19 Feb 2013
It Takes a B.A. to Find a Job as a File Clerk

Anybody who wonders where the next financial crisis is coming from need look no further: $100,000 of student loan debt with a salary of $37,000 per year is a recipe for absolute economic catastrophe.

Student loan debt is effectively eternal - you must pay it off or die trying, as you can't even bankrupt out of it. It literally follows you until you die, and your Social Security or other pensions. Any asset is open season for student loan debt. Any wages or income (even lottery winnings) can (and will) be garnished to satisfy the debt. Requiring future janitors and mail clerks to incur such debt just to enter the labor force is economic suicide. These folks will never clear the debt - never. And the government (read "taxpayers") will be left holding the bag.

How did this happen? The Federal government guarantees student loans - when a borrower defaults the government makes the bank or other lending institution whole. There's absolutely no risk for a bank to write a Federally guaranteed student loan. The government then tries to collect - but from what? There's an old adage about blood and turnips that's more than applicable here. Congress can ignore reality as much as it wants by "getting tough on deadbeats", but that's not going to change the fact that the deadbeats are broke, and couldn't pay if they wanted to. The banks and universities have effectively swindled both borrower and government here - they've raided the Treasury and saddled students with what effectively amounts to debt slavery. Even those lucky students who do get good enough jobs to eventually pay off their debt are snookered: why do you think the rate of inflation in education has been so extraordinary? Easy money supplied by the banks and guaranteed by the Feds has removed anything resembling a market in higher education.

Eventually the chickens will come home to roost - exactly what form this will take is hard to say. But I've got to wonder if the Federal government considers itself as "too big to fail", and if so, exactly who it expects to bail it's sorry ass out?

The college degree is becoming the new high school diploma: the new minimum requirement, albeit an expensive one, for getting even the lowest-level job.

(link) [New York Times]

22:33 /Politics | 1 comment | permanent link