The Great American…Loan

18 May

 

People in the United States owe a lot of money on credit cards. In fact we owe about 700 billion dollars in credit card debt. The only thing we’ve borrowed more money for is home mortgages… but home mortgages aside, who owes more than adults when it comes to borrowing money?

It’s school kids! And although technically they are school adults, if you have 1 or 2 or more of them in your home they are still kids to you…but still, the number one debtor in the United States today are young adults who have taken out loans from the federal government to finance their college education.

Student loan debt has gone over 1 trillion dollars…as in 1 followed by 9 zeros, and the federal government has just forecast a record 51 billion dollar profit this year from student loan borrowers. That’s more than the earnings of the nation’s most profitable companies.

Who knew? Did you?

But the good news? In July the 3.4% interest rate that students are paying on borrowed money now will jump to 6.8% …unless of course Congress passes the “Student Loan Affordability Act” which is proposed legislation that would keep existing interest rates… on some student loans… for the neediest households, fixed at 3.4 percent. However, The bill does nothing for existing student debtors….and besides who doesn’t smell a filibuster in the air?

The Department of Education…that much maligned government entity that oversees our crumbling school system and that also gave us the “No Child Left Behind Act”, has generated almost 120 billion dollars in profit over the last five years from student loans which ironically enough, is the only kind of consumer debt that has increased since the onset of the financial crisis.

And get this… Apparently officials in Washington are now worried that perhaps overly indebted student borrowers will be unable to save enough to purchase a home, take out loans for new cars, start a business or save enough for their retirement…and become, you know…productive American citizens.

What is it that we expected would be the rewards of plunging our children into massive debt? Talk about not leaving a child behind?! What about leaving adults behind?!…before they even get started!

And for some reason these adult/children/student borrowers are also finding themselves unable to refinance their loans even if they graduate from college and secure well-paying jobs, even though  most other borrowers are able to refinance debt at quite low rates. And why is that?

Because these loans have become so profitable to lenders thanks to the Bankruptcy Reform bill of 2005 when both federal and private student loans became non-dischargeable during bankruptcy. This has turned student loans into credit risk free loans for the lender. (with a debtor who literally has a lifetime to repay it) The loans are just too good for any respectable financial institution to give up…as any gambler could tell you,  they’re a sure thing!

Getting a higher education is a wonderful achievement but once again with the help of our nation’s love affair with capitalism, we’ve turned a good thing into a profitable thing and that profitable thing into a must thing…and with ever escalating college costs happily jumping on the bandwagon, (because if you can’t afford this much it’s just as easy to not afford that much!)…this thing is spiraling out of control.

Our children are literally taking loans out on the American Dream, which is being dangled in front of them like a candied carrot on a stick, with money they do not have and may not ever have… and in what may be the most sinister twist of fate…all of their government loan filing and debt approval makes them perfect candidates for…

credit card approval once they’ve graduated.

16 Responses to “The Great American…Loan”

  1. ontyrepassages May 18, 2013 at 3:03 pm #

    College is now big business. I already had a bachelor’s degree when I went to the local college about four years ago to talk to them about taking a few courses to make myself more marketable. Forget that! They tried to talk me into signing up for an entirely different degree program, one they’d just introduced. I don’t mean like they mentioned it, I mean they pushed it hard. They put most salespeople to shame. I escaped with a “I’ll think about it,” went home, and researched the degree online. What I discovered angered me: much of what they’d told me about the degree was false.

  2. sheilamariegrimes May 18, 2013 at 3:28 pm #

    SO TRUE …SO SAD!

  3. TheDoGooderMama May 18, 2013 at 5:43 pm #

    Yes! There should be a mandatory financial literacy course in high school that better prepares 18 year olds to make decisions about loans and credit that will impact the rest of their lives.

  4. Teri Lynn May 18, 2013 at 7:04 pm #

    Completely unfair to those seeking to better themselves through education. My youngest son will be graduating in August and will be among those students in debt.

  5. tric May 18, 2013 at 7:46 pm #

    Third level education in Ireland is largely government funded. It costs approximately 2500 euro per year. It is still costly when you add accommodation, but we have a long way to go to be as costly as the US. That is a shocking statistic. It reminds me of the mess most of my student nurse friends got into years ago. It took them half a lifetime to get clear.

