Economics lesson: The student-debt dilemma

If you have a child or grandchild about to go off to college, or have one already there, we hope you pay especially close attention to this week’s broadcast — your family’s financial well-being may be at stake. We did a little fact checking and came up with two interesting statistics. The unemployment rate for recent college grads – those under 25 — has been stuck at more than nine percent for three years running. But among older college grads, the unemployment rate has been under five percent during that whole time. So the question is this: at a time of high unemployment and relentlessly rising tuition, is a college education worth the expense? And if you decide it is, what do you need to know to get a better, safer loan?

Win Rosenfeld has been investigating.

Watch the rest of the segments from this episode.

 

Comments

  • Anonymous

    Student debt IS the next bubble in the US economy. I just completed my MPA last May and have yet to find full time employment and there are thousands of graduates in the exact same boat. I’ve been making my loan payments form my savings, but if (when) that runs out before I find a decent job, I will be forced to default. This situation is a ticking time bomb.

  • Chibi

    Good job in mentioning that Grace studied geography.  She considers geography a solid science?
    You should have asked her if she thought if she had studied math, physics, chemistry, biology, engineering, or accounting, it might be easier to find a good job (which may pay off her college debt faster).   How do you expect the USA to compete in the world economy with college graduates majoring in geography and other popular majors?

  • N1XIM

    @Chibi She studied GIS, not Geography. The fault lies with the reporter not bothering to find out what the difference between the two is, not with the student.

  • Dfarina1

    This segment did not mention how the states have cut back on the funding to public universities. This causes tuition costs to rise above the cost of living. My “public university” receives less than 1/3 of its funding from the state of NJ. Why is all the criticism leveled at the universities — and state governments are not held accountable?

  • Ignatius18c

    “Hard sciences” are often touted as a guarantee to good income, but they aren’t necessarily.  Besides, should everyone be doing physics, etc.?  Is everyone adept at integral calculus?  Does everyone dream differential equations?  Shouldn’t people be doing what fires their imagination? 
    Another point: The show doesn’t address graduate school loans — particularly in terms of those who become college professors.  Great training notwithstanding, you can no longer pay your bills and live a modest life when you become a professor.  I’m a “freelance” professor now (aka, “adjunct”) and after 3 weeks of work — preparing a new course, devising assignments that focus on student learning outcomes, devising content to post on Blackboard, writing lectures for a 2.5 hour class, and delivering those lectures – my first paycheck is LESS THAN $350. Let’s be conservative and say that I’ve only spent 40 man hours preparing all of this. Do the math: I’m not even being paid minimum wage.  Is that what America says its college professors are worth? Is that what my Ph.D. is worth? And because the job market is worse than awful, I’m forced to freelance — with low pay, with NO healthcare, with no benefits.  How do I pay my grad student loans?  No, believe me, “hard sciences” (which I did, by the way as an undergrad — organic chem, physics, partial differential equations, biology..) are no guarantee.  Aren’t we supposed to be fostering intelligence, critical and creative thinking regardless of what discipline people choose?  Those are the things that make a better citizenry. 

  • hunterprof

    I’d like to make two points.  First, the total for in-state tuition and fees at Hunter College for this year is about $5,500, so the tuition at Hunter is toward the low end of the range of what colleges charge.  It will be going up, which brings me to the second point.  The reason it is going up is that New York is cutting back on funding to its public universities.  This is one of the main reasons tuition at public universities is rising, and was not discussed at all on your program.  You might have had a look at the record of the previous NY governor on this issue.  When George Pataki came into office the public universities were one of his main targets, and their funding was brutally slashed.  When you want to apportion blame for rising tuitions at state universities, a significant amount should be assigned to the politicians.

  • John Hays

    I applaud Need To Know for this show and the exposure this issue needs.

    However, the young lady in the episode in no way started a movement of any sorts.  There have been forums and discussions online regarding the topic for 10 years or more.  The “army” she speaks has a group of veterans from early battles that are way ahead of her and have been living her hell for longer than a couple of years and have the battle scars to prove it.

    I was discussing this with fellow grad. students in the mid-90s, and many, many students were aware of what was going on with Sallie Mae and others in the student loan industry.

    What is happening is that “we” are in the right place at the right time to make this issue front and center for the mass of Americans to understand and act upon.

    The real sufferers of the student loan debt crisis are from age 30-50, not the kids in school now – their amount of student loan debt is a small portion of waves of students from the mid 1980s until the early 2000s.  And many of their lives have been destroyed and are beyond repair.

    But it is so important to let those in high school and those in their early 20s what the perils of student loans can be, and that college is not a path to a better future the way it was 40 years ago…that’s just a fact.

    Get a part-time job, intern, travel (the Peace Corps, etc.) for a few years.  Starting college at 22 is no different from starting college at 18 in today’s society.

