Wednesday, April 20, 2011

Student Loans Turn To Student Groans- Tuition Rates To Outpace Inflation

This post may be a little long, so for those of you who learn better from pretty pictures than the written word, here's a flowchart with lots of words!

Student loans have become a necessary evil in today's society. On one hand, we're told that finding a job in the current economy is difficult for everyone, on the other, going to college increases one's opportunity for both employment and salaries. However, because of the rising cost of higher education, the only way many students (myself included) are able to afford attending college, even state schools like SU, involves taking out a student loan or two.

The good news is Uncle Sam is more than happy to lend his nieces and nephews the money they need to continue their education; the bad news is, despite what parents, teachers, and guidance councilors tell you in high school, the chances of being able to pay back Uncle Sam (with interest) aren't great.

According to this article from The Pelican Post and The Economist, "college tuition has risen twice the rate of inflation and four times the rate of wage growth." In the United States, student loans increased 30% between 2004 and 2005. This alone would not be so frightening if 45% of college grads only earn less than $15,000 a year despite owing, on average, $20,000 in loans. If these statistics are giving you the chills, here are the percentages from The Pelican Post of students who are forced to default on their loans:

  • 25% of all government loans default
  • 30% of community college loans default
  • 40% of two year college loans default
  • 43% of loans from for-profit [private] schools default
Economists now worry that the cost of education may lead to the next economic crisis, something we literally cannot afford right now. When a large number of people invest a lot of money in something which ends up being worth less than their investments, these people become burdened with debt, and the economy begins to slow. The education market is starting to sound a lot like the housing market not too long ago, and we see where that got us!

So, what are we to do, Gulls? A high school diploma does not open many doors and has become the minimum requirement to pursue most respectable careers; however, even graduating from college does not assure many students to actually make money. Instead, it becomes a contract in which students agree to become indentured servants to the government. We are paying for the hope that we can realize the American Dream, pay off our loans with our amazing new jobs, and have plenty of extra left over cash to start a family and buy a house in the suburbs.

The government readily lends money to students to invest in their education; recognizing more funds are available, schools begin to raise tuition. They know that if they raise their cost by, for example, $200 per student for a semester, students can easily continue attending the school...they just need to take out a bigger loan. However, when tuition rises at a rate faster than inflation, paying back these loans in any sort of timely manner becomes virtually impossible. But, don't worry...the school already received their money, and the government knows you'll be good for it...eventually. In the meantime, don't mind the interest; you'll have plenty of time to worry about that later while you're holding your cardboard sign outside of Walmart.

10 comments:

Anonymous said...

Your buying into a con.

BILL LIVINGSTON said...

I can tell you way too many horror stories about young people graduating with student loan debt, credit card debt, a need to find new, longer-term housing that will be painfully more expensive when you don't have 4-18 roomates, and the fact that now that you allowed SU to build a lovely university-try to find a local job with that liberal arts degree that doesn't involve pouring tequila shots at the beach until you are forced to go to graduate school...where you will then add to your student loan debt and credit card debt. Have you even noticed the "mob-like" scam of not only bad, expensive textbooks-but how they change each year and your professor isn't cool enough just to allow kids to stick with the older addition, with any necessary corrections and such??

BILL LIVINGSTON said...

BTW, 'Bill'...that took a lot of stones to bring that very important issue up, that everybody right now is hiding from. Good for you. My joke on the government is because i had to go to law school at middle-age, I likely will never live long enough to pay back the loan, and the mob-style vig on it.

Bill O'Writes said...

From one Bill to another...the government is one of the best sources of comedy around. Sure, it costs us trillions of dollars a year, but somehow it just wouldn't be home without it. Jokes about the government are always allowed; no need to explain yourself. Though, I have to say, I like your style. I knew procrastinating was a useful life skill.

BILL LIVINGSTON said...

Procrastination turns to desperation once, what is it, 6 months after graduation Uncle Sugar starts to call and ask for his cheese back, plus vig. BTW-I know a bit about the law-the rich people use it to defer their taxes for about three decades until the money devalues and they have to pay. I may not be rich, but I am smart-money comes and goes, but being a dumbass is forever. BTW-not making the plug, but if you have a young audience that doesn't just want to confront the endless horrors of reality..well, we offer a lighter, hopefully more humorous, alternative. I do hope that SU gets a local blog voice, or six. I have often thought that since the University is perhaps the major player in this town, that ONE rep from the city council should be a full-time SU student-no matter their hometowm. You guys have the most to lose walking back from night class around the railroad tracks, or making a late-night ATM withdrawal. I have two degrees from SU, but had to go get another wayyyyyyy more expensive one, and ultimately move away from the community because there were no 'professional' jobs, nor much to do culturally other than international rules beer pong.

Anonymous said...

this is pretty disgusting

also when buying text books have you ever noticed that if you are able to find the international version of a book it is a lot less expensive. that is because in the US students are willing to pay ridiculous prices for text books whereas overseas they are not. The international version of any text book is the same book that we use in the US just cheaper and there is no reason we have to be paying ridiculous prices. It is expensive because it can be

BILL LIVINGSTON said...

I only wish I didn't learn this until the start of my third year; PER SEMESTER {IN ADDITION TO ABOUT 25K a year in tuition}, my 'required' casebooks/supplemental readings cost about, maybe more than, $500. What you have to realize is that any professor that is such a prick as to not understand kids are on a budget isn't likely to also understand that you hate his elitism so much you just went to Westlaw//Lexus, and downloaded the two-three paragraph case summary of the bs reading they expected you to do, and instead bought a bag of groceries so you could continue..well..living.

For the record, that is when I became confident to tell overpaid elitist slobs with tenure to...well, I can be a little flavorful with my language. But I meant it. BTW-as you graduate and actually start to realize the "American Dream," refer to our retarded tax code to see how unnecessary, redundant, change-one-phrase-every-year-to-make-these-suckers-buy-another-$100 text, or allow tax lawyers//accountants to keep you on the hook for what should be a flat-tax, short form even Beavis, and or Butthead, could complete.

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Anonymous said...

Really great article, thanks for posting!

Michael Swartz said...

I went to college before many of you were a gleam in your father's eye, but I had to take out student loans myself - I think it took me fifteen years to pay them off.

But mine came from a private lender, who I believe had the defaults guaranteed by the federal government. A couple years ago Uncle Sam simply decided to cut out the middleman and take the business over for himself.

So now you have a sort of incestuous relationship, as colleges and universities who already receive a pot of money from government meet students who are forced to borrow from the government in order to attend. There's exactly ZERO incentive to keep costs down because almost everyone is doing the same thing.

Let's face it (and I don't want to make this sound like a boring 'I walked seven miles to school when I was a kid...barefoot...and uphill...both ways' type of story) - there are a lot of fancy non-academic items to be found at college nowadays. Back in the day you were lucky to get two dining choices in the dining halls and it was the rare school that had a student athletic center - now these things and more are a dime a dozen, but so are 200-student lecture courses 'taught' by a graduate assistant.

There isn't true competition among schools to drive down prices, as they're colluding to get their mitts on an ever-expanding pile of money. It's the students who are losing in the end, and the coursework for my fancy bachelor's degree taught me a lot less than perhaps 18 months at the School of Hard Knocks I enrolled in shortly after my college career was over.