  6. A Voice May 18, 2013 at 10:25 pm #

    “Getting a higher education is a wonderful achievement but once again with the help of our nation’s love affair with capitalism, we’ve turned a good thing into a profitable thing and that profitable thing into a must thing…and with ever escalating college costs happily jumping on the bandwagon, (because if you can’t afford this much it’s just as easy to not afford that much!)…this thing is spiraling out of control.”

    It’s about pleonexia, sheer avarice, and not a given form of capitalism. From birth until death, citizens are treated as nothing more than mere consumers of mere products. We no longer hear talk about sodas, toys and the like, we hear about soda products and toy products, the emphasis always being on the fact that the given thing is a product. This has serious existential ramifications, indicating that the focus is not on making or selling a given thing but merely a product, something thing-like. The citizens, considered mere consumers, are not people but a sort of product, they are thing-like.

    • A Voice May 18, 2013 at 10:29 pm #

      Addendum:

      It doesn’t matter what you do to or with products. They are faceless, simply a clear shell with nothing of value. This is why corporations are able to release the things they do for sale and why people continue to buy them: they’ve been conditioning and conditioned to believe that it doesn’t matter, it’s just a product. This is a great part of our current state of affairs as a country.

      Think about it. Seriously. Think about it.

  7. emmylgant May 19, 2013 at 1:18 pm #

    It is outrageous… But where is the outrage? Are we so morally bankrupt as a people that we cannot, or rather will not stand up for our children?

  8. avwalters May 19, 2013 at 5:38 pm #

    I worked waiting table to pay for my undergraduate degree. I had hardly any debt when I graduated. Then I went back to school–on borrowed money. I never regretted it, but I paid for a decade to dig out from under. Now what will kids do? The amounts they’re borrowing are astronomical.

  9. leamuse May 20, 2013 at 4:05 pm #

    It is nearly six years since I sold my house in the states and paid off then cut-up the last credit card before moving to the south of France. If I don’t have the cash, I don’t buy anything.

  10. Jae May 20, 2013 at 9:57 pm #

    What astounds me is why aren’t the OWS crowds protesting the government, who made more on student loans than the banks made on ALL the business they did COMBINED. Pretty easy to make a killing on a business when you own the monopoly on it. Government loans = a bigger ponzi scheme than Social Security. And what do the universities do? Jack up prices, because they know they can even if you come out with a paper that means absolutely job-wise, and a mortgage but no house. And the government still needs more of our money. This has got to be the most mismanaged decade of our time. Both the Rs and the Ds are in it together to screw the Americans over, but neither side cares because they can’t have their team looking bad. People who knew Bush was wrong wouldn’t criticize him if they voted for him, but at least we had the rabid media scrutinizing his every move. Now that we’ve got a D in office, the media is mum on everything and none of the people who voted for Big O will say a word either. Neither party cares what happens to the American people, as long as they’re able to stuff their pockets and exempt themselves from their crap laws. Sadly, we deserve the tyranny we’re steering ourselves into…

  11. TamrahJo May 21, 2013 at 3:10 am #

    The only way it’ll get fixed is if enough people are suffering under the system – – will be quite awhile, as those who have been destroyed by this system are still seen as low-life whiners….

    Waiting for Rome to fall….

  12. Jeff Brown May 21, 2013 at 2:59 pm #

    They come on tv and say “We must educate the youth of this nation” when what they really mean is “We must make money off of educating the youth of this nation”. And it will not end until we the people pull out heads out of our asses & put our foot down!

  13. Nessa Nguyen May 22, 2013 at 2:33 pm #

    Borrowing huge amounts of money to go to college is a bad investment. Families just don’t value education that much if they can’t forgo fancy cars and houses to “save” for the kids’ college. Too many people are living beyond their means. It’s a delusion that simply earning a BA these days will take you places.

    College grads struggle to find high-skill jobs, let alone pay off debts. In Vietnam, we have a saying along the line of “Father’s debt, son to give back.”

  14. lyndaanning May 22, 2013 at 7:30 pm #

    a horrible vision of what will happen in the uk now we are charging students for their university fees. very grim.

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  1. Help Your College Student Manage Money | Price Insurance and Financial Group – A Nationwide Insurance Agency - June 10, 2013

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