    Remember, whatever you choose to do, your education should result in a situation where your avocation is your vocation. 

  • John Hays

    Another elitist idiot who thinks that you should only go to college and study a major that earns you a salary that benefits society financially, and nothing more.  Chi Pet, or whatever your handle is, people should follow their passion; if it’s music or literature, then go for it.  If it’s engineering, go for it.  Do you want a society full of engineers who only have the most basic introduction into liberal arts?  Not me.

    I have a M.S. in Biology and know all about chemistry, physics, geology, and all the other things that go into such a degree.  But I also understood that I enjoyed literature, philosophy, art history, music, and the like – it made me a well-rounded student, and not simply some droid churned out to make money for society without understanding how the arts enrich society.

    Persons with your point of view are the problem, but are too ignorant to understand why.

  • Ktokarska

    forgivestudentloandebt.com
    I want to stress the importance of supporting H.R. 2028 to reinstate bankruptcy protection to PRIVATE student loans. Lax lending hurts us in the long run, not just the borrowers. Mortgage lending drove real estate prices beyond what the economy can support. I see no difference between that and what the private student lending is doing to tuition and our educational system. 

  • http://pulse.yahoo.com/_RY3DO4EYM7JVNCZP2UZUGS6MEQ Seymore

    This is also a very big issue in Canada. Canadian students should see the video and produce one for Canadian students.

  • Purple

    This will be the next crisis like the housing crisis. All we need now is for Wall Street to be allowed to put insurance on these Loans and when they default they pocket cash.

  • Someone

    College was a waste of time.  All I heard after graduating was “sorry no experience” or “overqualified”.    All I can say is this:   I’m sorry Direct Loans, you’ll get some money when I get some money!  Defer!  Defer!  Defer!

  • http://www.facebook.com/people/Gayle-Springer-Kaplan/760844393 Gayle Springer Kaplan

    very interesting !

  • Kiss of Debt

    Since 2005, private lenders have had all the bankruptcy protection that the government enjoys. What more do you want to give to them?

  • Kiss of Debt

    … unless you study something that doesn’t pay well then assume that your lenders will understand your high minded ideals. Nope. The government’s argument is that they loaned you money with a credit check, nor dependent upon your choice of studies. Private lenders DO use credit as a basis for lending, and I can’t speak to their comebacks when you can’t pay because your love is not offering up the big bucks.

  • Kiss of Debt

    oops ….
    government loans are WITHOUT credit checks
    private loans are WITH credit checks

  • Kiss of Debt

    Stef Gray is doing every student debtor in this country an ENORMOUS
    DISSERVICE by falsely claiming student loans “can’t be bankrupted”.
    Viewers and debtors NEED TO KNOW that 11 USC 523(a)(8) very clearly
    allows for loans to be discharged — via an adversary proceeding. No, it
    is not easy. But it is POSSIBLE!

    Need to Know needs to correct this DISINFORMATION propagated by this
    show and this woman. Shame on you for taking her legal advice at face
    value with researching it!

    Shame!

  • @John

      John, chill out and take an economics class, pay attention to supply and demand.  Nobody is saying that everyone should be “engineers who only have the most basic introduction into liberal arts.”
      I agree with Chibi in the idea that you should have some understanding of the investment you are making in your education compared with the return available to you in the market.  I agree with your idea, John, that people should follow their passion, however, they should not turn around and blame “society” for not having an interest in paying them for their passion.
      There is much more wrong with your logic that I don’t have time to properly address. Also, you sound unreasonably angry toward people like Chibi, when her/his point of view, in my opinion would solve the issue of student loan debt nicely.  The demand would be met for Math, Science, Engineering, etc., which would lower the wages in those fields relative to others.  Then the people still in the Liberal Arts fields could make a decent living because there will be less competition for those jobs and wages will go up in relation.
      The imbalance that you are projecting hate towards is simply the will of people through their money asking for a correction in the market.  If you want it to be something other than what it is, then you have to change the will of people and I wish you luck with that.  Not that it’s not possible, it definitely is, but it takes more than a rant in a comment section to accomplish that.
      

  • Christina Droid

    “The real sufferers of the student loan debt crisis are from age 30-50, not the kids in school now – their amount of student loan debt is a small portion of waves of students from the mid 1980s until the early 2000s. ”
    Yes, 20 years of student loan debt is going to add up to more than 5 years of student loan debt. But 20 > 5.  But the people in their 30-50s are not “more” victimized than this generation, I have to disagree with you there. That cohort went to school when it was still reasonably affordable (at least public schools.) Tuition has been increasing at much more than the rate of inflation since the 1990s. College educated people in their 30s-50s have an unemployment rate of about 4.5% – less than half that of the 9.3% of the aged 25 cohort.  Not exactly a “battle scar”. The people that went to college in the 1980s and even the 90s were the last “lucky” ones. At least if you went to school in the 90s through early 2000s, the high costs were offset by tight labor markets. This cohort has the worst of both worlds. 

