Growing student debt

I was curious to take a look at the growing student debt load and the government’s exposure to potential repayment issues.

A recent analysis of individual credit data by Donghoon Lee of the Federal Reserve Bank of New York found that student loans are the one category of household debt that continued to rise during the Great Recession. As of the end of 2012, student loans came to nearly a trillion dollars, more than total credit card debt, auto loans, or home equity lines of credit.



Source: Lee (2013).
student1_apr_13.gif

Lee found that 17% of the student loans are currently delinquent. An additional 44% are not yet in repayment,
because the borrowers were still in school, or had graduated but were granted deferrals or forbearances delaying their regular payments.



Source: Lee (2013).

The explosion in student debt has primarily been driven by federal funding. Historically this took two forms. The first was the Federal Family Education Loan Program, which provided federal guarantees of loans made to students by nonfederal entities. The GAO estimated that FFEL loans outstanding as of the end of fiscal year 2009 stood at $493 B. This program was discontinued as part of the Health Care and Education Reconciliation Act of 2010. No new guarantees were issued after that date, though the Department of Education remained liable for guarantees previously issued.

The Act replaced FFEL with greater reliance on the second form of assistance, namely direct loans from the federal government. The financing for these works as follows. The Department of Education borrows funds directly from Treasury. In effect, some of the debt auctioned by the Treasury to the public is earmarked for the student loan program. This sum is reported in Table FD-7 of the Treasury Bulletin as “Treasury holdings of securities issued by government corporations and other agencies.” This balance grew from $104 B in 2007 to $714 B in 2012. This number is included in the $11.3 T total federal debt reported by the Treasury to have been held by the public as of the end of fiscal year 2012. Although these borrowings are included in the official debt figures, they are not included in the official deficit numbers. The growth in borrowing by the Department of Education in order to fund student loans has been one reason that outstanding federal debt has increased by more than the reported deficit in recent years.



Debt owed by the Department of Education to the Treasury by category, in billions of dollars as of end of fiscal year. Blue: direct loan program; yellow: loan purchase commitment, loan participation purchase, ABCP conduit, and TEACH program; brick: guaranteed loan program. Data source: Federal Student Aid Annual Reports.

However, borrowing for the Department of Education’s direct loan program only accounts for $549 B of the $714 B balance (represented by the blue region in the graph above). Another $122 B (in yellow) comes from measures implemented in response to credit market disruptions in 2008 and 2009. These appear primarily to have been purchases of securities based on previously guaranteed student loans. Although the Department of Education is no longer extending additional credit under these programs, there evidently has not been much repayment on these loans, because the balance due Treasury from this category has receded very little in the last two years.

Particularly interesting is the brick region in the graph above, which the Department of Education describes as Treasury debt associated with the guaranteed loan program. The curious thing is that, although the program was discontinued in July 2010, the Department of Education borrowed an additional $19 B from the Treasury for this program during fiscal year 2011 (which ran from October 2010 through September 2011) and another $14 B during fiscal year 2012, for a net accumulated debt to Treasury from this category of $43 B as of the end of fiscal year 2012.

I did not find an explanation of this in the FSA annual reports– if anyone can call my attention to one I’d be most grateful. Here’s how I interpret it. Separate notes in the 2012 annual report describe “defaulted guarantee loan programs” as one of the assets held by the Department of Education. I’m inferring that the accounting convention is that when the Department needs to honor a guarantee commitment for a loan that has gone bad, since there is no separate budget appropriation for this, they borrow the necessary funds from the Treasury, and simultaneously claim a defaulted guarantee loan (on which they hope someday to collect) as the balancing asset. Here is a screen shot from the FSA annual report from which I am getting these numbers.



Source: Federal Student Aid 2012 Annual Report, U.S. Department of Education.

If I have the correct interpretation, then most of the $43 B in that brick region and perhaps much of the $122 B yellow region represents money lost to the taxpayers so far as a result of the earlier guarantee program for which we’re not yet acknowledging that there’s been any cost to the budget.

American Action Forum suggests there may be related accounting issues with borrowing from the Treasury for the direct loan obligations as well, with significant losses for the blue region above also currently being concealed.

