Perry Glasser

Archive for June 7th, 2018|Daily archive page

THE CRUSH: THE COMING STUDENT DEBT CRISIS — PART 1 OF 3

In Economics, Economy, EDUCATION, Finance, Millenials, Personal Finance on June 7, 2018 at 5:58 pm

When it comes to student debt, because of the coercive necessity for advanced education and its the rising cost, the perennial Millennial and Gen-X complaint about how their parents, those self-centered Boomers,  screwed up everything, Dollar$ concedes the issue.

Millennials are, for once, correct.

Call them The Whiners, but call our system to fund education The Crush.

whiner

Dollar$ despises the reductio ad absurdum that dumps entire populations into convenient rhetorical buckets. Gross generalizations about millions of people can never be accurate. Any thinking person (a Dollar$ reader, for example,) can point to dozens of exceptions, but in the grand scheme of things it is now long overdue that we grapple with the out of hand system for funding education.

The Crush will soon crush us all.

So this column will not be about how Whiners need to man-up, knuckle down, and work. Look, a kid borrowing money for education is accepting debt precisely because the kid wants to get ahead. The Crush does not allow it.

This Dollar$ series will be about

  • our coercive culture,
  • risk-free lending from banks and The Fed,
  • educational institutions that have no incentive to manage costs.

The Crush allows  no escape, no free market options, no serious choice to not participate, and no institutions with any incentive to carry the weight, though plenty offer lip service as they add bricks to the load.

COERCIVE CULTURE

Citizens in America with advanced degrees earn considerably more than citizens without a parchment.

graph

Of course, free spirits may always choose to abandon The System and be poor, but the gap between having a Bachelor’s Degree and not having one in a nation where medical care, housing, and being reasonably fed depends on income, makes the Poverty Option the choice of living with a gun to one’s head or not.

Trapeze artists who fly with no net all eventually fall to earth.

What is a Whiner to do?

RISK-FREE LENDING

Bankruptcy laws are the enlightened replacement to debtor’s prisons. Nor do we allow people any longer to become indentured servants to pay their debt. Slavery is simply evil; holding debtors behind prison walls disables their ability to pay their creditors.

Besides, in our corporate state, to be fair, where corporations are legally people, you can’t jail a business no matter how badly it manages its affairs (though Dollar$ ardently wishes we could).

Bankruptcy laws humanely offer a Citizen a new start. To be sure, as a strategy to manage personal finances, declaring bankruptcy should always be a last resort; it cuts an individual off from future credit for many years, and the process of bankruptcy debt relief is managed by courts that apportion remaining assets to grumpy creditors who must accept something instead of nothing.

Yet debt incurred for education whether it be from the Fed or a private loan from a bank cannot be settled by bankruptcy. Businesses leverage their assets with debt all the time. Who would argue that leveraging oneself as an asset that can and will earn more is a bad idea? That debt follows the borrower forever, even through bankruptcy. Short of paying it off, the sole means of settling student loans is Death.

death

THE ONLY WAY TO ESCAPE STUDENT DEBT

Like Fat Harry, who in my Brooklyn childhood was all too happy to lend money for a quick plunge on a horse at Aqueduct, some education loans grow through compounding any unpaid balance. Harry called that the vig. Harry might apply a baseball bat to the knees of a derelict borrower to encourage compliance, though Harry never preferred a payoff when he could keep his money on the street earning ever more. An outstanding balance was far better than some Citizen … uh make that Sucker….trying to settle.

With educational loans, just because you’ve made the stupid decision borrow a fortune against future earning when you are in your teens (something like betting on the wrong horse), the banks and Fed will forgive several payments. No problem! Like Harry, they are delighted to fold what you did not pay into your outstanding balance and add it to your total debt! When you start paying the vig again, YOU’LL OWE EVEN MORE and if you don’t pay, they’ll take it through the IRS.

It’s not a baseball bat to the knees, it just feels like one.

THE RISING TIDE WILL SINKS ALL SHIPS

The cost of that required education at public and private schools has soared at twice to three times the rate of inflation, a rate that HMOs, hospitals, and medical insurance envy. Baby Boomers who earned a year’s tuition and fees with a decent summer job, if they needed it, worked during the school year for a few hours per week for incidental expenses, inexpensive textbooks and dormitory space that was less than luxurious, but kept rain off their heads.

Whiners caught in The Crush have no such option.

The average tuition and fees for a degree program at a state institution in 2017 is just under $10,000. Now add books and mad crazy things like food and a roof. Boy, those college kids are scamps!  The eat food! They wear clothing! Such frivolity!

There’s not enough ice cream to scoop to meet those expenses.

Of course, they might work their way through school, attending fewer hours while they work somewhere at minimum wage–except that winds up making the cost of their education go up by another year or two…

The Crush has no mercy.

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COMING SOON

PART 2—WHY DOES EDUCATION COST SO MUCH?

PART 3—THE CRUSH

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