Student loan debt: New bubble, new burden or both? [VIDEO]

Is student loan debt the next economic bubble to burst in the U.S.? Will most of these studious young adults ever find the kind of employment commensurate with their degree or the amount of money payed/borrowed to obtain it? Will college costs revert to pre-easy debt levels?

Yes, maybe and not likely.

We (Sonya and myself) are at the stage of life to have seen two kids through college age. Our oldest used a combination of cash and scholarships to finish a 4-year degree in philosophy with no student debt. Our second born attended college for a couple of years before changing directions and entering the workforce. (More on that later.)

I crammed a four year degree into 29 years and finished with no debt. Part of that was due to pastoral opportunities that included educational support. I’m currently half-way through a masters degree debt free.

Recently the New York Times told multiple stories related to the burden of student debt. In are article entitled A generation hobbled by the soaring cost of college, we read:

With more than $1 trillion in student loans outstanding in this country, crippling debt is no longer confined to dropouts from for-profit colleges or graduate students who owe on many years of education, some of the overextended debtors in years past. As prices soar, a college degree statistically remains a good lifetime investment, but it often comes with an unprecedented financial burden…For all borrowers, the average debt in 2011 was $23,300, with 10 percent owing more than $54,000 and 3 percent more than $100,000, the Federal Reserve Bank of New York reports. Average debt for bachelor degree graduates who took out loans ranges from under $10,000 at elite schools like Princeton and Williams College, which have plenty of wealthy students and enormous endowments, to nearly $50,000 at some private colleges with less affluent students and less financial aid.

Dallas Mavericks owner, the rowdy Mark Cuban, wrote in Business Insider in May:

It’s far too easy to borrow money for college. Did you know that there is more outstanding debt for student loans than there is for Auto Loans or Credit Card loans? That’s right. The 37 million holders of student loans have more debt than the 175 million or so credit card owners in this country, and more than all of the debt on cars in this country. While the average student loan debt is about $23k, the median is close to $12,500. And growing. Past 1 TRILLION DOLLARS.

Cryn Johannsen, reporting on AlterNet today, writes about the underbelly of student debt: suicide.

Suicide is the dark side of the student lending crisis and, despite all the media attention to the issue of student loans, it’s been severely under-reported. I can’t ignore it though, because I’m an advocate for people who are struggling to pay their student loans, and I’ve been receiving suicidal comments for over two years and occasionally hearing reports of actual suicides. More people are being forced into untenable financial circumstances as outstanding student loan debt has surpassed $1 trillion. And people simply aren’t able to pay all the money they owe. In the past few years, the rate of defaults for federal loans has increased at an alarming rate. According to the Department of Education, those recent graduates who began repayments in 2009, 8.8 percent had already defaulted on their federal loans. That compares to 7 percent in 2008. Currently, 36 million Americans have outstanding federal loans. I can’t help but wonder how many of those millions are feeling distressed or suicidal, or how many have attempted suicide because of all that debt hanging over their heads.

(Johannsen’s reporting first appeared in HuffPo and the Economic Hardship Reporting Project.)

The Atlantic published this graph in a recent story to provide perspective. If accurate, nearly half of graduates have $10k or less in debt. But, 54% have between $10 and 100k in student loan debt at the time of graduation.
Student Loan Debt Graph
Though author Derek Thompson remains pro-college as the article makes clear, he is forced to admit that college is only a “sure(-ish) bet.”

When my son–the second born mentioned above–came to us with a desire to drop out of college, I responded about like any parent. What are your plans? How do you think you will have a career without a degree? All the typical Baby Boomer responses. Perhaps my educational history was a stronger testimonial than my words as he proceeded to quit attending after finishing the spring 2011 semester. As he was already an adult we decided to support his decision.

Thereafter I received a steady stream of articles from him chronicling the student debt wave, the difficulty of getting a job in a graduate’s degree field, and the difficulty of getting a job at all paying enough to make a living and pay off the accumulated student debt. When we moved to Nashville, he was hired within a couple of weeks (based on a personal referral), received a promotion in about a month, and, if he chooses to remain with his current employer, will likely be making more in a couple of years than he ever would have in the specific career for which his degree would have prepared him.

As if we needed reminding some of the most influential business leaders of this generation did not finish college, including Steve Jobs, who dropped out of Reed College, Larry Ellison of Oracle, Bill Gates of Microsoft, Mark Zuckerberg and Dustin Moskovitz of Facebook, Michael Dell of Dell Computers, Brian Dunn of Best Buy, Anna Wintour of Vogue, Barry Diller of IAC, John Mackey of Whole Foods, David Geffen, Ralph Lauren and Ted Turner. Examples from government? Scott Walker, the governor of Wisconsin, dropped out of Marquette University. He is joined by Gov. Jan Brewer of Arizona, Gov. Gary Herbert of Utah, U.S. Sen. Mark Begich of Alaska and 33 members of the U.S. House of Representatives. Humanities? Maya Angelou never attended college to learn her craft. Nor did Gore Vidal, August Wilson, Mark Twain, William Faulkner, F. Scott Fitzgerald, Robert Frost, Joseph Brodsky and Harper Lee. Neither did Woody Allen, Clint Eastwood, James Cameron, Robert Redford, Michael Moore, Sidney Pollack, George Clooney, Hillary Swank, Tom Hanks, and Julia Roberts. Steven Spielberg was on the “Marty plan” finishing in 2010. (See CNN for the full list.)

Peter Thiel, a co-founder of PayPal, is so convinced that college stifles innovation he is offering 24 fellowships of $100,000 each to young entrepreneurs. The catch is they must drop out of college.

Thiel thinks ideas can develop in a start-up environment much faster than at a university. And the project is also intended to question the idea of higher education. Thiel told TechCrunch in April that the United Sates was in a higher education bubble.

“A true bubble is when something is overvalued and intensely believed,” he told Techcrunch. “Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo. It’s like telling the world there’s no Santa Claus.”

Below is a video that explains the student loan debt bubble. It is short and worth your time. I would also encourage parents for rethink the idea that all kids must go to college in order to do well. Some people need college; others do not. It is vastly more important to teach a love of learning and a biblical work ethic. Learning does not require college, and those who work hard will almost always find themselves bubbling to the top. (HT for the video: Jonathan Howe)

Marty Duren

Just a guy writing some things.