Econbrowser readers know that I am strongly opposed to having regular congressional votes on an overall debt ceiling for the U.S. Treasury. But establishing a separate ceiling on how much the Department of Education can borrow from the Treasury strikes me as a good idea.

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42 thoughts on “Growing student debt

  1. Ironman

    We should note that the federal government has a very strong incentive to make student loans – since they cannot be discharged in bankruptcy except for extreme hardship, they have become the equivalent of taxes – a way to get around having to raise the income tax rates that apply for low income people.
    To correct that situation, in addition to setting a cap as JDH has described to limit the Department of Education’s borrowing authority, all student loans should be made able to be fully discharged in bankruptcy proceedings, including and especially those student loans issued by the federal government.

  2. Jeffrey J. Brown

    I think that we area also seeing the disastrous consequences of the myth that everyone should get a four year (or more) college degree, as we experience wave upon wave of frequently heavily indebted college graduates coming out of college, with degrees that very poorly equip them for the realities of today’s job market.
    In my opinion, we desperately need reinvigorated vocational/technical and agricultural training programs.
    It’s my understanding that only about 30% of Swiss high school students are on an academic track. 70% are on a vocational track, and the vocational students all graduate with basic job skills–and then they of course can go on to higher levels of training and certification.

  3. camilo4

    people thinks that collegue is a safe investment but the reallity is that the students loans could be a problem for them and the economy.

  4. c thomson

    Can anyone provide a breakdown of the growth rates of the underlying costs of higher education?
    Teaching vs. admin for example. And pension cost growth for each? Ditto healthcare.
    My impression is that a BA was much more affordable 40 years ago, esp. in the state schools. What changed? Yes, the states have pulled the plug to some degree – no pun – but there must be more factors at work.

  5. Bruce Carman

    Annual change of employed age 16-24 as a share of nonfarm employment:
    http://research.stlouisfed.org/fredgraph.png?g=hwj
    The annual change of employed age 35-54 (peak earning and spending cohort) is again contracting yoy:
    http://research.stlouisfed.org/fredgraph.png?g=hwi
    Recession underway or imminent.
    @Jeffrey: “In my opinion, we desperately need reinvigorated vocational/technical and agricultural training programs.”
    Absolutely, including shifting billions of dollars from state four-year universities towards merging secondary schools and community colleges into polytechnical schools for 80-90% of students age 14-18 with lifelong re-entry/re-training for everyone who desires/requires it.

  6. Bruce Carman

    A bachelor’s degree once was a marker of having been socialized to be credentialed and allocated to the professional middle-class and upper-income management stratum of the occupational structure when the economy and organizations were growing and managerial positions were be added.
    Now a bachelor’s degree is required to compete for an administrative assistant or retail assistant manager job making $25,000-$30,000/year, whereas a growing large majority share of jobs being created are in low-paying service occupations that barely require a secondary school credential.
    A masters degree is now presumed to be required to be competitive for many entry- and mid-level professional positions.
    The 80% of US working-class households can no longer afford four-year post-secondary credentials that no longer provide a reasonable chance at entrée into a professional middle-class occupational trajectory. A young person graduating college today is more likely to be unemployed, underemployed, unterutilized, overindebted, on food stamps and Medicare, and without a chance at a career/occupational trajectory.
    Many argue that high schools are not preparing students properly for post-secondary education; but this wrongly presumes that a majority of students should be aspiring to four-year university attendance and graduation, which they clearly should not. The high schools are failing because we are preparing students to be students with few occupational prospects instead of young adults with life and occupational skills required to adapt to the emerging labor market conditions.
    Many suburban high schools have become de facto college preparatory girls schools in the way young males are overmedicated, feminized, uninspired, discouraged, underskilled, and underutilized.

