As more people defaulted with their students loans in the first three months of 2013, many are wondering when this bubble will pop. The student loan crisis can be compared to the mortgage and housing crisis just a few years ago. What we learned then was how damaging the aftershocks of this bubble could be. In just the few short months of the new year, $3.5 billion dollars in private students loans defaulted, rounding the total of debt to $85 billion. Even the collectors can’t keep up, they would need to be multiplying as fast as college tuition, but that would just be against the laws of physics.
Student loans are the loans that just keep giving, they can determine your ability to buy a new home, a car… And don’t worry, those students loans will stand by your side through thick and thin, since they don’t go away should an individual need to file for bankruptcy. As we look at the economic growth of the country, and wonder how the rebound will occur, we must take into account that the largest population who will be stimulating the growth might not be able to do so, because they will be Atlas, holding up the world from a single debt.
Many might argue, “Hey, I was fine, I did a cheaper college, got a job, no problem.” Don’t forget times were different, and to judge this current state by eras of the past is foolish at best. 20-30 years ago, minimum wage or entry-level positions could start you off to a normal life. Student loans weren’t half of your paycheck. There wasn’t a housing crisis, along with unemployment levels of 2009, and tuition that “sextuples in the last 30 years” making even state schools enough to rack up some hefty debt. Student loans are an interesting business. One of the reasons the mortgage crisis happened is because the lenders stopped making sure that the loans went to those who could repay them. Anyone was able to get a loan with or without demonstrating ways to repay them, and therefore, so many of them failed. Student loans are even worse. There’s no regulation on who can take out $20, $50, $100 thousand or more to go to school. Even those who are making steady payments are barely touching their loan, the money is all interest. I’ll give a personal example. The loan agencies give you a debt calculator in order to choose a repayment plan. If I went with a “standard” repayment plan, with the monthly dues being fairly reasonable, it would take me 20-25 years to pay it off, and I would end up paying almost 3 times the amount of my principle loan balance.
Now I’m a social worker, and proud of it, but we’re not exactly known for our fat paycheck. So as we struggle to get clients out of dangerous situations and bring them back from the edges of darkness, we also attempt to keep our own heads above the water. Loan forgiveness programs are scarce, grants and scholarships are out there, but hard to find and harder yet to make too much of a difference. The simple fact that 18-year-old kids may not fully be aware of what this commitment (with or without the help of their parents), means that once again, the company comes before the children.
Written by Courtney Kidd, LMSW
SJS Staff Writer