From the Wall Street Journal:
Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people.
New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama's proposed 2010 budget.
The sharp growth is "definitely above expectations," says Robert Shireman, deputy undersecretary of the Education Department. "But we're also in an economic situation that nobody predicted." The eye-opening increase in borrowing is largely due to the dire economic environment, which is causing more people to seek federal loans, he says.
The new numbers highlight how debt has become commonplace in paying for higher education. Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate, according to an analysis of the government's National Postsecondary Student Aid Study, conducted by financial-aid expert Mark Kantrowitz. Only a dozen years earlier, according to the study, 58% of students borrowed to pay for college, and the average amount borrowed was $13,172.
Meanwhile, 33% of all workers under the age of 35 live with their parents:
the AFL-CIO released the results of a disturbing new Peter Hart survey, "Young Workers: A Lost Decade" that found that about a third of workers under 35 live at home with their parents, and they're far less likely to have health care or job security than they were ten years ago.
So, considering the state of the family these days, what do you do with a dysfunctional family, or no extended support?
You're on your own has new meaning.
Indentured Servitude
That is where we are heading. The student loan situation is sad. I would argue that it creates labor inefficiencies because it almost forces college graduates to search for "higher" paying jobs and may overlook more socially useful professions.
RebelCapitalist.com - Financial Information for the Rest of Us.
RebelCapitalist.com - Financial Information for the Rest of Us.
just incredible numbers
when supposedly the Obama administration was going to "help students". ~24k in debt off the bat with just this year a 4.7% decrease in overall U.S. wages/salaries.
I wonder about the availability of scholarships.
I saw another pretty damning statistic with some grad students attempting to negotiate standard of living.
58% of TAs were making about $7k/yr and supposed to live on that.
That's another real problem...for Americans at least, if you are lucky enough to obtain funding for graduate school, that funding is simply not enough to even rent a cardboard box...
so, awesome, you got this great research associate position or whatever it is....only to discover you cannot afford to go anyway.
When I went to school, I had the lucky break to literally work my way through, often over breaks, working in my field of study (i.e. wages high enough to carry me along).
That too appears to be dead. That corporations are not offering internships, fellowships, co-ops and so on which one can do to pay for college.
What a complete waste, a refusal to invest in the U.S. future, the U.S. citizenry.
slow death
With the federal loan repayment plans at least you only have to pay a percentage of your income. However, that percentage increases (under the new IBR plan) as your income does. It's like an additional progressive tax on top of our already progressive tax system, and I doubt if the majority of graduates are going to ever pay off all that debt (especially lawyers like myself - see e.g. http://bigdebtsmalllaw.wordpress.com/) given that all our jobs are being outsourced. It sure doesn't provide a lot of motivation to work hard!
unreal
welcome to EP!
well, they are just starting on offshore outsourcing attorneys...
but doesn't it seem like if there is any disposable income anywhere, i.e. anything left out of the middle class...
they are trying to squeeze it?
What is the ROI on college these days in comparison to even say 20 years ago?
I'd love to see that post, i.e. you invest time money for let's call it a law degree, what's the payout over say 10 years now vs. 20 years ago and include the $$ to obtain said investment.
And I recall back in the day....one of the biggest problems, competition wise at that time were the students getting a full free ride, did not have to work plus could spread out their course loads over more time vs. us poor people, who did have to work and could not afford that extra semester/year of tuition to spread out the course load...just right there you were "hit in the GPA" trying to keep up...
so what's that situation now, with "hyper hype" on "accomplishment feathers" and demand for 4.0's, to the point of absurdity (but hey, get a degree from abroad and barely pass....you're still going to get into U.S. graduate schools, unlike the same scenario for U.S. undergrads!)
saturation
I can't speak for other graduate degrees but I know for a fact that the value of a law degree has been decreasing for decades. In spite of this, the cost of going to law school has never been higher, and new law schools are popping up all over the country.
Unfortunately, as far as I know there is no reliable source of data regarding the actual return value of a law degree. The schools themselves present skewed employment data based on surveys returned by graduates, but these statistics overly represent successful graduates and are very likely fraudulent. Prospective students see these statistics and enroll in law school, assuming crushing debt that they will never repay.
The wide availability of federally backed loans has spurred over-consumption of law degrees (and probably other degrees as well). This diminishes the value of the degree and increases the cost of obtaining it. Supply and demand principles don't apply because of false information given to prospective students combined with the fact that the lender who finances the education assumes none of the risk (federal loans are fully repaid by the Fed in the event of default, private loans are non-dischargeable in bankruptcy). Graduates then find that not only is there massive competition for the available jobs, but many jobs are being offshore outsourced to individuals without the crushing debt or degree.
By the way, you might be interested to know that the federal government treats bogus offshore degrees the same as American degrees when evaluating candidates for federal jobs.
Degrees vs. Job Market
Law degree without bar is just a degree. There are many with JD who do not (or cannot) practice "law" but work in related fields or as paralegals, practice specialists, etc. Saturation, yes. Regarding bogus degrees, I recall that the FBI brought fraud cases against federal employees with bogus medical degrees back in the 1980s (an MD degree got you more money for the same pay grade, even if the duties were not medical.)
Degree inflation and student debt is analgous to underwater mortgage, except that you can't walk away from it. The value of a degree depends on the market -- ask any adjunct faculty.
Frank T.
Frank T.
just one more point
Passing the bar doesn't help matters - I passed the PA state bar and the patent bar exam and the best I could do is get a job I could have easily gotten with my undergraduate degree, paying about $70k. So I'm doing OK it's just that my law degree/licenses have no value whatsoever, yet I'm in a tremendous amount of debt. Many of my former classmates are in much worse situations.