  7. 2slugbaits

    JDH It looks like the charts are all in nominal dollars, so maybe things are only really bad instead of really, really bad. The one chart I expected to see wasn’t there, and that was a chart breaking out student debt by gender. There’s been a lot of recent work on the higher education gender gap, with males “self-deporting” from college at a much higher rate than females. My interpretation of the charts is that total debt includes the debt of both those who graduated and those who didn’t graduate. A major problem today is that males get about halfway through a 4-year degree program and conclude that their prospects aren’t much better than if they just dropped out and pursued some other vocational career. And then there are those students who graduate from elite universities with high debt and bright prospects…or at least relatively brighter prospects. I feel a lot more sympathy for the debt burdens of the former group than the debt burdens of the latter group. Especially if the latter group includes finance MBAs who will spend the rest of their lives avoiding the tax payments that funded their educations.
    One thing that might help with rising college costs is better use of e-technology to pay for book costs. Given technology advancements over the last 20 years there is simply no reason why any textbook should cost more than $20. Ditto that with journal subscriptions. This is rent seeking behavior pure and simple…and it should be heavily taxed with the proceeds going back to education.
    Jeffrey J. Brown seeing the disastrous consequences of the myth that everyone should get a four year (or more) college degree
    What about the myth that people think everyone today is trying to get a college degree? The larger concern is that not enough people are getting degrees. What we should worry about is why so many people (particularly males) give up on a college degree along about their sophomore year? Granted, these are likely marginal students, but a marginal college graduate is still more likely to earn more than a middling vocational school graduate. What I find repugnant in your comment is the unspoken assumption that only people with special abilities should pursue college, while just anyone without any special talent can pursue just about any given vocational career. The truth is that the artisan trades also require special aptitudes just as much as the liberal arts. Your comment reflects an insulting and erroneous belief that vocational careers should be seen as dumping grounds. Being a plumber or electrician requires aptitude in those vocations as well. You can’t just dump high school graduates with only marginal SAT scores into any old vocational area anymore than you can better students into any old 4-year college major. Just because you’re good at math doesn’t mean you’re good at writing.
    A lot of today’s angst will go away when the economy eventually rights itself and aggregate demand is strong enough to give us full employment. Instead of worrying about how we can sent more high school students into vocational schools so that they can become unemployed carpenters rather than unemployed liberal arts graduates, why not focus on increasing demand for labor? The labor supply will eventually follow the demand for labor. What you’re proposing has it exactly backwards.

  8. Jeffrey J. Brown

    2slugbaits,
    I think that you have done a pretty good job of illustrating why our current approach to education is so disastrously wrong, as we experience the catastrophic consequences of Political Correctness run amok.
    Regarding the following comment, “A lot of today’s angst will go away when the economy eventually rights itself and aggregate demand is strong enough to give us full employment,” I can only say Dream On.
    In regard to their outlook regarding oil supplies, I have suggested that Republicans want to drive to the edge of the energy cliff in a H2 Hummer, as we increase our consumption of a virtually infinite fossil fuel resource base.
    In contrast, Democrats want to drive to the edge of the energy cliff in a plug-in hybrid, as we transition from virtually infinite fossil fuel resources to cool new green sources of energy.
    In my opinion, neither party is facing the reality of a post-2005 decline in Global Net Exports of oil (GNE), with the developing countries, led by China, consuming an increasing share of a declining volume of GNE.
    And therefore, neither party is facing up to how utterly unsustainable our auto centric suburban way of life is, and neither party is facing up to the reality that we are transitioning from an economy focused on “Wants” to an economy focused on “Needs.”
    In any case, here is what I wrote six years ago:
    The ELP Plan: Economize; localize & produce, April, 2007
    http://www.resilience.org/stories/2011-08-08/elp-plan-economize-localize-produce
    Excerpt:

    In my opinion, the unfortunate new reality is that we are going to see a growing labor surplus–against the backdrop of deflation in the auto/housing/finance sectors and inflation in food and energy prices. By reducing your expenses now, while you can do it voluntarily, you will at least be better prepared for whatever the future may bring . . .
    The biggest risk to family finances is trying to maintain the SUV, suburban mortgage way of life in a period of contracting energy supplies. Beyond that, one of the next biggest risks in my opinion, is excessive and unwise spending–especially debt financed spending–on college education costs.
    While we will desperately need engineers and many other technically qualified graduates, we are seeing wave upon wave of college graduates entering the work force with degrees that very poorly prepare them for work in a post-Peak Oil environment. We may ultimately see college graduates competing with illegal immigrants for agricultural jobs.
    Perhaps the best education investment that many young people could make is a two year associate degree in some kind of repair/maintenance area, perhaps with summer jobs in the agricultural sector.
    I would especially recommend that you consider buying, perhaps with a joint venture group, a small farm, either currently organic, or that can be converted to an organic farm. In the short term, if nothing else you could lease it out to an organic farmer. Longer term, you might consider building or moving a prefab, small energy efficient house to the farm. If nothing else, this plan may provide a place of work for your unemployed college graduate.

