Parents Snared in $100 Billion College Debt Trap Risk Retirement

[stockholmer]

http://www.bloomberg.com/news/2012-02-02/parents-snared-in-100-billion-u-s-college-debt-trap-risking-retirement.html

Terry Williams borrowed about $7,000 to earn a degree from Spelman College 38 years ago. For her youngest child, a sophomore at Belmont University in Nashville, she will take on almost $40,000 in parental loans. Williams, a 59-year-old widow who runs a nonprofit that helps black families navigate private-school admissions, is watching her retirement savings dwindle as she pays college bills for her three children, Bloomberg Businessweek reports in its Feb. 6 issue.

“I’ll probably work until I fall dead at my keyboard,” the Decatur, Georgia, resident said in an interview.

It’s not just graduates who are staggering under the weight of educational loans. Parents, too, are borrowing record amounts to put their kids through college, jeopardizing their retirements. With the housing crisis, many families can no longer avail themselves of one popular option for financing university studies: taking out a second mortgage. “A plunge in home prices has erased the equity that many homeowners had just a few years ago,” said Greg McBride, a senior financial analyst at Bankrate.com in North Palm Beach, Florida.

Federally backed educational loans to parents, at an estimated $100 billion, make up 10 percent of the $1 trillion in educational loans, according to data analyzed by Mark Kantrowitz, publisher of the website FinAid.org. The problem is more acute at some private schools, such as Colgate University, Trinity College and Sarah Lawrence College, which have smaller endowments and can’t offer the same financial aid as Harvard and Princeton universities.

‘Robbing Their Future’ .............

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What a broken system. It is so similar to the health care train wreck in the US. The more money that the US government throws towards loans and backstops to help pay for tution, the higher the tuition rates go, as the schools (especially the public ones, shame!) greedily raise the price to meet the new inflows of money. If college education costs were included in the inflation rate, who knows how high it would be.

[BlueToTheBone]

1. In 1983, my 4 year degree cost me

$10,000. That included living expenses. I was so lucky to be in the push for women's education and received a couple of grants and scholarships. I had work study and loans to pay for it all.

What is happening today is a real travesty. THe pukes hate educated people...Raygun drove the first spike in the coffin of public education as governor of California.

In contrast, the "Founding Fathers" knew that democracy couldn't survive among the stupid, so they enacted the first public schools.

[Romulox]

2. The price of college is set by supply + demand, not by the availability of gov't aid.

Increasing gov't aid will, if anything, increase demand for college, and therefore can be expected to RAISE the price of a college education.

Real world data more than bears this out.

[Fastcars]

3. Agree completely....

It also seems people don't often consider cost saving alternatives when it comes to getting an education. Changing majors several times. Losing credits when changing schools. Stretching what could be a 3 and 1/2 degree into 6 year stay. Staying in a more expensive apartment. Driving a new car. Expensive spring break trips....

All these are fine if you and/or your family has the wherewithal to allow these "luxuries" and not ruin themselves fiscally.

As long as people simple pay the asking price what incentive is there for institutions to try and keep costs down?

[stockholmer]

4. by increasing the amount of available credit (subsidised loans) & outright grants, an artificial

price bubble (driven, I agree, by an artificially high demand) ensues. You do remember the housing bubble, no? This is especially borne out in the less expensive end (ie public) of the higher education market, where the % of increase in tuition has rapidly out-paced the high-end 'elite' schools' tuitions.


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http://www.americanthinker.com/2011/03/are_we_getting_our_moneys_wort.html

Are We Getting Our Money's Worth in Higher Education? (March 22, 2011)


President Obama has stressed http://www.whitehouse.gov/the_press_office/Remarks-of-President-Barack-Obama-Address-to-Joint-Session-of-Congress/ that a college education is critical to the future of America and our ability to compete in the world marketplace. To achieve that aim, our government is spending http://www2.ed.gov/about/overview/budget/budget11/summary/edlite-section3d.html 60% more in 2011 than 2008 and providing 123% more in tax breaks for post secondary education (i.e., college). The Government has taken over all federally backed student loans, pushing almost all private lenders out http://online.wsj.com/article/SB10001424052970203440104574405154157021052.html of the 100 billion a year market.


But are we getting our money's worth?


One of the hallmarks of bad government is spending that is out of proportion to what is actually bought. Think 500 dollar hammers and 1200 dollar toilets seats. Ensuring that taxpayers get what they pay for at a fair price is doubly important in this age of a 14 trillion dollar national debt. http://www.usdebtclock.org/ When the conversation turns to such ephemeral ideas as a good education, measuring value for money is rarely talked about. Perhaps we had better start considering some of the salient statistics;


•The median debt for a student graduating with a 4 year degree is $19,999 and going up.
•56% of Students that start a 4 year program don't get a degree within 6 years.
•45% of students show no improvement in critical thinking, writing, or reasoning skills after the first 2 years of college.
•College tuition costs have grown 3 times the rate of general inflation, even outstripping medical costs.

These statistics underscore the unintended consequences of blindly funneling monies into the US college education marketplace. Much like the community re-investment act http://www.forbes.com/2008/07/18/fannie-freddie-regulation-oped-cx_yb_0718brook.html coupled with loose monetary policy fed the housing bubble, government monies are feeding the forces driving higher education cost up. This produces a vicious cycle where government drives costs up requiring more taxpayer money to help get students through school. Currently dividing the amount of aid available by the estimated total student enrollment results in more than nine thousand dollars of aid per student for 2010.............

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[Romulox]

5. I disagree. Demand for higher education is driven by the limited economic opportunities

faced by a person without proper credentials, not by the existence of loose credit.

[stockholmer]

6. if that were indeed the case, then you wouldn't have seen the explosive increases in tuition you did

during the articial boom years (mid 1980's, mid to late 90's and mid 2000's) with their low unemployment, rapid cost of living rises, and expansive asset price bubbles. A hallmark (and a principal cause) of these periods (and many other booms) was 'loose credit' to an extreme degree.