The Washington Post finally got around to addressing the
student loan bubble:
The amount of student borrowing skyrocketed from $100 billion in 2010 to $867 billion last year — or more than the $704 billion in outstanding U.S. credit card debt, according to the Federal Reserve Bank of New York. Of the 37 million borrowers who have outstanding student loan balances as of third-quarter 2011, 14.4 percent have at least one past-due student loan account. Together, these balances come to $85 billion, or roughly 10 percent of the total outstanding student loan balance.
But there is one critical piece of information that the Washington Post left out of the article:
Their ownership of Kaplan, Inc.
The Kaplan Higher Education unit had campuses where students defaulted on federal loans at rate of higher than 30 percent, more than three times the rate at private, nonprofit colleges, according to data released by the U.S. Department of Education. The high default rate may even trigger the loss of student aid under federal rules that take effect in 2012. When students default on their debt taxpayers are stuck with the bill and the students have their credit destroyed. Kaplan's marketing campaign targets especially veterans, single mothers and low-income students. According to the U.S. News & World Report, only 33 percent of Kaplan students graduate within six years.
I read that Post article twice. Did I miss their reference to Kaplan?
3 comments:
Is it time to slow down the rate of student loan handouts? Seriously. It is.
When someone goes to a state university and works part time, the debt can be a manageable couple of $10k's. But there are too many cases where some kid goes hogwild and doesn't even consider the consequences of their debt on a barely-useful degree from a private college.
Case in point: Friend of mine who "collects" degrees, it seems. Fifty-something years old and decided to borrow money for a MA in web journalism. Now he's got $60k in debt to pay back in the last 10 years of his underpaid life. Welcome to serfdom.
And a neighbor's kid is getting out of a private college in a few months with a degree in Music Education, and he's frantic about how he will pay back the $90k (!) he will owe! WTF?!! Maybe he's too stupid to know better, but why did his parents not beat some sense into him before he borrowed that much for that degree?
New rule: You may borrow up to the price of tuition at your nearest state university, and no more than that will be guaranteed by the Feds.
I'm quickly starting to agree with you Lou that something really needs to be done with the whole student loan problem. I understand that the reason they did the whole govt guarantee this was to encourage lenders to give money to the poor so that they could go to college. Thing is, the system compensated for all of that and prices rose due to artificial inflation as well as the insane incentives for bs private education. If people had to put up their own dime ahead of time, they'd not blow 30k going to a cooking school.
Frankly, changing the rule about guaranteeing the loans and being able to take them into bankruptcy would be ugly as hell but it would help slap some common sense into the system.
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