  9. tj

    The misperception that a college degree is a ticket to a well-paying entry level job, and middle class career is a huge issue.
    Lower income families with parents who did’t attend college dream of a college education for their chilren. They don’t understand that if your child spends 4 (or more) years pursuing a degree in a subject area with bleak employment prospects, that your child is going to end up with a pile of debt and no job.
    Schools are happy to take tuition, but they don’t explain up front that certain majors will set you up for career failure and financial ruin.
    The top 10 worst majors for job prospects are:
    http://www.forbes.com/sites/jennagoudreau/2012/10/11/the-10-worst-college-majors/
    1. Anthropology and Archeology.
    2. Film, Video and Photography.
    3. Fine Arts.
    4. Philosophy and Religous Studies.
    5. Liberal Arts.
    6. Music.
    7. Physical Fitness and Parks Recreation.
    8. Commercial Art and Graphic Design.
    9. History.
    10.English Language and Literature.

  10. FML

    Yes, I’ll be sure to take as gospel a top ten listsicle about job prospects from Forbes Magazine.

  11. Nick

    Another huge culprit in this is the enormous rise of (mostly online) for profit colleges: the likes of “University of Phoenix” and “DeVry University.” If you dig through their website, you can find that UoP charges about $60,000 for a bachelor’s degree.
    These schools suck in thousands of marginal students (think your HS graduate single mother) who are drawn in by the promise of “earn your degree from home!” These students are tricked by flashy advertisements and promises of financial aid that are really just thousands of dollars in federal loans. And those loans are tough to pay off when you drop out after two semesters with nontransferable credits and have to keep working as a waitress.

  12. Ricardo

    cahuenga wrote:
    I would posit that the explosion of student debt is primarily driven by the explosion in tuition and various fees…
    Your data is spot on but you have cause and effect backward.
    In the 18th Century Richard Cantillon pointed out that when money enters an economy it does not enter evenly. When the government subsidizes a sector that sector will experience price increases much higher than the rest of the economy. Consider where the largest government subsidies are directed: health care, housing, and education. Where have we experiences the greatest increases in prices? Where have we experienced the greatest explosion in new business? What parts of the federal budget have seen the greatest increases?
    Never forget that traders will move to where the money is. If the government shoves money into education, you will get a new University on every corner teaching everything from cooking to nail care, all billed to the government.

  13. Bruce Hall

    Perhaps one of the reasons for the explosion of debt is the explosion of “soft” degrees that are primarily sought by women who now comprise 40% more undergraduate degrees.
    http://www.aei-ideas.org/2013/04/huge-gender-gap-persists-in-college-degrees-but-gets-no-attention-because-of-a-selective-concern-on-gender-imbalances/
    This debt is, of course, comprised of the results of choices made by individuals who are willing to spend $100K of their money or their parents to say that they have a Bachelors degree in archaeology or social justice studies which have little or no chance of a return on their investment.
    Sadly, college has simply become an extension of high school for many students who then go out and find themselves with a high school level job and college level debts.

  14. ppcm

    Students loans growth a variation from above 200 Billions USD 2004 to almost 1 Trillion USD 2012 is not matched by a population growth of the same population age.
    http://www.nationmaster.com/country/us/Age_distribution
    The strong assumption, for a segment of age bracket 19 years 39 years, the relationship age and population number is quiet stable.
    One may assume that this subject could keep a sociologist deserved and busy and or a needed public accountant

  15. c thomson

    Still no analysis of why higher education costs have grown so much. No one has any data?
    As to the list of financially unrewarding subjects, a history degree from Yale isn’t a bad investment. Any degree – apart perhaps from computer science – from Turbot Melrose College isn’t worth much.

