were hiring people w/HB1 Visas who were willing to work for a 1/3 of the price of us Americans. Who could compete with that. It affected the whole market for my line of work even in a large city because it resulted in several thousands being laid off FLOODING the market. But, moving wasn’t going to solve anything because the outsourcing trend was spreading like a cancer in IT. The concept of paying workers $5/hr overseas became quite appealing. Long term it proved not to work, but that didn’t help those of us back here trying to survive. I was laid off 3 different times over a few years and my student loans started to snowball with penalties of 18% applied each time PLUS compounding interest. My loans are now $180,000. That should be ILLEGAL. There is no limit as to how many penalties they can assess or compounding interest.

    I have considered moving abroad and just ditching the loans. I know with the age of technology, that I may never truly “outrun” them- but I don’t know what else to do. The IBR programs are a start, but not nearly enough. Not only that, anything left over at the end of the 25 yrs is TAXABLE income- so what good does that do? They hide little things like that so the general public just assumes people w/student debt are being dead beats.

    I wish I had never gone to a 4 year college. I think I would have been much happier. The government will garnish my social security if there is any left when I get too old to work. The only solace I have in that little grim fact is that there likely will be no ss left by that time. So, there won’t be anything to garnish anyways. The joke will be on them at that point.

  16. Ben Brown says:

    Where can I find references to back up some of these stats? I would really like to find more info on tuition inflation starting in the 50s…

    • Seems like today the best place to start is the internet. I’m sure there are plenty of good books on Amazon which should reference their sources in the bibliography. Articles on the web should link to their sources (or at least mention them) so you can follow up and check the data. If you are planning on writing a formal paper you should trace these back to primary sources whenever possible.

      Some websites to check out that probably have many great articles on education include,,

      good luck.

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  23. clint says:

    What better way to cultivate a market for selling money (loans) than to provide every potential customer easy access to a loan? As more consumers bolster their ability to spend with extra cash from a loan, purchase prices are more easily afforded, and sellers are able to raise prices. Need for the loan will be amplified greatly if the markets audience is wide because as the whole market joins, all sellers will find higher prices are supported. An addiction is cultivated as higher prices demand the consumer obtain a loan to afford the purchase.
    I’ve been looking for an article like this that agrees with me. I would find in news commentary during the late 1990’s or early 2000’s statements about loads of investor cash looking for income. If your in the business of helping investors earn income and realize there is a tremendous amount of money out there trying to find income, then the “student loan” was certainly an under served market awaiting further cultivation. Return on an education had not yet been completely consumed by education’s cost and many families could yet afford tuitions for many schools.

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