  • Christina Droid

    Good points by Dfarina1 and hunterprof. Politicians are cutting back on funding to state schools because there is never ending demand for higher ed products. The costs are very easy to shift onto students from taxpayers simply because they are willing to pay (through loan programs more and more often.) For a politician its easy calculus. Even the schools that only have 1/3 funding from the state still get to be the same state patronage pits they’ve always been (particularly in NJ.) They are public employment feeding troughs for administrators who have NOTHING at all to do with the actual education of students. And they are all under the thumb of politicized boards of governors/provosts who approve massive capital projects that go to favored politically connected contractors, bond counsel etc. (Again, particularly true in NJ.) And even better, they don’t really have to pay for it out of the budget because the supply/demand curves suggest they can get it from user fees – students and their families.

     Its in the higher education industry’s interests to convince everyone not purchasing their product is committing economic suicide. Its become even better than the medicare pork barrel you see in some parts of the country. Its not exactly classic “waste fraud and abuse” but rather a big expensive system that tend to perpetuate itself and waste everyone’s money on transaction costs. I sat through Richard McCormick (Rutgers U outgoing president) giving a state of the University speech once. He actually promoted the idea of spending money to recruit out of state students even though its well known that NJ is net exporter of college students. Most higher ed personnel would give a cover story of “increasing diversity.” Since Rutgers is the most diverse school in the country and McCormick is a bit of an idiot, he basically explained to his audience that out of state tuition is 30% higher and that raises revenue! This is apparently a “trend” in higher education. State schools are going across borders with their glossy advertisement programs and trading high school senior cohorts so everyone can make 30% more. I wish I was making this up but I’m not. 

  • ms

    I had student loans with Sallie Mae. I consolidated them with Direct Loans, the Federal Student Loan agency. The terms are MUCH more lenient and generous. This was a few years ago. I would urge any one with Sallie Mae loans to look into this option. 

  • Kilroy992000

    I believe that once again financial institutions over invested in the loaning side of the economy.  Mr obamas plan seems like a way to solve the problem although some financial institutions will lose money.

  • Melypartida

    These student loans can be the debt of your life, so plan for the unexpected.

  • Peterson Adela

    After taking on my college loans with Sallie Mae, I graduated in 2009, and couldn’t find work. I became an Americorps Volunteer for the health insurance and for help paying my loans. Unfortunately, Sallie Mae doesn’t accept my education award (more than $5,000). I didn’t find out until after I became a volunteer for my second year. Because my volunteer stipend allows me only enough money to pay my rent, I use food stamps to buy groceries. My mom pays my Sallie Mae fees and interest NOT the principal, which totals over $400 a month. She can barely afford it, and lives paycheck-to-paycheck so that both of us aren’t sued for not paying the loans. When I think about how much Sallie Mae has taken from my life and my family’s, I can’t help but feel really angry and sad. I have always dreamed of graduate school, but now I’m hoping to be able to eat when I’m finished with my time as a volunteer.

  • JeanDeaux

    The basis of the question is incorrect – this is NOT ‘education’ (and has not been for a very long time) – it is very expensive ‘training’ – high high cost vocational schools

  • Greg Miller

    America, Failed State. $40M for $200K/yr job. Corporations/special interests manipulate government to drown out innovation/competition. Who pays for 26,000 lobbyists? Not We the People.  These loans are just voluntary slavery.  The government used to provide education.  Now it’s just big business and profits.What to do:Immediate Runoff Vote – Pick who you prefer without wasted vote.Public Funded Elections – No outside money/propaganda/influence.Talk Systems – Liberal/conservative/socialist says nothing.Stop Payoffs – Individual/corporation gives anything to a politician, 10 yrs and assets auctioned off.
    Quit kidding yourself, You have to change the system!

  • Greg Miller

    Better talk to Suzy Orman.  She states that these loans cannot be discharged!

  • Ten

    This whole story makes a big deal about rising tuition, yet the primary
    subject didn’t run up her debt on tuition, she ran it up because she
    moved to NYC. Please redo this story.  With subjects who truly are
    illustrating the issue.  You should find low income families who are
    unable to afford community college or state colleges because of
    potential cuts to Pell Grants.  This is the crisis, not young
    out-of-state people who want to go to “progressive/free-thinking”
    instutitions like Hunter, which was designed as a commuter school for
    local residents, not out-of-state people who didn’t really consider
    their housing expenses properly

  • Anonymous

    Do you wonder why we are having a shortage of Engineers, Doctors and Scientists, but have way too many Lawyers and Accountants? I think the answer is obvious. It is not worth going so deeply in debt that it will take you 20 years to dig yourself out, even when your earning potential is somewhat decent! 
     