  16. serf in control

    We need to have an honest discussion of student loans and nobody wants to have it. The fact of the matter is tuition is priced based upon the ability of the student to borrow, not the other way around.
    This debacle has been a long time coming and it’s going to be an awful mess to clean up.

  17. Dr. Morbius

    Jim, part of the problem with the balance of the “brick” portion that you describe is that the loans that are in default are repaid, for the most part, through loan servicing-agenices that charge 30-35% collection commissions. Several student loan servicing agencies are compensated through a ED program that pays for restoring students to non-default, but agencies like SallieMae still earn pretty substantial fees for default collections (talk about perverse incentives–SallieMae makes more money if students default than if they pay as scheduled). Since the repayments are net of the collection fees, the repayment amounts are much reduced compared to the new cohort of defaulting loans under the program. Eventually it will shift but not until unemployment goes down.
    And why does any story about student loan bring about this incessant hand-wringing about “bad” college majors, and the need for plumbers, electricians and machine operators? Anyone associated with the construction industry will tell you there are substantial numbers of idle plumbers and electricians. Just because they charge $80.00 an hour doesn’t mean anyone is paying them that on a solid 40 hour week. And for machine operators, let me say this as a fourth generation member of a machine company family, machine operators today are generally graduates of four-year technical college programs. These machines are now computer controlled technological marvels, the operators these mocking commentators speak of, worked during WWII, they would be qualified to sweep the floors of today’s machine manufacturing companies.

  18. tj

    fml
    Yes, I’ll be sure to take as gospel a top ten listsicle about job prospects from Forbes Magazine.
    Hey fml, you have a problem with it? Where’s your list?
    Here’s another from Georgetown University. Highest urates for recent grads.
    1. Archetecture
    2. Arts
    3. Humanities and Liberal Arts
    4. Social Science
    5. Recreation
    I’m guessing you are an academic that lures uninformed students into your program, helps them rack up debt to support your program, then graduate them out without a job and a pile of debt.
    It’s time you took a long hard look at your business model. It’s not sustainable. You need to partner with some employers, yes the evil ones who make a profit and create real jobs. You need to engage employers with ALL of your students on a consistent basis prior to graduation.

  19. Bruce Carman

    Stanford and MIT for the masses:
    http://venturebeat.com/2013/04/15/stanford-for-everybody-professor-launches-startup-make-elite-education-globally-accessible/
    http://ocw.mit.edu/index.htm
    Now we can be absolutely certain that the value and utility of a post-secondary “education” credential is plunging, as even an Ivy-like “education” will be available via the Internet to the masses.
    Once the implementation of intelligent systems, the cloud apps (replacing desktop, laptop, and enterprise systems and supporting infrastructure, firms, and employees), robotics, ubiquitous nano-electronic sensors, and biometrics accelerate from take off to critical mass of a growth, cannibalizing most job functions, the loss of paid employment, incomes, and purchasing power across public and private sectors and up and down the socioeconomic and occupational strata will be breathtaking and devaststating to the global oil- and auto-based mass-consumer economic model.
    An entirely new system of labor (non-labor) division, income distribution, and maintenance of purchasing power is hereafter required to replace the system of employment-based income and purchasing power. Without an effective, self-sustaining means of distributing far more of the intelligent-systems society’s productivity and labor-saving gains to the bottom 90% of society, rather than primarily to the rentier top 0.1-1%, the system risks collapse.
    Unfortunately, economists are at least 30-40 years behind the curve and woefully lacking in innovative thinking needed to assist in transitioning the economy and society to the post-growth, post-Oil Age, post-capitalist epoch.

  20. benamery21

    1)For profit schools/scams
    2)Dramatically reduced state and local support
    3)Reduced parental support due to loss of income and assets due to the economy
    4)Reduced repayment due to lack of jobs and pay for debtors (lowest labor share of GDP in postwar era) as well as loss of assets in stock and real estate markets
    5)Increased attendance due to weak job market.
    6)Reduced part-time income for students due to weak job market.
    Right answers: Free 16 year education and training at public institutions, more jobs, higher wages, and higher taxes on capital and corporate income.

  21. benamery21

    I suspect one of the reasons for the explosion of student loan balances has had to do with the disappearance of other credit available at lower interest rates, and the lowering of interest rates for student loans. Prior to the economic meltdown, parents and students may have been more able and more likely to use other sources of credit (home equity, credit cards, etc) to pay the same expenses for which student loans are now being used.

  22. c thomson

    But why does the product itself – a four year BA in a serious/useful subject – cost so much more than it used to?
    My impression is that the inflation rate in higher education is like that in medicine – way above the CPI. Why? Where are the new drugs, expensive procedures, etc. in education?
    Answers please!

  23. Bruce Hall

    Bruce Cameron:
    “Without an effective, self-sustaining means of distributing far more of the intelligent-systems society’s productivity and labor-saving gains to the bottom 90% of society, rather than primarily to the rentier top 0.1-1%, the system risks collapse.”
    From each according to his abilities, to each according to his needs.
    Been there; tried that.

  24. ezra abrams

    the graph nazis say, fig one has a basic fail: the two hard to distinguish colors, light and dark blue, have labels that are far apart; your brain has to do extra work to hold in working memory the light and dark and the labels.
    basic fail
    but of course, if one of your students did this, you would penalize them, but if someone dares to criticize one of the almighty professoriate, whoa, do you come down on them
    the use of xx xx date format is anoter fail, as hou have to do work to remember which is dayy and which is month; isn’t that the sort of trivial thing computers are supposed to release us from ??

  25. westslope

    Public goods and moral hazard. I seem to recall that close to 40% of student loans in Canada are never repaid in full.

    If education costs are indeed rising faster than other costs, that would make sense in an information technology economy where human capital is beyond doubt the most valuable asset and increasingly valuable over time.

  26. westslope

    ezra abrams: almost all modern web browsers all you to zoom in and zoom out of web pages. Ctrl-+ works on most browsers. By zooming in you will be better able to see and interpret the information a graph, like figure 1.

    By zooming in, you might have noticed that the date information in figure 1 is annual as of the fourth quarter. 06-Q4, 07-Q4,….11-Q4. Whether the information graphed is average fourth quarter or end of fourth quarter, I don’t know but don’t care because that detail does not change the overall story.

    Finally–and I hope Prof. Hamilton allows this to pass–I do enjoy your arrogance. Most amusing. If you are hinting at the notion that many within the economics profession are terrible communicators, you are correct. Nevertheless the profession does reward good communicators and, if I may so say, Prof. Hamilton is an excellent communicator.

    Why arrogant? In this forum, the poster and discussants communicate in full length, grammatically correct, well constructed sentences. Yet you make your contribution in lower case sentence fragments as if you were texting your close friends in your own peculiar subcultural dialect. This while criticizing the blog poster for poor communication. Oh, the irony.

  27. Bruce Carman

    @Bruce Hall, we need to step outside the false dichotomy of capitalism vs. socialism/Marxism/communism or “whateverism”. We haven’t “been there, done that” yet.
    “The market” will continue to do what it does best: reward those who own the overwhelming majority share of the means of production of goods and services and the compounding interest claims against labor, production, profits, and gov’t receipts this ownership permits.
    In fact, the better “the market” works, the more it rewards the fewer “winners” at the expense of the rest of society’s “losers” until the “winners” own such large claims per capita on everyone else’s labor, firms’ profits, and gov’t receipts (like today) that subsistence for the masses becomes imperiled, firms lack customers with purchasing power, and gov’ts become insolvent for lack of revenues to meet increasing demands from the masses lacking paid employment and purchasing power to subsist.
    “The market”, including increasing gov’t support of war, banking, “education”, and “health care” cartels, etc., has not created a net new full-time private sector job per capita in the US for 30-35 years (millions of jobs created in China-Asia and elsewhere, however). Real US wages after-tax have not risen for the bottom 90% of workers for 40-45 years, i.e., an entire working lifetime.
    But this is what “the market” inherently does when freed from constraints on capital flows, use, and accumulation and aided by gov’t. By logical extension, therefore, “the market” will continue to exert its effects until everything of economic value is owned by the top 0.00000000099989%, including gov’t and public assets; and then just one private firm or individual will own the entire planet, whereas the rest of us will be irrelevant to utterly superfluous.
    Thus, “the market” doesn’t much care whether the “losers” subsist or simply fade to dust to be swept into the proverbial “dustbin of history”.