    We do not earn enough to pay for our kid’s education. Here are some of our options: Even though my kids are American Citizens, I am seriously thinking of changing their citizenship so that they can go to other countries where they can stay with family and get their degrees for free. My son is thinking of going into the military to get his Engineering education paid for. We have Post Secondary Options here in conjunction with the local college and community colleges, my kids are taking advantage of this, and will have their first and possibly second year of college paid for. Not all kids have the grades that allow them to do this, but this program is definitely a step in the right direction. Larger Colleges do not always like this because this way they don’t make as much money, but for small local colleges that help the schools design and expand these opportunities, this is a win- win situation. Both of my  children want to become engineers or scientists, but surprisingly even with good grades, opportunities for scholarships are few and far between. Industry needs these skills, but where are the scholarships/grants sponsored by the corporations that need the skills? Especially at the local level. My children will be, and are, working to make money to help pay for some of their college expenses, but going to a top college is not going to be an option, because even working full time, the cost of that kind of education is prohibitive.

  • Anonymous

    We are actively looking at colleges right now and that is one of the things I noticed. Why would I want to pay more for an out of State College, unless that college has a markedly better curriculum – and none of the brochures address the curriculum.

  • Anonymous

    Yes you are right and given that premise, why aren’t the industries that need these skills paying toward acquiring them, instead of spending millions on lobbying? Give them tax breaks for scholarships and grants they offer to educate students.

  • Icwfaok

    Why did she have to go to graduate school now?    Couldn’t she try to go to work first?   She is so smart, couldn’t she figure the interest rate and how much debt she was racking up before borrowing?   Smart in some ways, stupid in others.

  • mywaterdr

    Thanks for bringing up Americorps, although I had never heard of it sounds like a great idea.  I just called them.  Don’t know if I”ll be accepted though because of my age, way over 24.

  • John

    Great job Win. Remember, American college students are now the most indebted students in American history. When Government supported higher education for the Greatest Generation (G.I. Bill etc), we became the best educated per capita nation in the world. Now with stripping of support (weakened Pell Grants, etc) we have fallen to approximately16th, as banks increasingly profit from students aspirations. If you didn’t catch Heather McGhee on the subject on Moyers, you should. She’s terrific.  Here’s a link    http://vimeo.com/36529482

  • Sam

    The largest lender in the world is the United States Department of Education.  They are borrowing money at less than 1% and charging students between 3.4% and 7.9%.  These exhorbitant rates were even used to pay for part of health care reform.  The government is making a huge profit that is a tax on students and their families.   Students unite!

  • JC

    I guess paying your own way, only taking on as much debt as you can reasonably pay back in a reasonable amount of time, going to a school that is affordable, and not loaning money to people who are a bad risk are no longer options?

  • Wjlfsl

     It is! Let’s start with the banks and the government!

  • SageK

    True! It annoys me to no end when the older generations (i.e. Baby Boomers) say something like “You aren’t trying hard enough to find a job. Just go apply at McDonald’s to get some money in your pocket and stop complaining.” Well, I’ve tried. Guess what? A person with a degree is “overqualified.” Same with housekeeping and other “menial labor.”

  • JC

    Indeed, rather than trying to emulate them.

  • Kevin G

    Feeling empowered, fighting back, and “winning” has been a fantasy, since graduating in 2009 and being underemployed, without even a raise, or a union contract since graduation. Since I was not allowed to pursue my alternative career credential (Physician’s Assistant), and was already employed in a public school district, I made the decision to get an MS degree in Education. I began paying those loans off for two whole years, now they are in “forebearance”  and long term debt is even more “ominous”…The social and financial incentive to pusue higher education has now become even harder to realize. My suggestion is that all students thoroughly research and be prepared for career prospects in the industry of their choice. 

  • Tamsaff

    I wish there were lessons in how to research whether we are qualified for tuition forgiveness
    under Americorps’ SERVE and other subsidiary programs. I wish there were more accessible
    resources of information to read up on which jobs volunteer or otherwise help to qualifiy
    a recent graduate from college for Tuition Forgiveness.

  • Bartmalley

    Because you chose to become an educator there is some relief for you regarding your education debt. Since 2007 the College Cost Reduction and Access Act has considered the plight of many students who chose to pursue employment in the low paying public sector. Take some time to review Federal Student Aid and the loan forgiveness for public service employees on the web site and see if you qualify. There is help out there and you deserve a bail out. I am a teacher also and it is hard but very important work. Do not despair. I hope this helps.

  • Gitgurl60

    I am disabled and have never, ever been able to pay the full amount each month. But I did always work out a payment plan. Now they are yanking me around with stuff to complex to say here but they are basically lying to me. I will not be on the phone with them unless I do a 3 way call with greenpath.org a non prof debt resolution center. THEY are lovely people. USE THEM, its fr4ee. And sM has to be accountable. Best