  28. Bruce Hall

    @ Bruce Carmen:
    “By logical extension, therefore, “the market” will continue to exert its effects until everything of economic value is owned by the top 0.00000000099989%, including gov’t and public assets; and then just one private firm or individual will own the entire planet, whereas the rest of us will be irrelevant to utterly superfluous.”
    By whose logic? Your sense of hyperbole overrides your economics sense. The sky fell when agriculture went from employing 1/2 the population to 2%. Oh, wait. It didn’t. The market fixes things that the government screws up. Sometimes, it just takes a little longer when the government really screws things up. Happy redistribution to you.

  29. cjh

    Problems with govt student loans are widely known, so why don’t they tighten the lending criteria. This is like watching a train wreck in slow motion.

  30. Theo

    Bruce C. — It is all market-based economics. There isn’t anything else. The constraint is time.

  31. Anonymous

    “A lot of today’s angst will go away when the economy eventually rights itself and aggregate demand is strong enough to give us full employment,”
    HAHAH 2slugbaits you are delusional. Look to Europe or Japan for what resembles our future.

  32. Anonymous

    Oh, as for the original article, here’s the reality:
    Mellenials aren’t paying their student loans back. The value of those assets (the govts assets) is probably 50% at best. Lending 50-75K to a brainwashed 18 year old is irresponsible. And yes, these kids are brainwashed by groupthink.
    “Student debt is good debt because it is tax deductable and an investment leading to higher income.”
    After being told this a million times in 17 years they believe it.

  33. Larry C

    If the Dept of Ed is borrowing from the treasury, why don’t students get their loans at T-bond rates?

  34. Anthony Eller

    There seems to be no solutions from President Obama or our Congress. I’m from Louisiana and my Senators Vitter and Landrieu both said they voted to keep interest rates low even though that will help and they share my concern? and they seldom agree an anything??? Now it looks our President and Congress can’t even agree on that. Please google ProjectTuitionReimbursement I have a theory; Trickle from the Middle Up and Down Theory
    I t can be used in different ways my first project is loosely based on The Opportunity Maine Tax Credit and the $5250 Tuition Reimbursement program where employees can go back to school and their employer pays and receives a tax credit.. This bring graduates and small business together. there will be Checks and Balances, Quarterly Reviews little or no waste our our tax dollars. this would create jobs where jobs are needed, would start to rebuild small business again. Please read several posts there are some other suggestions as well Please comment if you like it and tell your friends and if you don’t like it comment and tell me why.. We have got to get a conversation going about the solutions!!!

  35. Tom

    A worthwhile investigation. I’m curious, did you find any evidence that they ever write off any loans, ever? You’d think when a person dies without having repaid their student loans they might finally write them off. Or maybe they’re waiting for some Chichikov to offer to buy them.
    You might take a simpler, more cynical approach. Simply assume that any growth in DoE’s net lending is money spent. Growth in net lending is actually a combination of growth in the pace of lending and accumulation of not-written-off bad debt. But I guess the latter usually dwarfs the former, except perhaps in the aftermath of crises when a poor labor market encourages young people to stay in or go back to school.
    Statistics on the proportion of defaulted loans that were given to students of for-profit colleges would be very helpful. It’s plundering on a huge scale, with the cooperation of Congress and using the Washington Post as a tool. Almost all of these for-profit colleges would go bust within a year if their students weren’t subsidized and were made to borrow at commercial rates reflecting their likely willingness and ability to repay. One of the biggest and most blatant fields for corruption and waste at the federal level. The shame is that when the day of reckoning comes the likely result be a downsizing of the legitimate non-profit and public educational systems.

  36. Gabrielt

    College is overrated in my opinion, people think that with a college degree they have a secure job, but thats not true and when they dont get any job they arent able to pay the debt.

  37. Kurt

    Universities have been way too slow to make structural changes to respond to changing economic conditions and changing technology. The gold-plated American university experience is a growing bubble supported by rapidly rising debt. There is a crisis coming. Will university professors and leades try to get ahead of that, or just hope it comes after they retire?

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